A blockchain, simply, is a decentralized, public ledger of transactions. This technology can be used for cryptocurrencies, NFTs, and many other applications currently swirling around the web. However, one ongoing problem in blockchain technology is how to deal with security. Currently, many of the most popular cryptocurrencies use the technique Proof of Work (PoW). To validate any transaction, several third-party computers, “nodes,” in the system have to solve a cryptographic puzzle then verify the transaction as legitimate. This way, nodes must be at least somewhat powerful to ensure an individual doesn’t create thousands and thousands of virtual systems to verify false transactions, these nodes are then rewarded for their effort with small amounts of generated cryptocurrency.
There are serious problems with this technique, however. Because such a system incentivizes individuals to sink more and more power into verifying these transactions, significant pollution and waste can be produced. According to an article by Investopedia, “By the latest estimates, the bitcoin network uses as much energy in one year as the country of Argentina … accounts for about 35.95 million tons of carbon dioxide emissions each year—about the same amount as New Zealand.” These insane figures show both the size of the cryptocurrency industry, but also how surprisingly damaging it is.
There’s also another source of waste produced by the blockchain, Ewaste. As crypto “mining” becomes more and more popular, more specialized hardware is being produced to increase efficiency. However, due to their specificity, it’s almost impossible to repurpose these circuits which then, after obsoletion, simply become waste. Additionally, because in the PoW protocol verification power is directly related to computational power, a potential attacker would only need 51% of the network’s computational power to verify a false transaction.
One potential and increasingly popular solution is the Proof of Stake (PoS) mechanism. Instead of relying on cryptographic puzzles and computational power, PoS distributes mining and verification by the usage of total coins a miner holds. This way the high computational power and electrical requirements plummet because the system doesn’t inherently require them. Additionally, as an attacker would need to acquire 51% of total coins in the system in order to create a fraudulent block, these assaults would be practically impossible. Even if an individual or group was able to obtain 51% of the total coins in a network, it would no longer be in their interest to perform such an attack.
This greener and more secure solution is slowly being adopted by new cryptocurrencies. In an NBC article published in May, Polygon, Tezos, Polkadot, and EOS are all cited as coins that have implemented PoS mechanisms. Additionally, Etherium 2.0, a supposed successor to the wildly popular Etherium, will use PoS. The main problem, though, is that it’s immensely difficult for an established PoW cryptocurrency to transition to PoS. And as Bitcoin is by far the most popular cryptocurrency right now, it may take a while for the crypto community to transition to a more sustainable future.
Please Note: The information discussed in this article is relatively new and encapsulated within a continuously evolving field. Some information may be outdated by the time of reading and some new information or ideas may be unmentioned. Look out for follow-up articles and updates from us regarding this subject in the near future!