BITCOIN OPINION FEBRUARY 07, 2018 19:05
Proof of Stake Is Coming, and Will Be a Game Changer
Proof of Work mining (the protocol underpinning Bitcoin and many others) uses as much energy as the nation Denmark. It’s a costly and lengthy process, and with the user base growing traditional blockchains are struggling.
This is because every single transaction needs to be ‘mined’ by powerful computers solving complex mathematical problems. It’s a process that ensures the security of the network, preventing double spends and other malicious actions. Although effective, the energy used in this process is truly staggering. And that’s not all. With each transaction needing a lengthy confirmation process, (meaning long confirmation times) the blockchain cannot scale easily. Plus as more and more users join the network, which will create bottleneck. Bitcoin transactions are now unbearably slow and expensive, with long backlogs of transactions waiting their turn.
Ethereum too is suffering from the same issue. Although the network can currently handle approximately fifteen- twenty transactions per second, which is significantly more than Bitcoin. Case in point, look at the recent Cryptokitties mania to see the crippling effect of high network overload..
Backlogs of transactions quickly built up and transaction fees skyrocketed as users fought to get included in the next block. With the severe limitations proof of work has seen, it seems impossible for real-world use cases to succeed moving forward. Considering that VISA and other non-blockchains payment gateways, handle thousands of transactions per second,(similar to the RippleNet) and if the many projects emerging in the crypto space are to compete, something has to change.
Enter Proof of Stake, w/n Ethereum platform. ..
Vitalik Buterin, creator of the Ethereum ecosystem, aims to introduce what is known as a Proof of Stake concept later this year. The upgrade to the network is known as ‘Casper’, and it will be a game changer. Instead of powerful miners verifying transactions on the network, users will now be able to ‘stake’ their Ether. The chief developer behind Casper is Vlad Zamfir, who has been working on the upgrade since late 2014. Casper has been live on the Ethereum testnet since January and currently requires 1500 ETH to participate. Expect this number will be lowered when the mainnet release happens, and if you’re worried you still might not be able to participate, don’t be! Staking pools will work similarly to current mining pools, where users pool their resources and share the rewards.
Casper could bring huge changes to the Ethereum economic model, and consequently the price of Ether. Currently, new Ether is generated through a mining process similar to Bitcoin’s. Not only will transactions be confirmed much faster, enabling the growth of the network scalability, & saving polar bears. Casper will also cap the total number of Ethereum available. A fixed amount of Ether will mean no inflation. Combined with the increased demand Casper will generate (to stake, a fixed amount of Ether is required), we can surely expect an increase in price as users buy up and lock away Eth in stake.With Casper, stakers will be rewarded from the transaction fees generated.
With this change, will we finally see the expected ‘flippening’, with Ethereum dethroning Bitcoin to be the Newly most valuable cryptocurrency? Father Time will reveal ALL…
Raising the stakes
This prophecy might be narrow-focused, as it’s not only Ethereum that is drawing eyes through plans to introduce Proof of Stake. In the last week, Cardano (ADA) updated it’s roadmap, setting out its plans to switch to a proof of stake model as early as Q2 this 2018. Created by early Ethereum developer Charles Hoskinson, Cardano is attempting to tackle the blockchain’s many issues through a focus on academic R&D and rigorous testing, trial and error. ..
Meanwhile, other projects are escaping the limitations of proof of work in entirely different ways. EOS & IOTA.
IOTA frontlined by David Sønstebøs moving away from Blockchain entirely. Instead, the protocols offers a system where transactions are arranged in a tangle, a so-called Directed Acyclic Graph, with each transaction working to verify other transactions.
New technology is asking serious questions of what are seen as outdated Proof of Work systems, offering various solutions to the problems of and efficiency. Proof of Stake is one likely candidate in the running, and this year could be its make or break moment.
The limitations of Proof of Work are well documented, many continue to put their faith in protocols such as the Bitcoin network. It needs to be stated that developments within these systems are ongoing as well, with Lightning Network and block size change in the contention. However, whether these upgrades can truly tackle the limitations proof of work systems face remains to be seen, and other projects aren’t hanging around.
BITCOIN, CRYPTOCURRENCY, ETH, POW, PROOF OF STAKE, PROOF OF WORK