The Ethereum Blockchain remains the second largest network in the industry. Ethereum has announced its big plans to change its consensus mechanism, which will fundamentally change the way the entire blockchain works in the future. This change will have a direct impact on the security of the network and those involved in the mining of new coins.
What is PoS and how is it different from Pow?
Proof of Proof of Share (PoS) is the process of maintaining consensus within a blockchain network. Unlike Proof of Service (PoW), PoS does not require miners to solve complex mathematical puzzles to secure transactions, but instead uses economic incentives to secure the network. The theory is that using this technology is a better and more effective way to maintain network consensus.
Network validators should freeze the coins on the network that are actually collateralized. These coins at stake are lost if a validator tries to falsify transactions or manipulate the system. In PoS, the number of coins marked, as well as the number of times the coins have been spread across the network, help determine the probability that the validator will be given the opportunity to protect the next block of transactions.
There are many variations of the PoS model that take into account other validator factors, but this basic difference between betting coins and performing mathematical calculations in PoW is true for all PoS solutions. This eliminates the need for miners to use computational power to maintain the network and instead relies on network members to freeze their coins to be selected as network validators and motivated by awards, in the form of new coins.
Why does Ethereum switch to PoS?
If there is a serious problem with PoW networks, such as Bitcoin, it is the increasing cost of energy needed to keep your network secure. A Bitcoin block requires a lot more power than many countries to stay safe and operate without failure.
Ethereum founder Vitaly Buterin and other key network designers have noticed this problem and decided that PoS is a viable alternative to power consumption. Butterin even went so far as to show his contempt for the current blockchain structures, tweeting: "Every blockchain that exists today, including ETH and BTC, sucks and... PoS is necessary".
Switching Ethereum to PoS. What will happen to the mining?
The idea of using PoS has gone beyond the hypothetical stage, as the Ethereum team recently released a test version of the new PoS protocol on their network. This protocol, known as "Kasper", is configured to move the entire Ethereum network to PoS.
The original idea for Kasper was introduced in 2015 and has since gone through serious stages of development. The current idea is for Kasper to be implemented with another network update known as "Sharding", which involves breaking up the blockchain into pieces for storage to reduce the capacity needed to store blockchain transactions. Sharding cannot be done on a PoW blockchain and therefore Ethereum must implement Kasper to take advantage of this network update.
How will this change Ethereum network mining?
Mining is a feature of PoW networks. A network that does not function according to the PoW consensus model does not need maintainers and therefore does not need any hardware or software to be mined. The PoS model that Ethereum offers will eventually put an end to Ethereum blockbuster mining.
At this point the transition to PoS has not yet been made, but there is information in the network that the minimum steak of validators to support a PoS network will be from 32 ETH.
Vitaly Butterin suggested setting the annual yield depending on how much ETH is made in the whole network. In percentage terms, it was between 1.5% and 1.8%. Leading developer Justin Drake proposes to strive for 5% yield, which will include gas return as well as inflation. We will not fully trust these figures, as they are not accurate information an