There are two main blockchain protocols: proof-of-stake (PoS) and proof-of-work (PoW). These protocols are consensus algorithms for distributed networks
There are two main blockchain protocols: proof-of-stake (PoS) and proof-of-work (PoW). These protocols are consensus algorithms for distributed networks: rulesets that dictate how networks – made up of thousands of nodes – agree on new additions (blocks) in a permissionless setting.
Proof-of-work is the blockchain protocol used by bitcoin and Ethereum. Proof-of-work began a revolution: it enabled the creation of secure, permissionless, distributed networks. But to achieve consensus for each new block, proof-of-work requires an enormous amount of energy.
The University of Cambridge’s online tool estimates Bitcoin’s annual electricity consumption is more than The Netherlands, United Arab Emirates and Argentina
Cambridge researchers say it consumes around 121.36 terawatt-hours (TWh) a year. If Bitcoin was a country it would be in the top 30 energy users worldwide.
Alex de Vries, a data scientist at the Dutch Central Bank, estimates that each bitcoin transaction requires an average 300 kg of carbon dioxide (CO2)–equivalent to the carbon footprint produced by roughly 750,000 Visa swipes.
As much as I like Bitcoin I believe that this is not sustainable and certainly the world can’t afford to have another blockchain consuming these levels of energy.
And that’s why Ouroboros was created, the purpose was to define the parameters of the new world: a protocol more secure, scalable, and energy-efficient than anything that has come before.
Ouroboros as a Proof-of-stake protocol is the answer the performance and energy-use challenges of proof-of-work because sa more sustainable solution. Instead of relying on ‘miners’ to solve computationally complex equations to create new blocks – and rewarding the first to do so – proof of stake selects participants (in the case of Cardano, stake pools) to create new blocks based on the stake they control in the network.
Networks using Ouroboros are many times more energy efficient than those using proof of work – and, through Ouroboros, Cardano is able to achieve unparalleled energy efficiency.
At the same level of decentralization – for example, 100 pools, which exceeds bitcoin’s current network – Cardano could consume as little as 0.01567GWh (gigawatt-hours) per year.
This is based on Ouroboros’ ability to run on a Raspberry Pi, which has a power consumption of 15 to 18W (watts). In theory, this equates to more than four-million times the energy efficiency.
This enables networks to scale horizontally, increasing performance by incorporating additional nodes, rather than vertically, through the addition of more powerful hardware. The resulting difference in energy use can be analogized to that between a household and a small country. PoS is positioned scale to the mass market; PoW is not.