As the world has become increasingly worried about the environment, recent crypto debates have shifted their attention to the impact of cryptocurrencies on the environment. The impact of the Proof of Work (PoW) consensus method on the environment vs Proof of Stake (PoS), the consensus mechanism employed on the Oasis blockchain, is one of the current disputes in the community.
Even though this discussion has been going on for quite some time, it was Tesla CEO Elon Musk’s tweet that re-ignited it and rightfully so. His post indicated displeasure with the usage of fossil fuels in Bitcoin mining, and his words sparked heated disputes in the sector. Musk visited with prominent bitcoin miners just a few days after his original statements to better understand the environmental effect of cryptocurrencies and learn about existing and future solutions.
Here is an In-depth how PoW and PoS operate, how they vary, and how each influences the surroundings.
Understanding Consensus Mechanisms
Consensus algorithms on the blockchain bring dispersed processes to agree on a single data value or a single network state. To put it another way, they aid in the verification of blockchain transactions. This type of technology is critical in decentralized blockchains because it ensures the integrity of each transaction and generates consensus among all participants on the ledger’s state.
Two of the most well-known consensus approaches are Proof of Work (PoW) and Proof of Stake (PoS). In the PoW system, miners compete against one another to solve complex mathematical equations. The participant node who solves the challenge the fastest gets the privilege of adding new transactions to the blockchain.
The Environmental Impact of PoW and PoS
The most prevalent complaint of the PoW consensus method is that it consumes a lot of energy to keep the network running. According to a University of Cambridge study, Bitcoin’s yearly electricity use (excluding the biggest PoW blockchain) amounts to about 0.6% of world energy consumption.
Although this appears to be a huge amount of energy for a cryptocurrency to use, Bitcoin supporters say that this figure is less than 10% of what the traditional banking system requires.
Bitcoin proponents also argue that a big portion of the energy consumed by cryptocurrencies originates from renewable sources. Bitcoin mining consumes a considerable quantity of energy that would otherwise be squandered. The administration of Sichuan, a Chinese province, is conducting a conference to assess the impact of a prospective bitcoin mining ban on the hydropower industry.
So How Does PoS Compare to PoW
PoS is generally considered significantly more energy-efficient, and PoS-based blockchains far outweigh PoW-based blockchains in terms of adoption. According to a Fast Company article, computer power is less of an issue with PoS, with Ethereum, the second-largest crypto project by market cap, now moving to PoS from PoW, citing scalability, speed, and efficiency as reasons. This fact alone serves as the ultimate confirmation for the whole use case of PoS for many in the blockchain world.
Ethereum intends to save 99% of the energy it spends by switching to PoS. As Ethereum inventor Vitalik Buterin put it, “it’s commonly recognized in the Ethereum community that PoW requires much too much energy.” It is the most important thing to me.” This type of sentiment naturally reverberates across the crypto industry, and it will almost certainly persuade more new and future projects to choose PoS over PoW.
About Oasis Network
The Oasis Network is the first privacy-enabled blockchain network intended for the next generation of blockchain for open finance and a responsible data economy. With its high throughput and secure design, the Oasis Network can allow private, scalable DeFi, revolutionizing open finance and making it accessible to more people than only traders and early adopters. Its unique privacy features have the potential to reinvent DeFi and produce Tokenized Data, a new form of digital asset that will allow users to take custody of the data they generate and receive incentives for staking it with apps, culminating in the first-ever responsible data economy.