Ethereum’s Proof of Stake System: Do Other Coins Use It?
Ethereum is currently switching to the proof of stake system. Click here to find out what this means and whether other coins are using it.
This year sees the merge between Ethereum as we have known it into what is called Ethereum 2.0. The most significant change taking place is the switch from POW (proof of work) to POS (proof of stake).
Since the dawn of cryptocurrency over a decade ago, the big players in the crypto world have been running on a proof of work system that, although fully tested and functional, has a few issues surrounding it. This is why Ethereum is implementing the merge, which is due to raise the value of ETH, as well as make it a more sustainable, secure and scalable coin, to the point where it could even overtake Bitcoin as the most valuable and traded coin in the digital financial landscape.
But What Is The Proof Of Work System?
To understand how Ethereum is using proof of stake to move forward, it is first essential to understand what exactly it is leaving behind. The proof of work system has been operating for years now. It is essentially a consensus mechanism that asks users to validate data and secure the blockchain blocks, allowing each block to stay safe and certified. These users are referred to as miners, and they compete against each other to solve puzzles, with the winner selected to add new data and transactions to the blockchain, simultaneously receiving a financial reward once the chain is acknowledged as valid.
While this has been an efficient system, it is argued that, due to a number of different miners competing against each other, the excess electricity consumption is far too high and is leading to exponential energy wastage.
Was Proof Of Work Really That Damaging?
Some argue against proof of work being so damaging. A report on crypto mining released in 2018 estimated that 80% used for proof of work was green. Also, in some cases, Bitcoin miners were using electricity from power grids that were unable to store and distribute.
Nevertheless, the general consensus across the crypto landscape is that the system should be updated, especially when certain companies refuse to utilise cryptocurrency solely because of their environmental impact. Getting companies and governments onside will be integral for crypto going forward, and this is why Ethereum has decided to undertake the merge.
What Is The Proof Of Stake System?
Unlike proof of work, proof of stake will reduce the energy wastage and make validating the blockchain far more sustainable and efficient. In this system, the owners of coins stake their coins as collateral, allowing them the chance to be chosen as a validator.
Validators are then chosen to validate a block and earn their reward, with the users chosen entirely at random rather than through the competition of puzzle-solving. For Ethereum, a validator will have to stake 32 ETH to give them the chance to validate.
Are Other Coins Using It?
While Ethereum is the largest coin to implement proof of stake, other POS coins are currently able to be staked. These include AKT, the Akash Network proof of stake chain, and XTZ, the first proof of stake currency to be supported by every major exchange for staking.
It is worth noting, however, that while other coins use the proof of stake system, Ethereum is the first major cryptocurrency to implement it entirely as a working system. This is why the so-called merge is taking such a long time. There are many factors that have to be considered in the lead up to Ethereum 2.0. The future will need sustainable cryptocurrencies to overtake traditional banking; it is integral for Ethereum to get it right and not crash its value.
Will Every Coin Eventually Use Proof Of Stake?
While proof of stake is undoubtedly the way forward for many coins, it is not necessarily going to be implicated across the entirety of the cryptocurrency landscape. Bitcoin, for instance, is unlikely to merge to proof of stake. They were the first proof of work system, and introducing a new mechanism would mean every miner would have to adapt and earn fewer Bitcoins, which would likely lead to Bitcoins value plummeting further than ever before.
With Bitcoin remaining in its tried and tested POW system, there is every chance that Ethereum’s drive to become sustainable will subsequently lead more users to invest in their coin, making it overtake Bitcoin as the highest valued crypto coin on the market.
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