PoW vs. PoS

Beams of light
Arrows
Arrows

26-10-2023

George Hammick

GM MIN3RS! We’ve been discussing blockchain & the environment. This post explores the primary factor relating to a chain’s energy consumption - its consensus mechanism.


A consensus mechanism enables a decentralised network of machines running a blockchain’s software to reach a consensus on the state of the chain. It is crucial in an environment where there’s no centralised book-keeper.


There are two primary models for achieving blockchain consensus - Proof of Work (PoW) & Proof of Stake (PoS).


PoS chains require validators to lock up (stake) a blockchain’s native token (e.g. ETH for the Ethereum chain) to participate in consensus. They do this in exchange for reward (yield). Generally, to breach a PoS chain’s security, a bad actor must control >51% of the stake. On Ethereum, this means controlling over $46B. Even then, ecosystems have other layers of protection.


Instead of capital, PoW chains reach consensus with computing power. To breach security, bad actors must control >51% of the network’s computing power. For Bitcoin (the dominant PoW chain), this is considered almost impossible using today’s technology.



⛽ Energy Consumption


Generally, PoS chains do not require high computing power. Ethereum validators can operate on cheap consumer-grade computers. Therefore, Ethereum’s energy consumption & carbon footprint are small. When Ethereum relied on PoW (it switched in 2022), it consumed ~78 TWh of electricity p.a. It’s now ~2601 MWh (a 99.99% reduction, equivalent to 0.2% of global energy consumption).


Mature PoW chains do require significant computing power. Bitcoin miners rely on specialised hardware &, as a result, the energy consumption of Bitcoin is significant - similar to Ethereum pre-PoS.


🪫Is PoW Energy Consumption Bad?


No, not necessarily - e.g. Bitcoin mining is becoming a net positive for the environment (see our previous post in the comments):

  • - Regulates grids & incentivises the build-out of green energy supply
  • - Harnesses wasted & stranded energy (reducing harmful emissions)
  • - Puts “waste” products (e.g. heat) to productive use (e.g. water distillation)

Regardless, some things (e.g. securing the world’s hardest money) are worth spending energy on!


🤔PoW or PoS?


There are clear cases for PoW & PoS existing side-by-side as they typically serve different use cases. Take Bitcoin & Ethereum as examples.

Bitcoin primarily aims to be a monetary or store of value asset. History demonstrates that money can only resist debasement when it is difficult to produce & secure - PoW mining helps to ensure that.


Ethereum aims to be a ‘world computer’, hosting a multitude of different applications & services, from decentralised finance, gaming & social media, to tokenising real-world assets & supply-chain management. As such, it prioritises fast/cheap transactions, which are easier to deliver using PoS.

So, if any of you are cautious about experimenting with blockchain for environmental reasons, don’t worry!