For quite some time now, one of the world’s most prominent blockchains, Ethereum, has been trying to improve its network. Several analysts expect Ethereum’s switch from Proof of Work (PoW) to Proof of Stake (PoS) to positively impact the price of Ether and reduce the transaction fees on the network.
But according to Ethereum developers getting PoS right is a big technical challenge and not as straightforward as using PoW. With several tests underway, the transition has had some delays, but it is finally back on track. Before we dive deeper, let’s look at the difference between Proof of Work and Proof of Stake and why Ethereum prefers the latter.
Proof of Work vs. Proof of Stake: an overview
First used by Bitcoin, networks that use Proof of Work validate transactions with the help of massive computing power–the main reason why it’s called “Proof-of-Work.” It’s popular because the amount of processing power involved makes it impractical for anyone to meddle with the cryptocurrency’s payment network.
However, because PoW is energy-consuming, it becomes difficult to accommodate large transactions on other blockchains. Ethereum developers understood from the beginning that PoW would limit the network from scaling. And so “Proof of Stake” was created as an alternative.
Proof of Stake?
Proof of Stake varies by blockchains, but in general, the mechanism selects network participants who contribute or “stake” the crypto they own in exchange for updating the blockchain with the latest transactions.
Ethereum’s journey so far
Ahead of the launch, Ethereum was recently testing a new way to approve transactions and launched, ‘Kiln.’ This is the last significant public testing phase before the whole network transitions from Proof of Work sometime this year. The success of this testnet is crucial to migrating to the new network finally. And, post merge, Ethereum claims the network’s energy usage will drop by 99.9%.
So far, Ether deposits to the Ethereum 2.0 contracts spiked this month after a relatively lean period in January and February this year. Price-wise, Ethereum has increased by 7.3% this week and is trading at $2,801.