Is Proof of Stake coming now?

The Ethereum merge was successful yesterday. A switch from the energy-intensive Proof of Work (PoW) to the Proof of Stake (POS) consensus mechanism is said to reduce power consumption by 99.9 percent. Bitcoin is now under pressure. The criticism: the power consumption is too high, the CO₂ emissions are too environmentally harmful and the PoW technology is too outdated.

swipes from all sides

Bitcoiners have had to endure a lot of frowning and attacking comments lately. Meanwhile, there have been numerous studies, papers, and debates on the subject of PoW vs. PoS. One thing has changed: Authorities, governments and environmental organizations now also play a major role.

Greenpeace USA launched the Change the Code, Not the Climate petition in March. The move to Proof of Stake was suggested in this regard. Apparently politicians in the EU Parliament took this as an example: in the course of the MiCA procedure, a consensus change was also a topic of discussion.

ECB and White House have energy concerns

Scientists at the European Central Bank (ECB) published two bitcoin reports each in the summer. The first report deals with the immense energy consumption of “some crypto assets estimated to consume a similar amount of energy as individual countries like Spain, the Netherlands or Austria every year.” Everyone knows which “crypto asset” is meant by this: Bitcoin.

The second document refers to the “quest for the holy grail of cross-border payments.” But here, too, it quickly becomes clear: Bitcoin is not this. One of the points of criticism is once again the high, proof-of-work-related energy consumption.

The White House recently called for a drastic reduction in the industry’s energy consumption in a report on the climate impact of the crypto industry. Accordingly, the climate goals of the United States are the top priority: greenhouse gas emissions are to be reduced by more than 50 percent by 2030. To this end, “states, municipalities and the crypto industry should be involved together in the design, development and use of environmentally friendly crypto technologies”. If the targets are missed, a proof-of-work ban is threatened. BTC-ECHO reported.

Bitcoin bleibt Proof of Work

In August, the Berlin Socratic Lab, a monthly Bitcoin event in Berlin, featured the Bank of Italy science team’s proof-of-authority concept. After a round of laughter, the next item on the agenda was discussed.

The raging Michael Saylor, who just reacted to the request of the White House, shows the same behavior. In a letter, he explains that he believes the recurring energy discussion is part of the lobbying efforts of competing proof-of-stake crypto projects. More about this here.

But not all Bitcoin advocates are as callous as the MicroStartegy founder. Crypto expert Matthias Reder explains to BTC-ECHO how he feels about the merge:

I think bitcoin belongs in every sensible portfolio. Nevertheless, I’m also looking at the merge and have to honestly say that I’m happy if it goes through. Because for me, the competition in the bitcoin and blockchain space is extremely important. Of course, one can now say that Bitcoin and Ethereum do not compete at all. But there is definitely competition within the crypto sector. There’s competition for companies, venture capital, and the brightest minds in the space, so competition is essential to innovation. From this point of view, I see the merge as positive.

Matthias Reder

It remains to be seen how the merge will ultimately affect Bitcoin, its energy consumption and Proof of Work. In the meantime, a look at the Flippening index helps. Although this has risen sharply in recent months, Ethereum has not reached more than 54 percent of the market capitalization of the number 1 cryptocurrency this year. For bitcoiners, a change in the consensus mechanism is just as inconceivable as flippening: because bitcoin without proof of work is not bitcoin.