In short:
- No need to consume large quantities of electricity in order to secure a blockchain (eg. it's estimated that both Bitcoin and Ethereum burn over $1 million worth of electricity and hardware costs per day as part of their consensus mechanism).
- Because of the lack of high electricity consumption, there is not as much need to issue as many new coins in order to motivate participants to keep participating in the network. It may theoretically even be possible to have negative net issuance, where a portion of transaction fees is "burned" and so the supply goes down over time.
- Proof of stake opens the door to a wider array of techniques that use game-theoretic mechanism design in order to better discourage centralized cartels from forming and, if they do form, from acting in ways that are harmful to the network (eg. like selfish mining in proof of work).
- Reduced centralization risks, as economies of scale are much less of an issue. $10 million of coins will get you exactly 10 times higher returns than $1 million of coins, without any additional disproportionate gains because at the higher level you can afford better mass-production equipment.
- Ability to use economic penalties to make various forms of 51% attacks vastly more expensive to carry out than proof of work - to paraphrase Vlad Zamfir, "it's as though your ASIC farm burned down if you participated in a 51% attack".
What to mine after Ethereum’s PoS
It is a positive move for both Slush Pool and the cryptocurrency community that more reputable and legitimate cryptocurrencies such as Zcash are being availed to miners. Currently, the two major cryptocurrencies which miners focus on is Bitcoin and Ethereum.Although Ethereum’s Ether is considered more as a crypto asset due to its characteristics and inflationary nature, its staggering $4.4 bln market cap appeals to a large section of the global mining community.However, as noted in a Cointelegraph exclusive interview with Ethereum co-founder Vitalik Buterin, the Ethereum network is planning on switching to proof-of-stake (PoS) consensus protocol by this year or by early next year. He confirmed that the first phase of PoS development is nearly completed.Buterin told Cointelegraph:
“I expect Proof of Stake to be finished in the next one or two years. We plan to do a transition from Proof of Work to Proof of Stake in several steps. The first step is close to being finished and is starting to be tested now. We’ve already done a lot of work in making sure the algorithms are correct and formally verified. We’re planning to start implementing the first stage very soon and, depending on how quickly that goes, then move on to Proof of Stake over time.”