One of the reasons NFTs and cryptocurrency are such divisive technologies is because of environmental impact. Blockchain technology is incredibly inefficient when it comes to energy consumption. Or, at least, it was. The inefficiency stems from the method used to verify transactions, known as the proof of work (PoW) model. This is why the new, more eco-friendly proof of stake (PoS) model was named number six on MIT Technology Review’s 10 Breakthrough Technologies of 2022 list.
Ethereum Leads the Charge
Ethereum, the second most popular blockchain behind only Bitcoin, currently uses a proof of work model to verify transactions. At the moment, one transaction on the Ethereum blockchain uses about 238 kilowatt-hours (kWh) of energy. To put that into perspective, that’s about 90,000 more kWh than 100,000 VISA transactions. You use more energy in a single Ethereum transaction than you would by swiping your VISA card for a lifetime. However, that’s all set to change.
Ethereum will shift from the proof of work model to the proof of stake model sometime in the near future. Though, there isn’t an exact date for this shift just yet. There are several differences between the proof of stake and proof of work models, but there’s one big important one. When Ethereum switches to PoS, they estimate it will use 99 percent less energy.
About Those Differences
Energy efficiency isn’t the only benefit that switching to a proof of stake model offers. According to Paul Wackerow, a front-end developer at Ethereum, proof of stake, “comes with a number of improvements to the proof of work system.” These improvements include lower hardware requirements for creating new blocks on the blockchain, and “stronger immunity to centralization.” It also adds support for “shard chains.” To oversimplify, shard chains spread out the data load of transactions to make the network more efficient.
Ethereum currently sits at a calm $350 billion market cap. Switching to a proof of stake model does create potential problems that put a whole lot of money at risk. PoS has proven successful on a much smaller scale, but this is the first time it’ll be put to the test on a blockchain so massive. There will almost certainly be kinks to work out, but if successful, it could change the game for blockchain technology.