If we understand different mechanism of consensus then 'proof of work' and 'proof of stake' are broadly adopted by large communities .Finally, Ethereum also going to change its consensus algorithm to proof of stake .
Recently , there were some important reason to change the consensus algorithm by Ethereum which are:
- Proof of work consensus was more electricity consuming for Mining the Ethereum .
- Inflation rate was high in 'proof of work' consensus because every after 12 seconds 1 block had to mine with reward 3 Ethereum.
- Complex computational devices integrated to secure the network.
'Proof of stake' consensus for Ethereum2.0
This is most unique techniques in the array of blockchain of Ethereum where staking is open source protocol where anybody will stake its Ethereum and earn the annual rewards in ETH . Whoever will be going to stake their ETH , called Validator who can stake 32 ETH to run the node ,to conduct the blockchain transactions. These validators need to install Beacon Computer software to participate as validator and stake holders .
The protocol is set in such way where Mining by staking ETH will totally reduce the consumption of electricity and complex devices together with strictly controlled inflation in ETH .
Proof Of Stake is going to be profitable because:
- Simply use your computer hardware to run the Beacon node which will be launch soon in June ,2020 and stake 32 ETH to become validator and earn interest. all the phases are divided in 3 parts ; phase 0 , phase 1 and phase 2 . if we understand in analogy of body then we find phase 0 is just like 'heart' phase 1 'limbs' phase 2 'brain' . overall in 2021 , all these phase will be completely launched and after that proof of work will be removed for mining ethereum .
- It will provide scalable adoption among all the consumers.
- Smart contract and application building will be expand faster.
- It will build trust in people about gain more value in future.
- Ethereum domain market will be boost because of its uniqueness and mass adoption.
- There are many smart contract Dapps providing collateral vault facility where you hold your ETH and withdraw DAI in as loan or generate DAI as interest without loosing your ETH.
Overall , Ethereum has no such halving protocol like Bitcoin but after proof of stake consensus , it will be more worth of .
Resources:
https://ethereum.org/learn/#eth-2-0
https://ethos.dev/beacon-chain/
https://en.wikipedia.org/wiki/Proof_of_stake
