- Ethereum is expected to fully move to the proof-of-stake system later this year.
- The Ethereum network made the first move towards the proof-of-stake system in August last year.
- Cardano, Solana, Avalanche and others are already running the environmentally sound proof-of-stake system.
In another hit to Ethereum’s supremacy as the cryptocurrency that will stand the test of time, the Terra network overtook Ether in terms of total staked value a few days ago. According to crypto staking data provider Staking Rewards, Terra’s native token (LUNA) has a total staked value of over $26 billion, compared to Ether, which had a value of over $24 billion. Solana remained at the top with $32 billion, while Cardano and Avalanche took the fourth and fifth spots, respectively.
Staking is a system employed by cryptocurrencies that use the proof-of-work (POW) mining system. In this system, miners have to stake their own crypto in order to qualify for mining rewards.
Source: Staking Rewards [as of 6 pm IST, March 8]
Unlike proof-of-stake (POS), the POW system doesn’t reward all miners on the network. Who gets rewarded depends on the stake they provide, and mistakes lead to reduction of this stake too. More stakers means more miners have confidence on the network and more transactions can be validated as well. LUNA’s annual staking rewards were pegged at 6.62% against ETH’s 4.81%.
To be sure, the higher staking value doesn’t mean Ethereum is not as valuable anymore. In fact, the Ether token remains the second largest after Bitcoin in terms of market cap. According to Coinmarketcap’s listings, Ether is the second most valuable cryptocurrency, at a valuation of over $309 billion, while Terra ranks seventh at over $29 billion. Ether was trading at over $2500, while LUNA’s price was set at around $81.
Why does it matter?
The POS system of mining has been widely recognized as a more environmentally sound system of cryptocurrency mining. The POS system is said to consume 99% less power than the POW system. According to the Digiconomist, the Ethereum network consumes more power than the country of the Netherlands per year, and a single Ethereum transaction can consume as much power as an average US household.
The POW system is used by both Ethereum and Bitcoin right now, but the London Hard Fork for Ethereum in August last year set things rolling for the POS system. Ethereum is set to move to version 2.0 later this year, which will move the network entirely to the POS system. And for that to work, the Ethereum network will also need a large number of stakers.
To be fair, the number of stakers on the network right now is understandable too, given that Ethereum hasn’t fully moved to POS as of now. Solana, Cardano and BNB Chain (formerly Binance Smart Chain) are other networks running completely on POS systems.
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