After years of anticipation, the cryptocurrency ethereum has finally implemented a significant network upgrade that fundamentally alters how the blockchain verifies transactions, mints new coins, and secures its network. This system, known as proof-of-stake, has reduced ethereum’s energy consumption by more than 99 per cent.
Energy consumption has been a major source of criticism in the cryptocurrency industry. However, bitcoin is unlikely to follow suit.
Instead, the bitcoin network will continue to use a system known as proof-of-work, in which highly specialized computers attempt to guess a winning number that will be used to validate transactions and create new coins. This is referred to as mining.
At the moment, it takes over a hundred sextillion attempts to guess a winning number. All of this work contributes to network security by making it nearly impossible for bad actors to amass enough computing power to take control. However, according to recent research, mining Bitcoin will consume 75.4 terawatt hours of electricity in 2020, which is more than Austria or Portugal combined.
This is the system that ethereum previously used. However, the network has switched miners for validators. Instead of engaging in a massive computational guessing game, validators are tasked with verifying new transactions and earning ether as a reward.
To make sure that these validators act truthfully, they must basically make a security deposit into the network by staking a certain amount of ether coins. A validator’s stake will be forfeited if they attempt to attack the network. Ethereum supporters argue that the penalty will make the network more secure, whereas bitcoin supporters believe that proof-of-work is the more secure, tried and true approach.
However, the network is grappling with the optics of bitcoin’s energy consumption in the midst of the global climate crisis. As a result, some major bitcoin miners are beginning to seek out renewable energy to power their data centers, and some are attempting to change the narrative by touting bitcoin’s energy use as an asset, as it helps drive investment into the country’s aging electrical grid.
(Adapted from Rreuters.com)