Ethereum is now Proof-of-Stake: Consequences for Energy Consumption and GPU Market

It is a first in the world of cryptocurrencies: the second largest currency, Ethereum, switched the proof-of-work procedure to proof-of-stake during ongoing operations. What that means and what is changing for investors and miners.

The change from Ethereum (ETH) to the proof-of-stake process was postponed for years. With increasing delay, this caused a lot of ridicule on the Internet. But now it’s done and the cryptocurrency is officially running with Proof-of-Stake. Not much will change for investors at first, but it will for the miners.

Proof of Work vs. Proof of Stake

In the proof-of-work process, miners around the world compete with each other to solve complex mathematical puzzles. By solving this puzzle through trial and error, another “block” is added to the blockchain, the miner is rewarded with two ETH for his work.

In Proof-of-Stake, miners do not compete in parallel, instead they are randomly selected to mine. In the meantime, they validate and certify proposed blocks. Rewards are available for both mining and validation. To become a validator, users must stake 32 ETH. These are the stake and can also be lost if the user validates malicious blocks.

Proof-of-Stake reduces energy requirements by over 99 percent

Since countless miners try to solve the same tasks in parallel in the proof-of-work process, a large part of the energy used is lost. Apart from the miner who ultimately succeeds, everyone else has put in the effort for nothing. With Proof-of-Stake, miners are drawn at random for mining, the other computers only perform the less computationally intensive validation.

The Etherum Foundation estimates that energy consumption by Ethereum miners will fall by 99.95 percent as a result of the switch. According to Ethereum inventor Vitalik Buterin, this should reduce global energy consumption by 0.2 percent.

Impact on the graphics card market

In all likelihood, the changeover will also have an effect on graphics card prices. Ethereum mining has been one of the reasons for the hardware shortage in recent years. Since running large mining farms is now significantly less profitable, many ex-mining cards could end up on the used market. This also increases the pressure on AMD and Nvidia to keep the prices of current and future GPUs low.

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