Ethereum is Proving Crypto Energy Costs Can Be Cut— Crypto Platform to Pave the Way to the Future

Ethereum says they could cut their energy reliance by 99%, here’s how they plan on doing it, and what this means for the crypto space.

Serenity, Shard chains, and Ethereum 2.0 finally started their launch in December of last year. While those invested in cryptocurrency, through crypto platforms, met this announcement with appropriate levels of hype and excitement, the rest of the world has largely ignored this thrilling news. Mostly because Bitcoin, Ethereum’s biggest contender, has been taking up most of the headline space for cryptos. With the mega coin hitting massive highs, and expecting even more in the future, there has been little information dedicated to this new paradigm for Ethers’, and quite possibly all of cryptos’, future.

Both Ethereum and Bitcoin ran on a validation system called “Proof of Work” (PoW), while a brilliant strategy for decentralized transaction validation and ledger systems, the format requires a ton of energy. Like the kinds of energy demands that are normally associated with entire countries. Vitalik Buterin, the founder of Ethereum believed there was a better way to achieve the same results— and he’s well on his way to proving it. However, just jumping on your favorite crypto platform for trading Ethereum is unlikely to showcase exactly what this change means for the future of cryptos at large. Or how important this innovation could prove to be.

Shifting the Burden

Ethereum has long been a leader in crypto innovation, particularly with their initial programming language that allowed for the crypto platform to create and resolve smart contracts— virtual contractual agreements that are arbitrated digitally. Completely removing the age old and often costly middlemen. This decentralized system of contract remittance changed the game for Ether, and allowed the entire crypto platform to continue to create necessary and novel financial tools. From smart contracts, this crypto platform created DeFi, decentralized financial tools and structures that mimic those of legacy centralized systems, all without the pesky human element. Allowing for people to engage with crypto in the same way they would with centralized banks— but without the manipulation, discrimination, and cost.

As Ethereum continued to build upon what will most certainly become the new era of finance, adoption continued to swell— and so did energy consumption. Which lead each ethereum transaction requiring almost as much energy as the average daily American household. “That’s just a huge waste of resources, even if you don’t believe that pollution and carbon dioxide are an issue. There are real consumers— real people— whose need for electricity is being displaced by this stuff.” Buterin was quoted as saying. Thanks to the whiz kid’s penchant for solving problems and thinking on a global scale, the Ethereum network was able to not only in vision a better way of doing business, but to execute it.

Which is where Ethereum 2.0 comes in.

Proof of Stake and Ethereum’s Energy

The main culprit behind Ethereum’s (and Bitcoin’s, and most other crypto’s) energy greed is the mining process. Mining is the term used to describe how new tokens are minted and transactions on a given network are validated and added to the blockchain. So it’s simple to see that the process of mining is crucial to ensuring that cryptocurrencies not only work, but continue to remain decentralized. But Buterin believed there was another process of validation that didn’t require mining, in fact— one that didn’t even require blockchain.

Proof of Work (PoW)

PoW is probably the most common method of validating crypto transactions. This system relies on miners, computers that are connected to the network and compete to solve complex mathematical algorithms, to validate transactions. This means that nearly every computer connected to a PoW network is competing with one another to solve the exact same equation— and whoever wins the race gets the reward.

Miners are rewarded in newly minted tokens, as well as scant transaction fees.  Once an equation is solved, the transaction can be added to the blockchain. Because of the blockchain’s linear construction, only one transaction can be added to it at a time. Which means that the process is not only slow, but also consumes a huge amount of space, creating these massive lines of information. While competing miners means that no one person can ever exert total control of the network, it also means that a number of miners are expending energy unnecessarily— particularly if they’re not the first to solve the puzzle.

Proof of Stake (PoS)

Ethereum 2.0 has promised to change all of this— from the energy demand, to centralized power grabs, and even to the way transactions are added into the public ledger. All by utilizing a Proof of Stake system. In a PoS system, miners are replaced by validators: individuals who ‘stake’ a load of ether (etheruem’s token) in order to get a chance at solving the transactional puzzles and subsequently getting the reward. The system works similarly to a lottery, as the individuals vying for the chance to win must ring fence a specific amount of ether in order to be considered. The stake is used as collateral, ensuring honest practice from the validator. Should the transaction be appropriately validated, the invested party will not only win their reward for solving the puzzle, but their staked ether will be returned to them as well.

This cuts energy demands by a hundredfold, without the need for computers to compete with each other, instead concentrating just one and its sole energy demands on a particular transaction. Where PoW might require 700 computers to be pumping out huge power demands, PoS requires only one. More than just the validation process, Ethereum plans to change the way that transactions are stored— which promises to allow for faster transaction rates and lower storage demands. Also serving to drop energy consumption by the network.

Shard Chains

To fully complement this new system of validation, Ethereum has also overhauled the way that transactions are added to the public ledger. In a blockchain format, transactions are added into blocks as they are confirmed. These blocks, once full of individual transactions, are then added to a long chain of similar blocks. Creating a huge trail of data. This system not only means that transaction times are incredibly slow, but that transactions can not be validated and added to the chain simultaneously.

Shard chaining on the other hand, the system that Ethereum aims to fully implement with Serenity, spreads this networks’ chain of information across 64 individual chains (or shards), making it so that transactions can be added simultaneously to any one of the 64 chains. This means that it also takes up less room in a computer’s storage systems as each Validator would only need to store the specific chain they are interacting with. Which means that validators can run nodes and use less storage, using even less energy.

Sharing works by splitting the traditional blockchain storage paradigm horizontally, spreading out the available transaction addition space. This is how the network will be able to process multiple transactions at the same time, while still allowing each shard to communicate with one another and the main net— just like blockchain. Ensuring decentralized power and a transparent public ledger system to boot. Not only this, but sharing also serves to boost the security of the network, by reducing the likelihood of single points of failure.

How Will This Affect Crypto Platforms?

Short answer? It won’t. As Ethereum has planned on rolling out this entirely new paradigm of validating, storing, and exchanging ether, slowly overtime— the new system is to be fully integrated into the way we interact with ethereum now. So while, over the period of the next two years, there are massive changes to be expected, most investors won’t have to deal with them until Serenity (the final stage of development) has reached its full potential and the Ethereum main net is integrated into this new system.


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