Ethereum Switch: Caution Holders!

The new consensus mechanism adopted by the crypto is yet to be fully tested for resilience and hidden vulnerabilities.

-  Avneet Kaur

ETHEREUM, the second-largest cryptocurrency with 17.7% market share, successfully shifted from proof-of-work (POW) to proof of-stake (POS) consensus mechanism on September 15. In POW, miners solve increasingly complex series of mathematical problems. Based on their problem-solving skill, they get authority to create blocks in the blockchain, submit to the network and earn rewards. In POS, there is no mathematical problem. Instead, one has to stake coins, and the holder who has more Ethereum gets authority to alter the ledger. “It is like a capitalist model where the richer/bigger entity gets to validate transactions,” says Kumar Gaurav, founder and CEO of Cashaa, a blockchain-based fintech.

In POS, if one turns out to be a bad actor, as a punishment, he or she may lose a heavy amount or coins put on stake. One needs a very good reason to make alterations in blockchain in POS, says Kumar. The shift to POS, which requires far less power, is expected to make Ethereum blockchain 99.95% more energy efficient, which is positive for the crypto ecosystem. Yet, while experts anticipate increased adoption of Ethereum blockchain by innovators, they are asking token holders or investors to exercise caution. “We could see more De-fi (decentralised finance), NFT (non-fungible token) and Web 3.0 applications on Ethereum blockchain because of this upgrade,” says Avinash Shekhar, CEO, ZebPay.