Ethereum’s transition to PoS will affect the whole industry

Binance has conducted a Proof-of-Stake (PoS) consensus cryptocurrency study. According to its results, the capitalization of coins on PoS will double after the transition of Ethereum to this method.

In the report
it is noted that the market capitalization of the 10 largest cryptocurrencies based on PoS, taking into account the future accession of Ethereum, is $ 25.8 billion. This is about 10% of the total market capitalization. Moreover, if we exclude the contribution of Ethereum, which is only planning to switch to PoS consensus, it turns out that the capitalization of such cryptocurrencies is $ 11.2 billion, of which $ 6.4 billion is used for stacking.

Unlike the Proof-of-Work (PoW) method, in networks built using PoS, blockchain nodes confirm blocks without investing computing power. The PoS algorithm selects block validators depending on the number of coins in the node’s wallet. That is, they are blocked on the account, and the node receives a reward for confirming the block.

Among cryptocurrencies traded on Binance, Algorand, Tezos and Cosmos coins show the largest percentage of stacking – more than 70% of the coins in circulation are used for stacking. In projects such as Tron and Qtum, less than 25% of coins are blocked on wallets to confirm blocks.

Researchers noted that PoS-based cryptocurrencies are suitable for passive investment, however, an investor needs to determine the profitability to risk ratio, as some projects have a lack of liquidity. In addition, the periods of blocking assets in the wallet differ.

Earlier, Ethereum co-founder Vitalik Buterin said that after switching to Proof-of-Stake (PoS), the Ethereum network will become more secure than the Bitcoin blockchain, and the cost of the attack is too high. The transition to a new algorithm in the Ethereum network is expected in January next year.