From PoW to PoS: Uncovering the Environmental Trend of Cryptocurrencies
“The Environmental Trend refers to a trend in which whole world is trying to reduce its carbon footprint by adopting such processes that are energy efficient and requires very little natural resources. The crypto industry is also facing the pressure of this environmental trend and the migration of the crypto currencies from an energy intense PoW consensus mechanism to an energy efficient PoS consensus mechanism has begun. For the long term survival, following the environmental trend would be the best choice that every entity in the crypto world will make.”
The Environmental Trend of Cryptocurrencies
Environmental degradation is one of the major issues that is being faced by the whole world at the moment and this has led to various organizations around the world to change their business models to incorporate environmentally friendly approaches. This environmental effect has now started to push the crypto industry to look towards more energy efficient means as the cryptocurrency mining is an extremely energy intensive process. It is estimated that the current annual electricity consumption of Bitcoin Mining is 129 TWh which is more than the annual energy consumption of a country like Argentina with 125 TWh energy consumption.
Ethereum is another cryptocurrency that uses Proof-of-Work consensus and requires energy to mine. This has attracted many environmentalists to write and research about the carbon footprint of mining, making a trend that impacts the usage of the cryptocurrencies by a large mass of people around the world.
Cryptocurrencies must follow the Trend and Migrate to PoS?
For a long term survival of the crypto industry, it must follow the environmental trend. There are various reasons that make it the need of the hour for crypto industry to migrate from energy intensive Proof-of-Work (PoW) to Energy Efficient Proof-of-Stake (PoS):
Bad Name from Environmentalists
Being an energy intensive cryptocurrency brings bad name to it and makes people shy away from investing. This is one of the reasons when Elon Musk announced the rejection of Bitcoin as a payment method for Tesla due to environmental concerns, the whole crypto market tumbled by more than 50% in May, 2021. It is one of the reasons that many cryptocurrencies such as Ethereum are migrating to PoS.
PoS is Energy Efficient
As PoS does not require huge computational power to mine cryptocurrency, rather requires an extremely less power for running nodes on the blockchain and staking the cryptocurrency and earning rewards, it makes it an extremely energy efficient consensus mechanism.
Fast and Scalable
The cryptocurrencies that use PoS as consensus mechanism can provide faster transactions on the blockchain and are scalable in nature. This makes PoS a need of the hour for cryptocurrencies. Ethereum 2.0 is a network migration to PoS consensus so that the network becomes energy efficient and scalable at the same time.
Disclaimer: The article should not be considered as any financial advice. It is advisable to conduct thorough research before investing.
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