It takes around 1,449 kWh-level of energy consumption to mine just one single BTC. Now, look at another situation- the upcoming Merge upgrade, that will transcend Ethereum PoS mainnet to complete the PoS chain, is claimed to bring around 99%+ reduction in energy consumption. In the light of the two incidents mentioned above, it won’t be exaggerating to claim that PoS blockchains are a welcome addition to the crypto scene. It’s self-explanatory why the new crypto blockchains mostly allow to stake crypto, i.e., these are backed by PoS blockchains. Check out more at Multibank.io.
The post below offers a brief on how the Proof-of-Stake consensus mechanism would influence the cryptocurrency industry.
A new addition to crypto scene
The stake crypto concept is a new addition to the fast-booming cryptocurrency industry.
When cryptocurrency was first introduced to the world, it came through Proof-of-Work blockchain. The PoW blockchain validates new blocks and mints new coins through the process of crypto mining. Now, as the crypto industry started evolving, new technologies started entering the market. In fact, this is one of the signs that the crypto industry- that was once considered to be novice and outsider- is finally progressing. The proof of stake consensus mechanism is one such new technology that is scaling up the crypto scene to new heights.
The stake crypto concept is different from that of crypto mining though both the mechanisms help the crypto blockchains to serve the same purpose- verify new blocks and bring new coins in the market. In crypto mining, miners have to solve complicated mathematical equations to find the right hash rate. The miner who will be the first one to make the right guess will receive new coins as reward.
The stake crypto procedure is a different business altogether. In crypto staking, crypto holders act as stakers. The PoS blockchain needs a certain amount of coins (of that blockchain) to execute the staking process- the process of verification of new blocks before they are linked to the existing chain. Now, to stake crypto, crypto holders will have to pledge a certain amount of coins to the blockchain. The coins will stay locked throughout the staking period and then will be released to the crypto holders.
More eco-friendly crypto scene
One of the latest shockers in the crypto scene is certainly China banning cryptocurrency. The Asian giant had been one of the largest hubs of crypto and cryptocurrency mining activities since the inception of crypto. But in 2021, China sent a shock wave across the crypto world when the country declared about the crypto ban. The most important reason cited by China behind the ban was environmental issues.
A large number of critics and crypto experts had largely criticized the move citing that China is now afraid that growing popularity of crypto might affect her national currency. However, it can’t be denied that the environmental concern is for real.
It has already been mentioned how much energy is required to mine just one single BTC. Well, the jaw-dropping figure equates to the total energy consumption of an American house in around 13 years! Can you imagine the dire need we have right now to stop crypto mining? But, it’s not that easy- crypto mining has always been the first and original consensus mechanism for crypto blockchains. If we stop the mining process, the whole crypto industry will come to a standstill. But, the PoS mechanism resolves the problem to some extent by offering a more eco-friendly alternative to new block verification. The stake crypto process consumes a fraction of energy consumed by crypto mining.
This way, the PoS helps to clean the image of crypto industry that had previously earned a bad rap as a high energy consuming industry. A lot of countries that had previously been apprehensive of crypto because of the environmental concerns is likely to be more welcoming to crypto.
Introduction of another income avenue in crypto zone
This is one of the main reasons why crypto investors, especially HODLers, have embraced the PoS mechanism with open arms.
The stake crypto concept offers a handy passive income opportunity for stakers. You already know by now about the mechanism of the staking procedure. Now, when stakers pledge their coins to the blockchain, the blockchain rewards them with staking rewards.
This way, crypto investors get a window to monetize their already idle coins. In other words, when you stake crypto, you get to earn from two sources. One is through HODLing which you are already doing. In HODLing, you keep the coins on hold for years and then sell them for higher returns. The other is through staking rewards.
So, thanks to PoS, the crypto scene is now able to offer not just two but three avenues to make money with cryptocurrency- investing/HODLing, trading, and staking.
Reducing option for crypto miners
With more and more crypto blockchains taking to the PoS mechanism, there is barely any new crypto blockchain that follows the PoW mechanism. While this is great news for the environment, it is causing a stir among crypto miners.
Crypto miners are getting increasingly apprehensive of their source of earning through mining. Likewise, the businesses associated with mining- such as ASIC companies, mining pools etc.- are worried about their future in the crypto space given the rising interest in PoS.
It could be that the crypto scene is approaching an era where crypto mining will become a thing of the past. Yes, you can mention BTC here – the king of crypto that could only be minted through mining. But, 19 million BTC are already in circulation and only 2 million are left to be mined. After the remaining BTC has been mined out, it’s quite likely that the mining process will almost disappear from the crypto scene. Yes, there are other crypto blockchains that follow PoW but none of them command the level of significance commanded by Bitcoin.
Blockchain developers have quickly taken notice of the PoS blockchain; almost all new crypto blockchains are PoS blockchains today. However, with Ethereum shifting to PoS from PoW, it won’t be too wild to claim that PoS is poised to rule over crypto blockchains in the coming future.
