0.3 Why the Switch to PoS

Introduction

There are many benefits to switching to PoS consensus. Many blockchains are finding that the benefits of PoS outweigh the costs of PoW. PoS will make Ethereum more scalable and increase the element of decentralization. Another advantage of Proof of Stake is reduced gas fees (transaction costs) and dramatically less energy required to sustain the network.

Learning Objectives

• Learn about how PoS reduces gas fees and increases scalability.

• Learn the main reasons Ethereum wants to make the switch to PoS.

• Understand how switching to PoS will be better for the environment.

Reading List

• Ethereum 2.0 - What is Proof of Stake?

• Why Is Proof of Stake Better for the Environment?

• Proof of Work vs Proof of Stake: Basic Mining Guide

• Proof of Stake

• Understanding Proof of Stake: The Nothing at Stake Theory

• Ethereum Staking and Slashing

Key Points

• Gas

  • Think of gas fees as blockchain transaction fees - this is how Ethereum miners get paid. They are oftentimes expensive, which can disincentivize traders. The gas fees are especially burdensome for small transactions when the fee is almost the dollar value as the funds being transferred.

  • With more validators in the network of PoS gas fees will be substantially lower which should promote more transactions.

• Environmental Impact

  • As mentioned above, reduced computational power required per transaction will reduce the amount of electricity needed in the network. The current system uses extremely high levels of electricity which has negative impacts on the environment.

Review Questions

• List some of the benefits of using PoS instead of PoW?

• Will there be disadvantages to using PoS?