If everything goes well - which is something rather scarce in the crypto world, but had happened before - tomorrow we will see an upgrade on the Ethereum blockchain, one that will enable the transition to a new governance model, namely staking.
For those of you in the HIVE world, this concept is not new, all participants in the protocol are using staking one way or another. But in the Ethereum world, this is something completely new. I also believe this will be a game changer, in the sense that it will shift governance in the entire crypto world from proof of work, to proof of stake.
And yes, that means Bitcoin too.
You see, we are slowly inching towards a place where there will be enough crypto mined so the actual creation process will not carry that much weight anymore. Until now, the mere process of generating some rewards, in the form of a crypto token, was important to secure the blockchain. The reward had to match the contributed resources. That's how crypto came into creation: those interested in supporting the chain(s) have contributed resources. The most affordable resource was computing power. Hence, we saw the golden age of miners (which I think it's slowly, but inevitably, sunsetting now).
Now, that we have already a significant amount of tokens floating around, and as computing power becomes way more expensive, the next thing that will glue the system together is trust. You will supervise transactions (and make sure your transactions are well supervised) by vouching with your pre-existing value (in the tokens already generated). By blocking (staking) some tokens, you will signal trust in a specific chain. In time, staking could be used as a trust operation for more atomic processes, but let's not rush, for now it will be used only to secure the chain.
I can clearly see a path in which the Bitcoin already mined will be used to secure the blockchain in a future proof of stake dialect, in a not so distant future. If the chain - and I mean Bitcoin - will stop minting tokens at 21 million, the actual functionality of the said chain must be supported by the staking of pre-existing Bitcoin.
I'm really looking forward to see how this Ethereum upgrade will go and how staking, as a process, will shift the world of crypto.
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What makes ETH proof of stake any more significant than the last 10 or so proof of stake currencies?
The adoption rate?
Adoption rate is a significant factor, IMHO. More important, though, when you pair the existing adoption rate with the smart contract engine AND the already existing apps deployed on this engine (of which DeFi is probably the most important now) you get the see the ripples of this movement.
So is gas a thing if the past as of the 1st too?
I don't think so. Gas is an intrinsic component of the network and it is used to reward miners / stakers / smart contracts. So from the 1st it will go to stakers instead of miners. But I might be wrong on that.
You may have a point. Suppose the price of BTC goes up by 100x in the coming decade. We'd be looking at BTC at $1.8 million. Because the cost of mining one Bitcoin follows its market price, mining Bitcoin at a price level in the millions of dollars could prove an environmental disaster. Suppose the average cost of mining one Bitcoin were $1 million in 2029. That's two mining reward halvings from now. The annual issuance rate of BTC will be 1.5625 BTC per ten minutes, which is equal to 624365 = 82,125 BTC per year, which would be worth maybe $82 billion. The energy cost of mining Bitcoin is between 90% and 95% of the total. Let's say $72 billion.
https://www.investopedia.com/news/do-bitcoin-mining-energy-costs-influence-its-price/
At the same growth rate, the total electricity generation market would be worth $2,095 billion.
At $1 million dollars per BTC, the share of Bitcoin mining of the world's electricity generation would be about 3.45%. It's not an overwhelming proportion but it is quite a lot.
Thanks for running the numbers for me, I had just an intuition that at some point PoW will be obsoleted somehow, but the actual unfolding of events wasn't clear.
Your scenario has a lot of chances to realize. Might be other paths as well that will lead to some dialect of PoS on the Bitcoin chain, but energy cost is definitely very plausible.
3.45% of the global total in 2029 isn't the utter disaster I envisioned the power consumption of Bitcoin to be before looking at the numbers more closely. But it's pretty bad. I don't think, however, that Bitcoin will be anywhere near the first coins to adopt PoS. But you have an important point to make regarding PoS becoming more feasible when a large share of the total of the coins ever to be issued have already been issued.
At that point, we should be celebrating if one bitcoin was at 1 million dollars, huge win for the world lmao.
Anyways:
If at the high price, alot of wasted energy today would be converted to using mine bitcoin. So while alot of energy, it also won't be wasting much energy. POW after all is a way to convert energy into money.
POW is still a natural force distribution mechanism as miners have to sell their bitcoin to pay their bills after all while in POS we are keeping the coin more and more.
I argue POW for bitcoin at least would remain as kinda like a global standard.
Funny this argument is also at play that since bitcoin focus is offchain, there wouldn't be any money for miners thus miners will leave in waves thus also making POW bad. :P
@dragosroua,
A big news, probably they have checked HIVE/STEEM governance before adopt this.
Thank you for sharing this news!
$tangent
Cheers~
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