The Eternal Debate - The Daily Gwei #169
Proof of Work or Proof of Waste?
One of the main goals of moving Ethereum to Proof of Stake is to get rid of the expensive and wasteful Proof of Work consensus mechanism that secures eth1 today. We’ve already achieved the first step here by launching the Beacon Chain but we’re still a while away from the eth1 <> eth2 merger so I thought it’d be prudent to talk about PoW and PoS today.
Firstly, I would take the numbers outlined above with a grain of salt because they most likely aren’t totally accurate but I don’t think that takes away from the point that Proof of Stake is orders of magnitude less energy intensive as Proof of Work. This is really by design - PoS does not require expensive mining hardware nor does it consume exorbitant amounts of electricity. On top of this, securing a PoS Ethereum network is much cheaper than securing a PoW Ethereum network as the protocol only needs to pay out rewards to the ETH that is staked which means ETH’s issuance under PoS will be well under 1% a year. Though Proof of Stake isn’t a panacea and does come with tradeoffs.
I think in the coming months and years the extreme energy use of PoW is going to come under heavy scrutiny from governments around the world due to climate change. This reality really is inescapable as by many estimates Bitcoin currently uses around ~0.50% of all global electricity and if Bitcoin were a country it would be ranked 33rd in electricity consumption. This isn’t where Bitcoin stops either - as the price of BTC continues to go up it becomes more profitable to mine on the network which means more mining equipment will come online which means more electricity consumption. We could very well see Bitcoin account for over 5% of all worldwide electricity consumption within the next few years.
The main arguments I see from Bitcoiners around why they believe Proof of Work isn’t wasteful is that mining encourages the use & development of clean energy and they also like to point to other things in the world that use lots of energy that they consider wasteful. For the former argument, I’ve never seen any unbiased research done on this (that is, research from non-Bitcoin aligned camps) and for the latter it’s just classic whataboutism tactics which don’t make for a sound argument. Though of course I’m always open to learning more here so if you know of any resources I should read please do send them across.
In saying all of this I’m fully aware that while eth2 Proof of Stake is live today, we still have a massive eth1 network that runs on Proof of Work and uses enormous amounts of energy. So until the eth1 <> eth2 merger happens, Ethereum is just as bad as Bitcoin when it comes to energy use and mining equipment waste. Though at least Ethereum has a plan to fix this in the near future.
Have a great day everyone,
Anthony Sassano
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All information presented above is for educational purposes only and should not be taken as investment advice.