ETHEREUM GOES GREEN
Move to proof-ofstake this year
CRYPTOCURRENCIES are volatile, rife with scams, and at the mercy of legislation, but the concept remains sound. Which currencies survive is another matter. Many will die. In fact, nearly all of them will— there are over 18,000 in existence, and a good number aren’t worth the electricity used to create them. Like many technical developments before it, the original design is no longer a good fit.
At its heart cryptocurrencies, or rather the blockchain that supports the biggest of them, has a problem. It uses a proofof-work (PoW) system. Transactions are made using complex calculations which the miners compete to finish to earn their slice. All this works neatly on a small scale, but as it gets bigger, it gets ridiculous. Bitcoin consumes enough electricity to run a small country, such as the Netherlands, for example. This is clearly unsustainable in the long term.
Enter PoS, proof-of-stake, which debuted in 2012. This replaces the near-endless number-crunching with a system in which the validators controlling transfers prove themselves by their holdings in the cryptocurrency (that’s the short version, it’s a bit more complicated than that). There are plenty of PoS coins about, including Cardano, which is ranked number eight in terms of its overall market value. However, Bitcoin and Ethereum currently dominate the market, and both currently use PoW.
Ethereum consumes about half the power of Bitcoin and has been working towards shifting to PoS since 2016. Its developers have tested PoS on a ‘shadow fork’ of the coin and, apparently, it works, albeit with a few teething troubles. They plan the full switch to PoS this year, dubbed ‘the Merge’. The result is an estimated 99 percent drop in power consumption. Good news, if all goes smoothly.
All eyes now, of course, turn towards Bitcoin, the one that started it all. Here, there is reluctance: it is effectively owned by the big miners and once it moves they’ll lose much of their power and be left with sheds full of unwanted hardware. However, the big PoW miners won’t be missed: they consume vast resources, and our precious GPUs, to produce nothing with any physical value. Moving a digital coin from one wallet to another shouldn’t require the services of a medium-sized power station.