Environmental issues continue to plague Bitcoin, but the Ripple CTO thinks the market demands it stays as it is.
The New York Times published an article featuring calls from experts saying Bitcoin will eventually need to follow what Ethereum is doing and change to a Proof-of-Stake (PoS) consensus mechanism.
Bitcoin’s ravenous demand for electricity is an undisputed fact. But things get muddled when it comes to where that energy comes from, i.e., fossil fuels vs. renewable sources. As much as switching to a PoS mechanism would bypass both issues, that isn’t something that will happen soon, if at all.
Bitcoin’s environmental impact
Data from Cambridge University estimates Bitcoin’s annualized electricity consumption is 138.6 TWh. That’s more than Sweden, which consumes 131.8 TWh of electricity a year.
Bitcoin relies on the Proof-of-Work (PoW) consensus mechanism. This process enables miners to add new blocks based on whoever comes up with the winning PoW.
Finding the winning PoW is matching a “guess” of random letters and numbers to the target. The more guesses get churned out, the more likely to match the target and earn the block.
Millions of calculations a second are made in what is a highly competitive endeavor. All of which places a huge demand on electricity supply.
The founder of Blockchain for Climate, Joseph Pallant, spoke about Ethereum’s switch from PoW to PoS, saying Bitcoin will eventually have to follow suit. Particularly if the environmental backlash worsens.
Pallant added that despite push back on this, the calls for it to happen will not go away.
“Rather than just be like, ‘Ah, I’m going to back away and not touch it,’ I’d say dive in and then figure out what you need to do for your conscience.”
Why PoS is not coming anytime soon
Mining power on a PoS network comes from the proportion of coins held by validators. The PoS algorithm randomly selects validators to write blocks.
This method does away with the need to utilize power-hungry mining equipment. The only competition comes from validators attracting token holders to join their pool. They typically do this with statements of better staking returns than the next validator.
On Bitcoin transitioning to PoS, Ripple CTO David Swartz said that stakeholder dynamics would drastically change if that were to happen. Taking PoW away from miners would cause an uproar, as we are witnessing on Ethereum now.
A group of Ethereum miners recently threatened to concentrate their hashing power, as a show of force, in protest over plans to reduce their mining rewards. Doing this could theoretically leave the network exposed to a 51% attack.
Schwartz said investors choose Bitcoin because of what it is. If PoS and environmental concerns take precedent, then users would simply invest in such tokens. But he thinks there’s room for at least one PoW blockchain in the market.
Despite claims that PoS is as secure as PoW and lower cost, Schwartz said this is not a universally accepted truth.
One of the major draws of Bitcoin is that its high PoW hashing power makes it the most secure blockchain out there.