In a significant upgrade, Ethereum, the Blockchain underlying the cryptocurrency Ether, wants to reduce the massive energy use in Ether mining by 99.95%. The firm has declared that it would abandon the current Proof-of-Work system in favour of one based on Proof-of-Stake (PoS) (PoW).
Because of the latest upgrade, "Ethereum upgrade will have nearly the same energy consumption as operating a personal computer for each node on the network," an Ethereum blog post asserts. It's hard to say what this means, however. This report examines how Ethereum's latest update is expected to reduce energy usage so quickly.
The energy usage of various blockchains varies.
If you're not familiar with Blockchain, it's a distributed digital database that records every transaction, making them transparent and unchangeable. And there is a variety of Blockchains to choose from, depending on the intended use of the technology.
Bitcoin and Ethereum are the two most widely utilised blockchains. The Bitcoin Blockchain is fast, safe, and strong, but it's also highly costly. On the other hand, Ether is less expensive but takes longer than Bitcoin to transfer funds. However, both blockchains have one thing in common: they both use much power.
On average, Ethereum upgrade uses 112 terawatt-hours of power every year, which is more than the Philippines or Pakistan, according to Digiconomist. The energy used by a typical US home for nine days is the same as the energy used by a single Ethereum transaction.
More than 1,50,000 VISA card transactions would use the same energy consumption as a single Ethereum energy consumption chart. Using Bitcoin is a lot worse than using traditional currency. As of this writing, it uses an average of 137 terawatt-hours of power every year.
What does POS stand for? What are the advantages of PoW?
Cryptocurrency mining may be done using either the PoS or the PoW algorithm. Using a network of private computers, sophisticated cryptographic challenges are continually being solved to verify the authenticity of transactions. Mining a coin is the technical term for this process.
The proof-of-work process is used by most established cryptocurrency energy consumption, including Bitcoin. Cryptocurrency mining has traditionally used a PoW technique, where many computers are needed at a mining facility, requiring a large amount of electricity.
PoS, on the other hand, allows anybody with any amount of bitcoin to use it as collateral to help fund blockchain development. For their efforts, the user receives a defined proportion of the pledged assets each time a new Blockchain block is created. The 'staking' of crypto assets is the name given to this procedure.
You obtain a block reward in several cryptocurrencies for successfully mining a block of the currency for Ethereum energy consumption. A new block is formed every time one is mined, and the miners gain a share of the token's value in the form of network fees or freshly minted tokens.
For a long time, proof-of-work was a popular method of Ethereum energy consumption since it required just a standard computer. However, a mining machine isn't necessary for PoS, which means it's more efficient than PoW in using less energy and increasing transaction speeds.
There are currently enormous, well-funded mining pools that don't own any actual mining equipment. However, all cryptocurrency energy consumption holders may now participate in mining and get specialised benefits thanks to the PoS system, which makes mining more accessible to everyone.
However, no one in the crypto world agrees that the PoS paradigm is superior to the PoW one. According to Jack Dorsey, a well-known marketer, this new approach does not provide as much network security as proof of work, as he noted in a previous tweet.