NiKoLaI

Greater Energy Efficiency

Let’s face it, the world is turning “green,” and since PoW mining operations are poised to reach the energy consumption levels of small countries, it wouldn’t take much of an outcry to elicit the wrath of powerful environmentalists and politicians looking to curry favor from such pressure groups by putting the squeeze on some of these large mining operations. Such unwanted attention could result in additional taxes or threatened closures if things get ugly.

Whether such a scenario ever plays itself out is debatable, but PoS is positioned to be a more eco-friendly and less expensive distributed form of consensus which may prove to be a more advantageous position to be in.

Lower Barriers To Entry and Decentralization

To become a validator on the upcoming ETH 2.0 network, one only needs a laptop computer, the technical ability to run the client software, the discipline to stay available online, and…oh yeah, the 32 ETH. Buying a laptop (other devices will work as well) is far less expensive than erecting a large mining facility, so right there the barriers to entry in this PoS system have been lowered.

However, that’s not to minimize the staking cost of 32 ETH. At the time of this writing, the price per ETH is $242 so even though we’re not talking about costs equivalent to starting a mining conglomerate, $7,700 is still a tidy sum.

Luckily, for those who can’t hustle up that kind of coinage, or those who might be afraid of exposing their entire nut to potential fund slashing, companies are springing up that will act as staking pools. These companies allow people to pool their funds with others to reach the required 32 ETH needed for staking. The rewards would then be divided up proportional to the individual’s contribution.

Lower barriers to entry mean more validators and more validators on the network means more decentralization. And that’s always a good thing.

To summarize, PoS addresses the three issues of PoW chains face: accessibility, centralization, and scalability, in the following ways:

PoS Accessibility:
PoS validators will not carry the burden of initial hardware costs nor exorbitant electricity rates like miners from the PoW chains do. This provides a significantly lower barrier to entry. And if the staking amount and time commitments are out of reach, there are staking pools available that one can join.

PoS Decentralization:
Participation in a PoS chain requires only an internet connection, and a computer (even a phone/tablet will do). That opens doors for a greater number of participants on the PoS networks resulting in more decentralization.

PoS Scalability – Sharding
We haven’t talked about this yet, because PoS alone does not improve scalability—sharding, however, does.

In PoW, a single chain made up of consecutive blocks is incredibly secure. Safety isn’t compromised but speed is. That’s because each node has to process and validate each transaction in consecutive blocks.

Sharding
Sharding is a scalability solution that can be implemented on PoS chains without compromising security. Sharding partitions the blockchain into multiple shard chains (in the case of ETH 2.0, that’s 64 separate shard chains), each of which is capable of processing blocks. Sharding divides the data processing responsibility among many nodes so that blocks can be processed simultaneously. This speeds up the process immensely—a minimum of 64x of the transaction speed of ETH’s original PoW chain.

Here’s a simplistic example in case this doesn’t make sense: If you’re impatient like me, you probably hate it when the person in line ahead of you at the grocery store waits until after the checker has finished ringing up the total before inserting their debit card. At many point-of-sale registers in the U.S., one can insert their chip card and type in their PIN code simultaneously as the checker is still scanning the items. There’s no need to wait until the checker is finished before starting the payment process. When customers work in parallel with the checker they finish at approximately the same time, rather than working consecutively. The checkout process moves faster—as do the lines (which are increasingly longer here since Covid-19). Sure, it only saves 10 or 20 seconds a person, but with thousands of people checking out daily the time adds up.

End of part 3