According to Ethereum co-founder Vitalik Buterin, Proof-of-Stake can be a solution to reduce the environmental impact of Bitcoin and cryptocurrencies.
The Ethereum network was created using Proof-of-Work (PoW), as was Bitcoin, but PoW does not allow the network to scale. Therefore, the decision has been made to move Ethereum to Proof-of-Stake (PoS), which is expected to happen in the next few months, or at most in the next few years.
In addition to making the network more scalable, with faster and cheaper transactions, PoS also consumes very little energy, compared to the high consumption of PoW.
Speaking during the StartmeupHK virtual festival in Hong Kong Buterin said:
“Proof-of-stake is a solution to the [environmental issues] of Bitcoin—which needs far less resources to maintain”.
The fact that PoS requires fewer energy resources is not in doubt, but the fact that it could be implemented on the Bitcoin protocol is open to question. To date, in fact, there does not seem to be anywhere near the level of consensus needed to replace PoW with any other consensus algorithm on the Bitcoin protocol.
How PoS will reduce Ethereum’s environmental impact
But if the discussion is extended to the entire crypto ecosystem, excluding Bitcoin, Buterin’s observation makes sense. For other cryptocurrencies, less decentralized than Bitcoin, it is easier to apply changes to the underlying protocol.
For example, according to the Ethereum Foundation, switching to PoS could reduce Ethereum’s power consumption by up to 99.95%. When the Ethereum network will be using PoS, its power consumption could be in the order of 2.62 megawatts, i.e. as much as a small American town with about 2,100 houses. Currently, however, with PoW, the Ethereum network consumes the energy equivalent of an entire medium-sized country.
However, the upgrade of Ethereum to PoS is still in its infancy, and far less field-tested than PoW, so much so that Buterin himself admitted that although they thought it would take a year to implement PoS on Ethereum, they have been working on it for about six years, due to the complexity of building such a model. This is also the reason why Ethereum’s transition from PoW to PoS is being done very slowly and cautiously.