Proof

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One of the world’s biggest blockchains is testing a new way to approve transactions. The move has been many years in the making but doesn’t come without risks.

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The market for NFTs—tokens that represent digital art, music, videos, & the like—soared last year to $44 billion. This brought a lot of attention lớn Ethereum, the blockchain network where most NFTs are bought và sold. It also brought a lot of attention to something else: the massive energy wastefulness of cryptocurrency mining. 


Blockchains don’t have a central gatekeeper, like a bank, to lớn verify transactions. Instead, both Bitcoin và Ethereum, the two largest cryptocurrencies, rely on a consensus mechanism called “proof of work” to lớn maintain a time-ordered ledger of transactions. Crypto miners are at the chip core of that process.

Decentralization comes at a hefty cost. In the case of proof of work, that cost is computing power. Proof of work pits miners against each other, as they compete khổng lồ solve a difficult math problem. Any miner who solves the problem first, updates the ledger by appending a new block lớn the chain, & gets newly minted coins in return. This requires an enormous amount of computing nguồn and, thus, electricity.


Ethereum uses 113 terawatt-hours per year—as much nguồn as the Netherlands, according khổng lồ Digiconomist. A single Ethereum transaction can consume as much power as an average US household uses in more than a week. Bitcoin’s energy consumption is even worse.


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Ethereum thinks it can change the world. It’s running out of time to lớn prove it.
The blockchain system has daunting technical problems khổng lồ fix. But first, its disciples need lớn figure out how khổng lồ govern themselves.

Right now the world is facing a power nguồn crunch, which is partly why china banned crypto mining last year, & why countries like Kosovo và Kazakhstan, where the miners scattered off to, are pushing miners out and cutting off their electricity. These countries need the power khổng lồ keep their businesses running & their homes warm.

Not only does proof of work waste electricity, it generates electronic waste as well. Specialized computer servers used for crypto mining often become obsolete in 1.5 years, and they over up in landfills.


Ethereum’s mechanism has other drawbacks—it’s tediously slow, averaging 15 transactions per second. & it doesn’t scale. CryptoKitties, a game where players breed and trade cartoon cats, caused a transaction pileup on the network in 2017.

With all the money venture capital firms are shoveling into Web3—a futuristic model where apps will all run on decentralized blockchains, much of it powered by Ethereum itself—now is a good time for Ethereum lớn disassociate from proof-of-work mining. & that’s the trò chơi plan.


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Sometime in the first half of 2022, in a dramatic sự kiện termed “The Merge,” Ethereum plans khổng lồ transition its entire network khổng lồ a different consensus mechanism: proof of stake, which it promises will use 99% less energy, allow the network to scale, & potentially help it reach 100,000 transactions per second.

Of course, Ethereum’s move lớn proof of stake has been six months away for years now. “ it would take one year lớn POS … but it actually taken around six years,” Ethereum’s founder, Vitalik Buterin, told Fortune in May 2021. That’s because building such a mã sản phẩm is complex.

What is proof of work? 

Bitcoin was the first blockchain. Its creator wanted to vày away with the control that third parties, often big banks or states, exerted over financial systems.

In a blockchain where participants maintain a shared ledger, Bitcoin’s creator needed khổng lồ find a way lớn keep people from trying to trò chơi the system and spend the same coins twice. Proof of work was a clever kludge—it wasn’t perfect, but it worked well enough.

By demanding a significant upfront investment, “proof of something” keeps bad actors from setting up large numbers of seemingly independent virtual nodes và using them lớn gain influence over the network. Essentially, you have to lớn pay to lớn play.


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In Bitcoin’s proof of work, that investment is hardware. Roughly every 10 minutes, Bitcoin miners compete to solve a puzzle. The winner appends the next block to lớn the chain và claims new bitcoins in the size of the block reward. But finding the solution is lượt thích trying khổng lồ win a lottery. You have lớn guess over và over until you get lucky. The more powerful the computer, the more guesses you can make.

Sprawling hệ thống farms around the globe are dedicated entirely to just that, throwing out trillions of guesses a second. Và the larger the mining operation, the larger their cost savings, & thus, the greater their market share. This works against the concept of decentralization. Any system that uses proof of work will naturally re-centralize.

In the case of Bitcoin, this ended up putting a handful of big companies in control of the network.

Since early on in Bitcoin’s history, though, crypto enthusiasts have searched for other consensus mechanisms that can preserve some degree of decentralization—and aren’t as wasteful và destructive to lớn the planet as proof of work.

How proof of stake works

Proof of stake, first proposed on an online forum called BitcoinTalk on July 11, 2011, has been one of the more popular alternatives. In fact, it was supposed to lớn be the mechanism securing Ethereum from the start, according to lớn the white paper that initially described the new blockchain in 2013. But as Buterin noted in 2014, developing such a system was “so non-trivial that some even consider it impossible.” So Ethereum launched with a proof-of-work mã sản phẩm instead, and set khổng lồ work developing a proof-of-stake algorithm.

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Proof of stake does away with miners và replaces them with “validators.” Instead of investing in energy-intensive computer farms, you invest in the native coins of the system. Khổng lồ become a validator and to win the block rewards, you lock up—or stake—your tokens in a smart contract, a bit of computer code that runs on the blockchain. When you send cryptocurrency lớn the smart contract’s wallet address, the contract holds that currency, sort of lượt thích depositing money in a vault.