Are Energy Thirsty Cryptocurrencies Going Green? They May, but How?
The Massive 100 terawatts carbon footprint!
Environmental footprints of cryptocurries has been stygian. In 2021, Blockchain consumed 100 terawatt of energy, equivalent of the energy consumption of Finland. Ethereum, the second largest cryptocurrency in circulation, is shifting to ‘Proof of stake’, a new way to operate with energy consumption as low as 99.95% lower.
Who Ensures Safety in Unregulated Blockchains?
In a typical banking transaction, bank and regulations ensure the safety, but who ensures security in a blockchain transaction as it is completely unregulated?
Answer: The nodes or members of the network validate each transaction. So in a blockchain consensus of the nodes ensure its safety.
Question: How do consensus mechanisms work?
Answer: Two major ways, Proof of Work (PoW) and the Proof of Stake (PoS).
Question: Are blockchains immutable and hack-proof?
Answer: NO! They are hackable, but its very unlikely. Blockchain are vulnerable to two types of breaches:
- Distributed Denial of Service (DDoS): Multiple fake requests consume most of the network’s processing capacity which can lead to server crash and every other node in the network is cut off from it.
- 51% Attacks: When over half of the nodes are under control and the hacker can take control.
Proof of Work Vs Proof of Stake
Bitcoin and Ethereum use ‘proof-of-work’ algorithms in which “miners” solve cryptographic puzzles and jostle for the right to verify a new block of transactions. Miners who succeed get cryptocurrency as a reward. Finding the solutions to puzzles consumes humongous amount of energy to feed the computers.
Ethereum is changing the ball game entirely, Proof of Stake uses the cache or stake of miners of cryptocurrency and allows them to enter a lottery. Winners are allowed to verify a set of transactions and are rewarded with cryptocurrency. The word ‘Stake’ is used becuase those validators that are unscrupulous in their conduct loose a potion of their stake.
Ethereum, now needs to merge the new system with the existing one. Its success will pave the way for wider adoption of this efficient technology.
Wider Adoption and Innovation
The energy efficient system will also make blockchain more accsesible, and affordable. This would trigger wider adoption and innovative applications unlocking the value it was long poised to deliver.
Other cryptocurrencies, are waiting and watching the pioneeing efforts of the second most popular, Ethereum.
