Like Bitcoin, Ethereum had been approving new transactions on the blockchain with a consensus mechanism called proof-of-work, whereby “miners” race to solve difficult mathematical problems using large amounts of computing power and are rewarded for their efforts. in cryptography. This approach consumes a lot of energy. It has also posed scaling challenges for Ethereum: network congestion drove up fees and slowed processing rates, making the network too expensive for smaller transactions and difficult to scale for larger ones .
Proof of Stake, on the other hand, requires “validators” to place a bet (a cache of Ether tokens in this case) for a chance to be chosen to approve transactions and win a small reward. The more a validator bets, the more chances to win the reward. But all staked Ether will earn interest, which makes betting something like buying stocks or bonds without the IT overhead.
Decentralization, the idea that decision-making and control should be distributed rather than consolidated in a single authority, has always been key to Ethereum’s vision. But this ideal has been difficult to achieve with a test of work. Although the mechanism was intended to promote decentralization, in practice, individuals or groups with access to significant computing power have dominated proof-of-work mining and reaped these benefits.
By reducing the overhead required for participation and lowering fees through efficiency improvements, the shift to proof-of-stake could help Ethereum distribute transactions among a wider and more diverse set of validators and users. But power dynamics remain a concern. The minimum amount you can stake to become a validator is 32 ether (ETH), which is worth about $51,000 as of Wednesday afternoon, although individuals can join a stake pool to fulfill the requirement