With proof-of-work, a blockchain project can run into real-life challenges and cause problems as their miners continue to upgrade equipment to get more mining power
While technology is always changing, constantly making itself better as the years pass by, it doesn’t guarantee that everything that falls within its realm will instantly change as well. This is especially true in some of the blockchain projects nowadays, such as – yes, you read it right – Bitcoin.
Using the Proof-of-Work (PoW) consensus method, a blockchain project can run into real-life challenges and cause problems as their miners continue to upgrade equipment to get more mining power. In Bitcoin alone, it’s estimated that the network currently consumes at least 2.55 gigawatts of electricity, and potentially this can grow to 7.67 gigawatts. These figures are close to Ireland and Australia’s annual power consumption (3.1 gigawatts and 8.2 gigawatts respectively). Along with great power consumption, comes great electricity bills and other potentially serious consequences.
With these serious consumptions of power, the demand is also high for electricity to be produced, and this is no easy feat. Electricity production costs quite a fortune and involves a series of prolonged activities – even just to build a turbine. Since everything involves rather expensive costs, this means only a select few could potentially be able to become competitive in a PoW mining ecosystem. You would need to be a millionaire, or join forces with big players in the mining field to be a serious contender, which means it potentially can bring about a monopoly – and what can be more centralised than a monopoly? It seems like the point of traditional cryptocurrency, which can be powerful in a decentralised environment, can be put into question when a monopoly happens.
Other complications that might appear and look less blatant would be the lurking potential of a fire occurring due to equipment becoming overheated. Because the mining equipment in a PoW mechanism usually works 24/7 with no rest at all, there is a chance that they may explode due to being overheated, even in rather colder countries such as Russia. Stories of buildings and homes becoming victims of a spreading fire are not unheard of, and in areas with a thick population density, this can become seriously fatal.
Then there are still other consequences: as people don’t want to miss out on the latest craze of cryptocurrencies, they can try to do their best to participate in mining in order to win their fortune. Many don’t seem to care about making money honestly: People have been caught stealing power for example. If you think that stealing it from a local power grid is kind of expected, you might be surprised that there is rather a more surprising case. A man was sentenced to three and a half years of imprisonment, for stealing power from a train network in China.
I believe stealing is wrong, but in our China case, it’s got even worse: What would have happened if he were not discovered and caught? In the right circumstances, a series of train accidents could have occurred.
For all these reasons, it’s no wonder why there have been proponents who advocate against using PoW, which they deem to be outdated anyway. Rather, they are proposing a new consensus mechanism that’s called Proof-of-Stake (PoS), or another, newer, consensus mechanism. Projects like Bitcoin are still sticking to PoW, and others like NAV and NEO are already using PoS.
Also read: Ethereum meets NEO at Consensus Singapore
In PoS, problems can be limited because you don’t necessarily have to set-up physical equipment that would need to be running 24/7 and using massive amounts of power. An example from NEO goes like this: The participants in their network can stake their coins, earning rewards in the form of GAS. Staking is made easy, because one simply has to keep their coins in a NEON wallet. The reward amounts to 5.5% on all these staked coins. By holding them in the said wallet, you don’t have to be online all the time, therefore already eliminating many of the problems in a PoW-powered environment.
This is made possible because in PoS, miners are participating based on their stakes. They are limited on their mining power based on the number of coins that they have. By having and storing these coins in their wallet, they would be qualified to be a node. A node can then be voted by participants of a blockchain to be a validator of transactions taking place in it. This has made a fairer competition, and eliminated many threats that PoW brings.
As people and creators of various blockchain projects all around the world begin to realize that they might need to start paying more attention in having PoS (or other consensus protocol alternatives to PoW), this trend catches up with the industry. Ethereum, for instance, is planning to fully implement PoS into their previous PoW mechanism. While there is no set date yet for it, it’s currently estimated that their testnet will be re-attempted anytime between November-January.
Other blockchain projects will do good to follow in Ethereum’s footsteps. After all, isn’t blockchain supposed to benefit more people and make the world a better place?
Whether or not this ideal can be satisfyingly fulfilled, it remains to be seen. Only time will tell, but you and I can only hope that the answer is: yes.
Paweł Tomczyk is a technology enthusiast and an early adopter, contributor in the blockchain ecosystem, and a range of funds. He has been specialising in marketing and fintech for 6 years, and he is also the founder of Cyberius, which specialises in content creation and crowdfunding.
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