Ethereum blockchain PoS

Ethereum, the second largest cryptocurrency, has moved from Proof of Work (PoW) to the Proof of Stake (PoS) model — the so-called major upgrade “Merge” was completed on the morning of September 15, 2022 in the Ethereum blockchain. This was confirmed by the creator Vitalik Buterin.

The motive for this blockchain reform was a concern for the planet and the need to reduce the carbon footprint of the company — the new algorithm of work will allow the second largest cryptocurrency to significantly reduce energy consumption by an estimated 99.95 percent.

So what exactly has changed?

The Ethereum PoW system worked by having crypto miners compete to record transactions on their ledger by solving cryptographic puzzles — earning Ether in exchange. The process was extremely energy intensive, requiring 200 kWh per Ethereum transaction, which is comparable to what a family uses in a week. In fact, the entire network consumes about 78 TWh per year, about the same as a country like Chile.

On the other hand, the new PoS algorithm requires validators to hold and stake tokens — in this case, at least 32 ETH. This works similarly to lottery tickets. The more ETH you stake, the more likely you are to be selected to record a block of transactions on the Ethereum digital ledger, earning you a reward. This system is significantly more efficient — as we already told, the Ethereum network is expected to consume 99.95 percent less energy. In turn, this will reduce global electricity consumption by 0.2 pecent.

Also, Ethereum’s transition to PoS does not involve the use of GPUs for mining, which should lead to further price reductions for GPUs.

Ethereum’s transition to the PoS model has been under development since 2016. The switchover began on September 6, when the Bellatrix update was activated.

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