The Next Big Thing In Blockchain

 

Cryptocurrencies such as Bitcoin - the most reputable digital currency tradable via different digital tokens - use an immense amount of power to safeguard their network. But what is the reason behind such massive energy consumption, and what are the alternatives for this problem? Blockchain calculations are forming to be a powerhouse of disturbing proportions.

 

Even the lesser energy consumption of the latest hardware involves sheer calculating effort and the tendency to connect dozens, hundreds, and even thousands of computers to achieve financial gains, which because of its nature is hard to get. In the case of blockchain, more problematic means more CPU cycles, and more CPU cycles result in more power demand.

 

Blockchain Technology

It is the underlying technology that fuels digital currencies such as BTC. Blockchain is an autonomous, publically available digital ledger that records all transactions in a chronological manner which makes it highly secure & transparent. Many companies are looking forward to sinking their feet into the sea of blockchain technology to make their operations seamless and minimize their costs.

 

Can Blockchain Contribute To Global Warming?

It is quite possible because, according to Digicominist, Bitcoin miners consume 54 terawatt hours of electricity, which is sufficient to power five million homes in the United States or even the entire country of NZ. But it does not stop here. The POW offers massive rewards to individuals with better and more effective tools. Your hash rate is directly connected with your chances of mining a new block.

 

The higher the hash rate, the more likely you are to establish the upcoming block and earn a mining reward. To enhance this probability, miners create mining pools by grouping them. In this way, they pool their hashing power and disburse the reward equally to everyone in the mining pool. Because of the POW, miners are consuming a large amount of energy, and it supports the utilization of mining pools that turns the blockchain into something more centralized instead of decentralized.

 

The POS Consensus Mechanism - The Next Big Thing

To cope with the problems of Proof-Of-Work, a consensus mechanism is required that is more satisfactory and more practical. Therefore, the Proof-Of-Stake (POS) algorithm came into existence. Unlike the POW, where everyone is competing against each other, the POS uses a voting mechanism in which one node is randomly selected to validate the next block. The POS algorithm contains no miners as it has validators, and it does not let individuals mine blocks, rather they mint new blocks. If you want to become a validator, you have to deposit a specific amount of points in the network.

 

This would be the same as the security deposit. The amount of the stake decides the probability of a validator being selected to mint the next block. For instance, if an individual deposits $10 and the other one deposits $100, the second individual has ten times more chances to be chosen as a validator to forge a succeeding block. And the most important thing is that the POS is much more environmentally-friendly.

 

It does not let everyone mine new blocks, and therefore, it consumes significantly less power than the POW consensus mechanism. In addition, the POS is more decentralized than the POW, which becomes centralized due to mining pools.

 

The Rise Of Stablecoins

These are the cryptocurrency developed to offer much more stability than other sorts of cryptocurrency ledgers. Stablecoins are backed by real-world assets such as gold, silver, or top-notch cryptocurrencies like Bitcoin, etc. They are generally not volatile like other digital currencies.

 

This attribute makes them a lucrative investment choice for those who want to safeguard their hard-earned money from inflation and other economic oscillations. Stablecoins are believed to be the next big thing in blockchain technology. In the coming years, Stablecoins will be used to make a splash in the crypto world. There are chances of these coins becoming a Central Bank Digital Currency (CBDC) like the Yuan is CBDC in China.

 

Even after the downfall of the volatile Stablecoin TerraUS, several governments are considering creating a Central Bank Digital Currency to allow Peer-To-Peer Payments and P2P transactions around the globe without the involvement of central banks and other regulatory authorities that charge high fees.

 

Besides this, Non-Fungible-Tokens (NFTs) are also becoming attractive investment opportunities and can turn out to be the next big thing in the blockchain.