The cryptocurrency industry is engaged in a seismic shift. Companies are looking for ways to divest themselves of the traditional blockchain mining ecosystem. While once a perfect fit, mining is now running head first into scalability issues.
Between advancing hardware and intense power consumption, the average miner can no longer turn a profit. The recent proliferation of ASIC mining rigs is even damaging the core concept of blockchain technology – decentralization. If a single entity can produce enough mining power, they can control a majority of newly minted coins.
As such, proof of work (PoW) is becoming less attractive. In its stead, established projects and ICOs alike are looking to proof of stake (PoS) to offer a new solution. Rather than require arbitrary computations and shifting difficulties to meter the release of new currency, PoS relies on an investment in the project itself. Users that hold a portion of the currency can serve as validators – rather than a series of mining rigs.
Ethereum is easily the largest project to plan a switch to a PoS algorithm. Their dominance of the smart contract environment put them in a poor position at the beginning of 2018. Transaction speed slowed to a crawl and mining fees started to grow. A proof of stake algorithm would free resources to focus on transaction validation rather than coin creation. Further, it would remove ASIC mining rigs from the equation – and the associated centralization that goes along with it.
Many of the newer…