As
cryptocurrencies’ popularity has grown in recent years, so has criticism of
their environmental impact. The amount of energy required to power the
blockchain networks that underpin cryptocurrencies has been a major source of
concern, especially as the demand for energy-intensive mining operations has
increased.
As a result,
many blockchain projects are now using Proof-of-Stake (PoS) as a more
energy-efficient alternative to Proof-of-Work (PoW) (PoW).
Evolution
from Pow
PoW is the
original blockchain consensus mechanism, and it relies on miners solving
complex mathematical puzzles to validate transactions and create new blocks.
This process,
however, consumes a lot of energy because it requires powerful computers to
perform millions of calculations per second. As a result, many in the
blockchain industry are concerned about the energy consumption of PoW networks.
PoS, on the
other hand, is a newer consensus mechanism that aims to address the energy
consumption issue by substituting a stake-based system for the computational
work required in PoW.
Instead of
miners, validators are in charge of validating transactions and creating new
blocks in PoS. The amount of cryptocurrency that these validators hold and
“stake” as collateral is used to select them. The more cryptocurrency
a validator has staked, the more likely it is that they will be chosen to
validate the next block.
Because it
eliminates the need for miners to perform energy-intensive calculations, PoS is
much more energy-efficient than PoW. Instead, validators are chosen at random
based on their stake, and the only energy used is to power the validators’
computers.
This has the
potential to significantly reduce the environmental impact of blockchain
networks while also lowering the costs associated with their operation.
PoW
mining VS PoS mining. How BTC is solving its energy problem
With Bitcoin
mining accounting for an estimated 0.27% of global energy consumption many have
wondered if PoW mining is dead.
However, to put
things in perspective, that means that Bitcoin is currently using less energy
than, for example, all residential air conditioners in the world.
This fuels the
debate whether PoW mining, namely Bitcoin mining is actually sustainable,
especially when compared to PoS.
However, one
should consider that this drop in the bucket gets further alleviated as around
a quarter of its energy consumption comes from renewable energies; a fact that
is surprisingly in stark contrast…
