Bitcoin has easily held on to its position as the most valuable cryptocurrency in the world and has gathered widespread popularity over the past few years. Blockchain technology has brought a new revolution in the world of finance and the transfer of money. Although, these advantages also bring with them, a few challenges. The most talked about criticism of Bitcoin has been its significantly high energy consumption and carbon footprint and the resultant impact on the environment.
As of now, the mining of bitcoin accounts for more than 0.5 percent of all the energy consumed across the globe. With more people joining the bitcoin blockchain network, mining is becoming more energy-intensive, as bitcoin works on a ‘proof of work’ mechanism. Experts believe that this crisis can be resolved if bitcoin shifts to the more efficient ‘proof of stake’ mechanism.
What is Proof-of-Stake and how is it better?
The proof of state mechanism is a consensus-based design that does not require crypto miners to solve complex computational problems, as required in the proof of work model. Instead, proof of state uses a transaction validation process using validators, who put some stake in the network. Validators are chosen based on their stake and this mechanism incentivizes people to increase their stake which in turn increases their odds of being chosen as a validator. A validate does not attack the system because his stake is locked with the network. If a validator tries to do something malicious, they face a penalty called ‘slashing’ which reduced the value or eliminates their locked capital.
The Proof of Stake framework can be delegated or hybrid depending upon the need for decentralization. This mechanism is highly energy efficient as it does not require a lot of computational power to run, and it also offers better scalability than the proof of work mechanism.
Ethereum, which is the second largest cryptocurrency has moved from a proof of work model to a proof of stake model in 2022 and has joined the league of other prominent protocols like Cardano, NEO, EOS, etc.
The proof of stake mechanism faces criticism on the aspect of decentralization and some might argue that it places more power to control the network in the hands of bigger investors like institutions. Although, the migration of Ethereum to the proof of stake mechanism shows that it is not a concern
With the progress of blockchain technology, it is vital to move towards sustainable use of energy and environment-friendly practices. Although it is not easy for Bitcoin to migrate from a proof-of-work mechanism to the energy-efficient proof-of-stake model, it is definitely possible. The increasing popularity of the proof of stake mechanism stems from its 99% lower consumption of energy as compared to the proof of work model, and if Bitcoin can adopt this change, it would surely lead to a huge positive impact towards sustainable growth of blockchain technology in the world.