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General Studies 3 >> Science & Technology

ETHEREUM

 

ETHEREUM

Source: indianexpress
 
 

CONTEXT

The "Proof of stake "consensus mechanism will cut Ethereum's energy consumption by 99.95%.

ETHEREUM is one of the most used platforms by developers to build decentralized apps, smart contracts, and even crypto tokens. Ether is only second to Bitcoin (BTC) in terms of market capitalization

The change in the way Ethereum builds the blockchain comes with not just environmental consequences, but also major cyber and financial security implications.

CONSENSUS MECHANISM

  • Decentralized transactions are processed on blockchains using consensus mechanisms
  • Ethereum’s former method," proof–of–work”, which is also used by Bitcoin, needs powerful mining hardware that consumes a lot of electricity and generates enormous amounts of heat. This energy is then used to process extremely difficult mathematical puzzles, the solutions of which would let new transactions be added to the blockchain to reward the miners with crypto.
  • Many environmentalists, policymakers, and regulators have strongly criticized the impact of Bitcoin mining on local communities.
  • Common enters of mining included China, the U.S., Russia, and Kazakhstan –countries with cheap electricity rates and colder climates.
  • Ethereum's website admitted that their crypto's total annualized power consumption nearly matches that of Finland while its carbon footprint is comparable to Switzerland.
  • Ethereum has decided to switch to a "proof–of–stake "consensus mechanism, where Ether owners will stake their coins to serve as collateral and help process new blockchain transactions, in return for rewards.
  • Crypto experts are divided as to which consensus mechanism offers better protection from hackers. Theoretically, there are ways to hack both verification methods. But Ethereum claims the 'proof–of–stake consensus mechanism offers better security.

BITCOIN AND PROOF-OF-STAKE CONSENSUS MECHANISM

Bitcoin switching to a proof of stake consensus mechanism seems highly unlikely because of the following reasons.-

  • Switching to a proof–of–stake consensus mechanism would violate the principles of decentralization
  • It would also represent losses of millions of dollars for individuals miners and companies trying to solve the puzzles that would reward them with BTC.

COMPARING BETWEEN BITCOIN AND ETHEREUM

  • Some Bitcoin supporters go so far as to say that miners’ activities, though harmful to the environment now, will help bring about an energy revolution and the faster adoption of solar, wind, gas, and nuclear energy.
  • However, the consequences of crypto mining across the globe have included mass electricity blackouts, fire accidents, overburdened grids, struggles between locals and crypto miners for more control over the energy supply, and even crypto mining on indigenous land.
  • Ethereum on the other hand was co-founded by Vitalik Buterin, who has an active presence on Twitter .he also attended various international crypto events. The blockchain is backed by powerful non-profit organizations to support its activities-the Ethereum foundations.
  • Therefore as far as the Ethereum community is concerned, miners will no longer produce valid blocks for the Ethereum blockchain.
For now, no other top coin is planning an Ethereum-style Merge.

CONCLUSION

Ethereum Classic has made it clear that it is loyal to the proof–of–work mechanism. It has invited miners to mine ETC and has said that stakers are free to choose ETH2.

May both chains co-exist in their right providing options for stakes and miners.

 

 

 


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