Proof-of-stake is a mechanism for achieving consensus on a blockchain. Blockchain is a technology that records transactions that cannot be deleted or modified. It is a decentralized database, or ledger, that is not under the control of any person or organization. Since no one controls the database, consensus mechanisms such as proof-of-stake are needed to coordinate the operation of blockchain-based systems.
While Bitcoin popularized the technology, blockchain is now part of many different systems, allowing for exciting applications like decentralized finance platforms and non-fungible tokens, or NFTs.
The first widely commercialized blockchain consensus mechanism was proof-of-work, which allows users to reach consensus by solving complex mathematical problems. To solve these problems, users often participate in the system. This process, called mining, requires large amounts of computing power. Proof-of-stake is an alternative that consumes much less power.
In essence, blockchain technology provides three important properties:
- Decentralized governance and operation: The people who use the system can collectively decide how to govern and operate the system.
- Verifiable state: Anyone using the system can validate the correctness of the system, and each user can ensure that the system currently works as expected and has done since its inception.
- Resilience to data loss: Even if some users lose their copy of system data, either through negligence or cyberattack, that data can be verifiably recovered from other users.
The first property, decentralized governance and operation, is the property that controls how much power is needed to run a blockchain system.
Vote on blockchain systems
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 each user to vote on how the system should work and whether any particular operation : accept a new block in the chain, for example, it must be approved.
Traditionally, voting requires that the identity of the people who cast their ballots can be known and verified to ensure that only eligible people vote and they do so only once. Some blockchain systems allow users to present a digital ID to prove their identity, allowing voting with negligible energy use.
However, in most blockchain systems, users are anonymous and do not have a digital ID that can prove their identity. So what stops one individual from pretending to be many individuals and casting many votes? There are several different approaches, but the most widely used is proof of work.
In proof of work, users get votes based on the amount of computing power they have in proportion to other users. They demonstrate their ownership of this computational power by solving difficult math problems. If a user can solve twice as many problems as another user, he has twice the computational power of other users and gets twice the votes.
However, solving these math problems consumes a lot of energy, leading to complaints that proof-of-work is not sustainable. Researchers at the University of New Mexico have found that the climate impact of bitcoin mining is greater than the impact of world beef production.
proof of participation
To address proof-of-work power consumption, another way to validate users is needed. Proof of Stake is one such method. In proof of stake, users validate their identities by proving ownership of some asset on the blockchain. For example, in Bitcoin, this would be owned by bitcoins, and in Ethereum, this would be owned by Ether.
Although this requires users to temporarily lock their assets on the blockchain for a period of time, it is much more efficient because it requires negligible energy expenditure. Based on company estimate, move from proof of work to proof of stake reduce Ethereum power consumption by 99.95 percent.
The Ethereum ‘merger’
This improved energy efficiency is why many blockchain systems intend to move from proof of work to proof of stake. Ethereum made this change on September 15, 2022. This is known as the Merge. During this merger, operations went from being voted with proof of work to being voted with proof of stake. Upon completion of the merger, only proof of stake will be used to vote on the transactions.
The goal is for this to make Ethereum sustainable for the foreseeable future.
This article is republished from The conversation under a Creative Commons license. Read the Original article for scott wheelsAssistant Professor of Computer Science, university of tennessee.
