Proof of Stake is coming fast, and it promises to be a game changer. With growing awareness of cryptocurrencies and increasing transactions, the existing mining protocol, Proof of Work is proving to be a liability given the lengthy and costly transactions involved. The energy consumption is also mind boggling and as more users get into networks, new, cheaper and faster alternative ways of validating transactions are being sought.
Proof of Work is designed to validate transactions through mining. This process involves powerful computers solving complex mathematical problems. This is effective since it ensures there is security and double spending doesn’t occur. The only problem is the energy inefficiency. Also, with each transaction needing a lengthy confirmation process, the blockchain cannot scale easily as more and more users join the network.
This has caused many creators and developers around the crypto community to think outside the box and come up with a solution to this problem. The result is Proof of Stake is coming fast, a transaction protocol that is faster, cheaper and secure. Earlier this year, Ethereum creator Vitalik Buterin announced his decision to step down from Fenbushi to focus on what mattered most which according to him was scalability, Plasma, Proof of Stake and privacy.
He aims to introduce the system this year. The upgrade to the network is known as Casper, and it promises to be a game changer. Instead of powerful miners verifying transactions on the network, users will be able to ‘stake’ their Ether. If the stakers act honestly, confirming legitimate transactions, they will be rewarded with interest proportional to their stake. If the stakers act maliciously and try to cheat the system, their stake will be lost.
Casper could bring huge changes to the Ethereum economic model, and consequently the price of Ether. Transactions will be confirmed much faster, enabling the growth of the network. It will also cap the total number of Ethereum available. A fixed amount of Ether will mean no inflation. Combined with the increased demand Casper will generate (to stake, a fixed amount of Ether is required), we can surely expect an increase in price as users buy up and lock away Eth in stake.
While Proof of Stake is coming fast, do you believe Ethereum could dethrone Bitcoin to become the most valuable cryptocurrency? Let us know in the comments section below.