The emergence of cryptocurrencies disrupted the traditional financial sector and captivated the world. The decentralization movement not only prevents fraud, but for those living under authoritarian governments, it can provide a means of exchange resistant to censorship, thus providing an essential means of financial freedom.
Progress with a great price
Although cryptocurrencies are praised for their technological progress, they have not gone without moments of control. In May, Elon Musk decided to stop accepting Bitcoins as currency for Tesla and wrote on Twitter that he was concerned about “the rapidly growing use of fossil fuels for BTC mining.”
This is because high-end cryptocurrencies – including BTC, Bitcoin Cash and Ethereum – require high power consumption to function. The report showed that by 2020, BTC is well on its way to consuming more energy than 159 countries combined.
No wonder people like Musk are promoting greener alternatives. Despite the fact that most new technologies compromise, this question has sparked a debate on how blockchains can move further towards environmentally friendly practices.
PoW and PoS
This is where Proof-of-Work (PoW) or Proof-of-Stake (PoS) becomes interesting in terms of the environmental impact of blockchain. Both PoW and PoS algorithms can have a direct effect on power consumption.
However, it is known that PoW usually requires a significant amount of energy because miners have to sell their coins in order to pay the bills. PoW was created as the original consensus algorithm for blockchain and is used to commit transactions and add new blocks to the data storage chain.
An alternative is PoS, which operates on the basis of the percentage of coins held by the miner. Cryptocurrencies have adopted it in order to maximize energy efficiency, as it usually has a significantly lower level of consumption, because miners do not have to solve complex mathematical problems as in the case of PoW blockchain. For this reason, PoS has become the default choice for most newer blockchains.
In view of this, the argument that PoW-powered blockchains are not able to provide energy-efficient mining solutions is not entirely accurate. With advances in scalability, new PoW technology has emerged that allows this form of mining to be as environmentally friendly and safe as PoS.
Although it may seem at first glance that PoS blockchains are better for the environment, on closer inspection they present a number of problems due to their lack of scalability. On the other hand, although PoW-based blockchains initially appear to consume more energy, they may also have very good potential to be greener and safer than PoS-based blockchains.
While during the blockchain boom, most players in the industry opted for the promises offered by high-energy PoS mechanisms, one organization, Kadena, focused its efforts on scalability and devoted its time to building a more robust basic blockchain solution.
While PoS-using blockchains claim that PoW is not sustainable, the most critical factor contributing to PoW’s energy efficiency is transactions per second (TPS). Kadena claims to be able to enforce up to 100,000 TPS, which will be confirmed during testing later this year.
Not only will this be a breakthrough speed, but it will also make it the only scalable PoW blockchain. Compared to PoS, which can sometimes reach only 10 TPS, this can be a much faster and greener protocol.