Good Riddance to Proof of Work?
Good Riddance to Proof of Work?
We spent a great day yesterday outlining how smart contracts worked for our students. I even managed to do a live creation and consumption of the smart contract. After hacking kettles, dolls, CCTV cameras, and so on, I think that demonstrating a smart contract to an audience — and where it worked — is perhaps the most satisfying demonstration that I have ever given. Why? Because I was showing a new way of thinking. An alternative. A way to get students thinking about the options they may have in designing systems.
One of the elements of the demonstration is the usage of gas, and where we can view the data on the Ethereum blockchain chain without paying anything. But, once we want to chain the state of the data contained in a smart contract, we must pay the miners some gas for their work — a Proof of Work (PoW). It’s a standard way to make sure that miners are trustworthy.
But, Bitcoin has not given PoW a good name and is consuming so much wasteful energy — just to make sure we have a consensus every 10 minutes or so on the current list of transactions. Satoshi built a great model, but now it is flawed. While Bitcoin will struggle to release itself from PoW, Ethereum is now moving towards Proof of Stake (PoS). At the current time, Ethereum consumes around 113 TeraWatts-hours per year. Along with this, the GPUs used for the mining process are often discarded after just a few years.
But, in 2022, Ethereum aims to move towards PoS, and which aims to cut the energy consumption to just 1% of the current levels. This scale down will also see a scale-up with transactions with the aim of achieving more than 100K transactions per second. This work moves it into the Visa processing scale.
PoS will aim to remove miners, and use validators, instead. These validators will then win rewards if they do good work, such as validating and running a smart contract. The trust in the validators will build up over time, and the longer they do good work, the more trusted they will become. But, they will be watched by others, and as soon as something is not quite right, they will lose their stake, and then become untrusted. It’s a difficult algorithm to write, and there are many models for this, so only time will time if PoS will win over PoW.
The plan for Ethereum is that a validator would put up 32 ETH (around $100K) in order to be part of the infrastructure. This would be an individual node or part of a staking service to multiple entities. The higher the stake, the higher the chance of winning the work, and thus gaining tokens in reward. If they produce bad work, they will be “slashed” and will lose all their ether — and where the ether is sent to an unuseable wallet. A prototype has already been created on Beacon Chain and where around 9.5 million ETH ($37 billion) has been applied. Currently, it is planned for this to merge with the main Ethereum networks in the next few months.
If you are interested, here are some of the labs we have been using to explain how Ethereum works: