Proof of Stake is a mechanism for achieving consensus on the blockchain. Blockchain is a technology that records transactions that cannot be deleted or changed. It’s a distributed database, or ledger, not under the control of any one 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 this technology, blockchain is now part of a variety of systems that enable interesting applications such as decentralized financial platforms and non-fungible tokens (NFTs).
The first widely commercialized blockchain consensus mechanism was Proof of Work, which allowed users to reach consensus by solving complex mathematical problems. To solve these problems, users are generally offered a stake in the system. This process, called mining, requires a large amount of computing power. Proof of stake is an alternative that consumes far less energy.
At the core of blockchain technology are three key properties:
- Distributed Governance and Operations — People using the system can collectively decide how to manage and operate the system.
- Verifiable State — Anyone using the system can verify the correctness of the system, and each user can be assured that the system is working as expected today and has worked since the beginning.
- Resilience to Data Loss — Even if some users lose copies of their system data through negligence or cyberattacks, the data can be verifiably recovered from other users.
The first property, decentralized governance and operations, is the property that controls the amount of energy required to run the blockchain system.
Voting in blockchain system
Blockchain systems use voting to decentralize governance and operations. The exact mechanics of how voting and consensus are achieved vary from blockchain system to blockchain system, but broadly speaking, blockchain systems describe how the system works and how specific operations (new Each user can vote on whether or not to accept a block onto the chain. For example, you have to approve.
Traditionally, voting requires that the identities of those voting must be known and verifiable to ensure that only eligible people vote and only once. Some blockchain systems allow users to prove their identity by presenting a digital ID, allowing them to vote with negligible energy consumption.
However, in most blockchain systems, users are anonymous and do not have digital identities that can prove their identities. So what prevents individuals from pretending to be many individuals and casting many votes? There are several different approaches, but the most commonly used is Proof of Work.
With Proof of Work, users get votes based on the amount of computing power they have in proportion to other users. They prove ownership of this computing power by solving difficult mathematical problems. If a user can solve another user’s twice as many problems as her, that user has twice as much computing power as the other user’s and gets twice as many votes.
However, there have been complaints that proof of work is not sustainable because solving these mathematical problems consumes so much energy. Researchers at the University of New Mexico have found that bitcoin mining has a greater climate impact than global beef production.
Proof of Stake
To address the energy consumption of proof of work, we need another way to validate the user. Proof of Stake is one such method. With Proof of Stake, users verify their identity by proving their ownership of assets on the blockchain. For example, in Bitcoin it is ownership of Bitcoin and in Ethereum it is ownership of Ether.
This requires users to temporarily lock their assets on the blockchain, but is much more efficient as it requires negligible energy consumption. The company estimates that moving from Proof of Work to Proof of Stake will reduce Ethereum’s energy consumption by 99.95%.
This improved energy efficiency is why many blockchain systems are moving from proof of work to proof of stake. Ethereum made this change on September 15, 2022. This is known as merging. During this merger, operations changed from being voted using Proof of Work to being voted using Proof of Stake. Once the merge is complete, only Proof of Stake will be used for transaction voting.
The goal is that this sets Ethereum to be sustainable in the near future.
This article is reprinted from conversation Under Creative Commons License. Read the original article by his Scott Ruoti, Assistant Professor of Computer Science. University of Tennessee.