Proof-of-stake is a consensus mechanism used to coordinate the operations of blockchain-based systems. And blockchain is a decentralized database, or ledger, that cannot be changed or deleted and is not under the control of any one person or organization.
Bitcoin popularized this technology and is now used for many different applications, such as decentralized finance platforms and non-fungible tokens (NFTs).
The first blockchain consensus mechanism to be widely used commercially was proof-of-work. This allows users to reach a consensus by solving complex mathematical problems to earn a stake in the system, referred to as mining.
Unfortunately, this process requires a lot of computing power. By contrast, proof-of-stake consumes significantly less energy.
At its essence, blockchain technology has three main benefits:
- Decentralized control and operation – users of the system come together to make decisions about how to manage and run the system.
- Verifiable state – users of the system can validate that it is functioning correctly, and each user can be sure that it has been doing so since the beginning.
- Resilience to data loss – even if some users lose their data, whether through negligence or malicious attack, the data can be recovered from other users in a reliable way.
Voting In Blockchain Systems
Voting in blockchain systems is the property that controls how much energy is needed to run a blockchain system. Blockchain systems use voting to decentralize governance and operation.
While the exact mechanisms for how voting and consensus are achieved differ in each blockchain system, at a high level, blockchain systems allow users to vote on how the system should work.
Proof-of-work requires users to solve complex mathematical problems to get stake in the system. However, this process requires large amounts of computing power and energy, leading to complaints that proof-of-work is not sustainable.
Proof-of-stake is an alternative that requires users to demonstrate ownership of some asset on the blockchain. This does require users to temporarily lock their assets in the blockchain for a period of time, but it is far more energy efficient than proof-of-work.
Ethereum’s “The Merge”
Ethereum plans to transition away from proof-of-work to proof-of-stake during the week of September 15, 2022. This is known as “The Merge” and is expected to reduce Ethereum’s energy consumption by 99.95%. The hope is that this will make Ethereum sustainable for the foreseeable future.
