Initially, early 2022 was planned, then June was envisaged, but now even this date is no longer achievable: Ethereum’s planned switch from PoW to PoS will probably be delayed even longer. The revolutionary update is supposed to make it possible to process transactions faster, cheaper and more energy-efficiently. Ethereum chief developer Tim Beiko wrote on Twitter in April. “We don’t have a firm date yet but are definitely on the home stretch.” Added to this are doubts as to whether the proclaimed quantum leap can be achieved in this form: “Delays in the much-awaited switch to the ‘proof-of-stake’ method are understandable, as it is highly complicated,” says Brendan Playford, founder of Masa, a financial services company specialising in crypto transactions. “Also, it’s still unclear whether it can deliver the promised cost reductions and higher transaction speeds.”
The idea behind Proof-of-Stake is: While Proof-of-Work only rewards the miner who is the first to calculate the corresponding algorithms and all other participants go away empty-handed, with PoS a handful of validators with large ETH holdings are responsible for block production. Some cryptocurrencies such as Solana or Cardano already use this procedure exclusively or in part.
Pros and cons
The advantages are clear: in addition to dramatic energy savings, the switch also beckons an enormous acceleration of processes from the current 30 to up to 100,000 transactions per second. This is also necessary – after all, Ethereum is not only a digital currency, but also a software platform on which automated payment processes can be programmed. Many NFTs are also registered on the Ethereum blockchain. Everything would thus be in place to greatly increase Ethereum’s attractiveness: “We are already seeing funds shifting money into Ethereum in preparation for ‘Merge’, although it is not yet clear when the update will come,” says Noelle Acheson, chief analyst at Genesis, a brokerage firm specialising in cryptocurrencies.
“Where there is much light, there is much shadow”, Goethe said in his “Goetz von Berlichingen” – energy-intensive PoW is used to check the integrity of the validation nodes, which increases security and ensures decentralisation. And the energy demand is not necessarily a big problem either: there are already efforts to use green energy and not only in the USA, now the number one mining nation, mining farms are now used to absorb any energy surplus. Especially with regard to the use of wind and solar energy, it is necessary to be able to cushion fluctuations – if energy peaks were not consumed, wind turbines would have to be switched off if they produced too much.
This can turn surplus energy into bitcoin, ensure grid stability, and provide the power producers with the opportunity for regulation that governments around the world want to achieve but find difficult to do so: By means of electricity price adjustments (high price during consumption peaks, low price during surpluses or low consumption), mining farms can be used to stabilise the energy grid. Thus, a paradoxical situation occurs: The producers of volatile cryptocurrencies stabilise the energy volatility of renewable energy.