Ethereum has announced its plans for a big shift in its consensus mechanism which will drastically change the way its blockchain operates in the future. This change will have a direct effect on the security of the network, and those who have been mining its blockchain.
What is PoS, how does it differ from PoW?
Proof-of-stake (PoS) is a process of maintaining consensus on a blockchain network. Unlike proof-of-work (PoW), PoS doesn’t require miners to solve complex mathematical puzzles in order to secure transactions, and instead, uses economic incentives to secure network security. The theory is that the use of economic game theory is a better, and more efficient way to maintain network consensus. This eliminates the need for any miners to use computing power to maintain the network, and instead relies on network participants to stake their coins in order to be chosen as network validators.
Why is Ethereum switching to PoS?
If there has been one major concern over PoW networks such as Bitcoin, it is the rising cost of energy it takes to maintain network security. The Bitcoin blockchain requires significant power, greater than the power output of many nations, to remain secure and operate in-line with its mission. Ethereum founder Vitalik Buterin and other key network developers noticed this problem and determined PoS is a viable alternative to this energy consumption. Buterin has even gone as far as to show his disdain for current blockchain structures, noting in a tweet, “every present-day existing blockchain, including ETH and BTC, sucks, and…PoS is necessary.”
The Casper Protocol
Notions of utilizing PoS have moved past the hypothetical stage, as the Ethereum team has recently released a test-net version of a new PoS protocol within its network. Known as “Casper”, this protocol is set to hard fork the entire Ethereum network to PoS. In a whitepaper written by Ethereum developers Vitalik Buterin and Virgil Griffith, Casper is said to present, “a novel proof of stake system,” for the Ethereum blockchain.
How will this change mining on the Ethereum network?
Mining is a function of PoW blockchain networks. A network which doesn’t function on a PoW consensus model has no need for miners, and therefore no need for mining equipment and software. The PoS model which Ethereum is proposing would eventually put an end to mining on the Ethereum blockchain.
This would not only have an effect on the Ethereum network but other blockchain networks as well. This is because miners who previously mined the Ethereum blockchain would now take their hardware to a different blockchain to mine, creating an influx of hashing power to alternative blockchain networks.
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