Ethereum (ETH) has the second-largest market capitalization in the crypto space. As one of the most popular cryptocurrencies out there, Ethereum has become the topic of many new and seasoned crypto investors. The topic that is being widely talked about is none other than Ethereum’s consensus mechanism – whether it works on a Proof of Work (PoW) or Proof of Stake (PoS) consensus mechanism.
If you are one of those who are unsure or would like to find out more about Ethereum’s protocol, then this article is certainly one that you shouldn’t miss!
Ethereum is Currently Using Proof of Work (PoW) Mechanism
Ethereum, similar to Bitcoin, presently employs a Proof of work consensus mechanism. This enables Ethereum network nodes to agree on the status of all data captured on the Ethereum blockchain, preventing specific types of financial threats. Miners can create ETH under Ethereum’s existing Proof of Work paradigm by focusing massive quantities of computational power on intricate challenges.
In fact, Proof of Work indicates that when new transactions are recorded onto the Ethereum blockchain network, various computers on the system have to validate and authorise them before new blocks are generated and included in the blockchain.
Ethereum is Gradually Shifting to Proof of Stake (PoS) Mechanism
Cryptocurrencies such as Ethereum are frequently chastised for the method of generating new currency. Both presently employ a mining mechanism known as Proof of Work, which involves hard arithmetic equations that vast quantities of computers compete to solve. This is also why Ethereum has been attempting to move from the energy-intensive Proof of Work mechanism to a Proof of Stake mechanism, which enables users to utilize their current Ether cache to validate transactions and mint new coins. This uses significantly less electricity than mining, resulting in speedier transfers.
A long-planned network update known as “the merge” will change its protocol from a Proof of Work framework to a proof of stake framework. Following prior delays, the July statement designated September 19th as the new date for the transfer.
To put it in simple words, Ethereum is currently still using the Proof of Work consensus mechanism. However, once the Ethereum merge is completed, Ethereum will officially shift from using the Proof of Work consensus mechanism to the Proof of Stake consensus mechanism. All crypto enthusiasts and Ethereum supporters are looking forward to the merge, as many believe that the transition will enable Ethereum to overtake Bitcoin as the largest cryptocurrency in the crypto market.
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