1. What is the system “certified” for?
Cryptocurrencies would not work without blockchain, a new technology that performs the age-old function of maintaining a time-series ledger of transactions. Unlike pen and paper records, ledgers are shared by computers around the world. Blockchain has to perform another task that is unnecessary in the world of physical money. Manipulating the digital ledger to ensure that no one can use a cryptocurrency token more than once. Blockchain works without a central guardian such as a bank in charge of a ledger. Proof-of-work and proof-of-stake systems rely on group actions to create, verify, and secure blockchain continuum records.
In today’s major Bitcoin and Ethereum networks, transactions are grouped into “blocks” and published to the public “chain”, but only after a “proof of work” order has been executed. In Bitcoin’s software, it happens when the system compresses data in blocks into puzzles. This puzzle can only be solved through potentially millions of trial and error calculations. This work is done by miners who compete to be the first to come up with a solution, and are rewarded with free cryptocurrency if other miners agree that it works.
3. What are the drawbacks of Proof of Work?
When bitcoin was worth a penny, mining was cheap too. However, as the currency rose in value, a sort of arms race began as miners poured their resources into acquiring new coins. Responds to intensification. As a result, the extremely high power usage resulted in calls from eco-conscious people to avoid Bitcoin. The European Union considered banning the practice before deciding that cryptocurrency providers must disclose the energy consumption and environmental impact of assets they choose to list. Proof-of-work systems are also leading to increased dominance by large, centralized mining farms, creating new vulnerabilities in decentralized designed systems. In theory, blockchain could be rewritten by the party that controls most of the mining power.
4. What is Proof of Stake?
The idea behind the Proof of Stake system employed by Ethereum is that by giving groups of people a string of carrots and sticks to cooperate, they can make it easier to secure their blockchain. People who bet or staked 32 Ether (in mid-August he traded at around $1,900 for 1 Ether) can become “validators,” and those with less Ether become joint validators. can do. Validators are selected to order transactions into new blocks on the Ethereum blockchain. A validator is awarded her Ether if a block is accepted by a committee whose members are called attestors. Ethereum’s proof-of-stake system has already been tested on a blockchain called Beacon Chain, which is separate from the proof-of-work system. increase. So far, $25 billion worth of he Ether is staked there. The two blockchains he plans to merge in September.
5. What are the advantages of the system?
Switching to Proof of Stake is believed to reduce Ethereum’s energy usage, estimated at 45,000 GWh per year, by 99.9%. From a carbon footprint perspective, it’s essentially no different than any other Internet operation that uses energy just to run a network of computers, rather than a venture that resembles a collection of giant digital factories.
6. What is the vulnerability?
Proof of Stake is not as battle-tested as Proof of Work, whose security has been under scrutiny for over a decade. Therefore, new vulnerabilities may be discovered. Its proponents believe the risk is worth it in terms of environmental benefits and what comes from involving a wider group of users in the process.
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