Proof of Stake Goes Live On Ethereum

Proof of Stake Goes Live On Ethereum

Bitcoin gives blockchain a bad name, as it consumes so much energy — just to create a new block every 10 minutes or so. At its core is a proof of work method that ensures that it would be far too expensive to provide the computational resources to compromise the network. This is defined as a proof of work (PoW), and has succeeded in creating a robust cryptocurrency, and has resulted in a waste of energy.

Ethereum improves on this by rewarding miners for their work with gas (known as Ether), but this is still based on a proof of work. To overcome this, Ethereum 2.0 now aims to address this by providing a proof of stake (PoS), and where nodes — defined as stakers — must apply a financial stake to be part of the consensus network. As this state is costly, and the rewards are profitable, the stakers should provide a robust infrastructure. We will thus move from “miners” to “stakers”, and which should significantly reduce the energy used. Along with this, we may see the transaction rate rise using a newly defined sharding method.

As, so today, the Ethereum mainet was forked in order to move to a PoS model. Over the past few months, this PoS has been tested on testnets, but these do not have the same size as the mainnet. These transactions have been recorded here:

Along with saving energy, it is hoped that Ethereum will be able to scale up its transaction rate, and, perhaps, cope with the rates that Visa can provide. This dashboard shows the number that over 1.8 million transactions had been processed, and an average block time of 14.8 seconds [here]:

A few basics of Ethereum

Rather than taking around 10 minutes to produce a new block, Ethereum manages to create a new one every few seconds [here]. We can see here that each block is created in less than 10 seconds, and where, in this case, a block has between 58 and 131 transactions:

For mining these blocks, the miners have been rewarded around 2 Ether. Ethereum makes sure that no mining pool has more than 51% of the hashing power. Each transaction is also charged some Ether, and this varies with the amount of work that the miner has to do:

Conclusions

One looser today on the stock market today was NVIDIA, and it may be due to the demand for GPUs is probably going to reduce with the advent of PoS in Ethereum.

And so the distributed ledger that was created in 2015 is now evolving to a new level. Overall, it is a bit like trying to fit an engine booster to your car, while it speeds along at 100 mph. The outcome of this test will now inform the actual roll-out of the full PoS model … so watch this space!