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Is Proof-of-Stake Really Better for the Environment?

It is undeniable that human society has negatively impacted the environment. Naysayers of cryptocurrency have long cited the environmental detriment of the Proof-of-Work (PoW) model as reasons crypto should never be widely adopted.

The Proof-of-Stake (PoS) consensus mechanism arose partly out of that discourse and promises to be an environmentally-safer alternative to PoW. Is there any truth to the claim that staking is better for the planet?

What is Proof-of-Stake?

As mentioned, PoS is a consensus algorithm created in 2011 on the Bitcointalk forum as an alternative to the well-known PoW. 

Instead of having miners like in a PoW blockchain, users of PoS blockchains may stake their crypto to become a validator in the network. The staked tokens are used to check if transactions are valid, sign them, and add them to the blockchain in a process known as forging. Validators then earn rewards in the form of transaction fees.

In contrast, PoW requires miners to solve complex problems in order to generate new blocks. While this makes PoW very secure, it requires a high level of computing power. As miners compete to solve the problem first, they build increasingly complex mining rigs, requiring higher levels of energy to sustain. This is why electricity consumption for PoW networks tends to be extremely high. To illustrate, Bitcoin’s energy consumption has increased tenfold since 2017.

Is Proof-of-Stake Environmentally Friendly?

Solar panels against blue sunny sky produce green, environmentally friendly energy from sun. Blue solar panel background of photovoltaic modules for renewable energy.

Let’s start with what isn’t environmentally friendly – PoW. To put it all in perspective, the Bitcoin miners consume an estimated 110 TWh annually. This is more than the whole country of Switzerland in a year. Proponents of Bitcoin, however, argue that more than half of the energy comes from renewable sources, and that energy consumption isn’t the same as carbon emissions.

PoS does not require validators to compete for mining power and is significantly less energy-intensive than PoW. On top of this, instead of massive mining setups requiring high amounts of energy to run, PoS requires each node to have the computer power of the average laptop. In fact, the Ethereum Foundation Blog estimates that moving to a PoS consensus mechanism will decrease Ethereum’s energy consumption by ~99.95%. In the words of Ethereum founder, Vitalik Buterin, “It’s widely accepted in the Ethereum community that PoW uses far too much energy. For me, it is the №1 priority.” 

For this reason, with the growing environmental concerns, more companies and projects are considering their transition to the Proof of Stake consensus mechanism.

Crypto VS Traditional Banking

In a report on Bitcoin’s energy consumption by Galaxy Digital, Bitcoin’s energy consumption is less than half that of the traditional banking system. Of course, that is hardly a fair comparison as Bitcoin is just one network, and the banking system is used by 70% of the world’s population. 

As more and more networks switch over to the more popular PoS algorithm, the energy consumption of cryptocurrencies will only continue to decrease.

Bitcoin mining is also driving innovations in renewable energy as miners strive to get the cheapest source of energy possible in order to maximise their profits. As a result, miners are incentivised to use green sources of energy without any government intervention.

In Conclusion – Beware of the FUD

A superimposed planet Earth sitting on top of grass.

Climate change is real and it’s happening. Should proponents of cryptocurrency be environmentally responsible and consider the impact of their actions on the environment? Absolutely – and it is already happening. With more and more chains moving towards a PoS consensus mechanism and abandoning the energy-intensive PoW one, crypto’s carbon footprint will be significantly reduced.

The conversation on saving the planet should not be centred on getting rid of crypto or blockchain technology altogether. The same report by Galaxy Digital found that the electricity consumption of always-on electric devices in America alone is nearly 20x higher than that of Bitcoin’s. Perhaps the discourse on Bitcoin’s energy consumption is just a small part (0.5% to be precise) of the overall conversation we should be having on saving the environment.

With innovations in renewable energy, and moving toward more environmentally friendly mechanisms such as PoS, the crypto community is actively taking steps to limit environmental damage given crypto’s explosive growth over the past few years. Now, we should be putting the same heat on all industries across the board to help save the planet.

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