From time to time you can hear claims that the Ethereum cryptocurrency uses too much energy during mining and is therefore inefficient and harmful to the environment. After repeated claims of this kind, Ethereum decided to switch to Proof-of-Stake (PoS), which is expected to reduce energy consumption by a hundred times, or by about 99%.

Like Bitcoin, Ethereum uses Proof-of-Work as a consensus mechanism to protect the blockchain. This requires miners to arm themselves with computing power, which leads to electricity costs rising by millions of dollars. Proof-of-Work is based on the concept of large amounts of electricity and mining equipment solely on the basis that it generates rewards in the form of mined cryptocurrencies. This means that greater mining power is directly proportional to revenue.

Proof-of-Stake, on the other hand, applies a completely opposite philosophy to protect the network. In a Proof-of-Stake system, validators are the equivalent of miners. And the main task in a PoS system is to make sure that validators are always honest.

One of the most interesting things about PoS is the fact that these validators do not spend as much energy (compared to PoW) to protect the network, so the reward to miners can be significantly lower and, as a result, there is no need to issue as many new coins to motivate participants to continue taking part in the network.