Ethereum is switching to Proof-of-Stake. What does it mean?
Ethereum is currently in the process of switching from the proof-of-work protocols to proof-of-stake, and that’s a big deal. What even is the difference, and what’s going to change it? Let’s figure it out together.
What is Proof-of-Stake?
Proof-of-stake is a sort of consensus mechanism that networks are used to attain a distributed form of consensus. In PoW, users spend energy in order to prove that their capital is at risk. By comparison, the proof-of-stake requires validators to stake money directly, usually as ETH inside a smart contract. This staked ether is the collateralized funds that might be taken away in case of unsatisfactory behaviour on the validator’s part (keep it in mind). The validator’s mission is to make sure that the newly-created blocks are in order, as well as bearing even more blocks.
According to Ethereum, PoS comes with several improvements to the PoW system:
· Better energy efficiency — thus, there is no need to use lots of energy on proof-of-work computations.
· Lower barriers to entry and lighter hardware requirements — there is no need for elite hardware anymore to stand a chance of creating new blocks.
· Reduced the implementation of proof-of-stake is expected to reduce the risk of centralization by encouraging a greater number of nodes to participate in securing the network.
· Since you don’t need as much energy, not as much ETH is issuance is required to stimulate participation.
· Economic penalties for misbehavior make 51% of attacks gradually more expensive for whoever organizes them, compared to PoW.
· The community could resort to the social recovery of an honest chain if a 51% attack were to overcome the crypto-economic defenses. That means an attacker would need 51% of the staked ETH (about $15,000,000,000 USD).
Let’s consider the benefits and pitfalls of the Proof-of-Stake mechanism in the table below: