It requires lots of processing power. It consumes huge amounts of energy. It is becoming less profitable.
Those are key concerns about mining, the process by which bitcoin (BTC) and other cryptocurrencies have been generated since bitcoin’s earliest days. But mining was never the only model envisioned by blockchain developers, and the movement toward alternate approaches such as proof of stake (PoS) and proof of authority (PoA) continues to accelerate.
“I am seriously looking forward to when the cryptocurrency community basically passes away with proof of work,” Ethereum co–founder Vitalik Buterin said at a private, mid-August event.
Each mining alterntive has its own nuances and approaches to reaching consensus.
Even as long-planned efforts to introduce a hybrid model to Ethereum continue, other platforms, including Tron (TRX), are adopting alternatives to mining. Most important for application developers, enterprise providers say consortia models involving known entities don’t need elaborate models to pick the network participants who will validate new blocks of data.
Mining “works great in anonymous, open networks where competition for cryptocurrency promotes security on the network,” Microsoft software engineer Cody Born writes in a post introducing Azure’s proof-of-authority (PoA) model for Ethereum, which was released in August. “However, in private/consortium networks, the underlying ether (ETH) has no value.”
The Proof Is in the Pudding
The proof of work (PoW), proof of stake and proof of authority models each offers a different algorithm-based approach to reach consensus on blockchains.
Proof of work rewards participants who devote computational time and power toward solving complicated mathematical problems. The network participant who solves a problem gets to validate the latest block of transactions and add it to the blockchain. As a reward, this participant receives freshly minted cryptocurrency.
With the growth of massive mining operations and the resulting demand for energy, PoW has generated headlines and headaches worldwide.
Conversely, proof-of-stake models base consensus decisions on users who “stake,” or temporarily freeze or assign their tokens in order to vote on validation issues, with their votes proportionate to the number of tokens they’ve staked. The largest test of the model to date will come when Ethereum adopts a hybrid version of the protocol known as Casper, although the timeline for the shift remains unclear.
