The cryptocurrency community is holding its breath and hoping that 2019 will bring better tidings. This is after the rout in 2018 that threatened to collapse the whole cryptocurrency project. Interestingly, Ethereum is among the cryptocurrency projects billed to shine this year. Notably, the project is harboring plans to transition to PoS as opposed to the current PoW.
PoS versus PoW
While addressing the DevCon 4 conference in November last year, Vitalik Buterin, Ethereum co-founder, hinted at a switch to PoS. However, the young member of cryptosphere did not specify how that would happen.
Notably, the Ethereum network currently relies upon a Proof-of-Work (PoW) mechanism to complete transactions. This is to say that one will have to use a lot of computing power to complete a transaction. As such, the process is quite energy intensive and hence environment unfriendly.
In light of this, Buterin proposed a switch to the mechanism where members of the network validate transactions. To do this, one needs to stake a certain amount of their possession. As such, if the validator is dishonest about his/her actions, he/she loses the stake.
The plans to transition to PoS boosting the value of ETH
In particular, this is what cryptoverse calls Proof-of-Stake. Interestingly, the process is very energy efficient and could cut down energy consumption by 99%. Notably, validators do not need the amount of computing power that PoW networks require.
The effects of the possible plans to transition to PoS are already apparent. Early this year, Ethereum reclaimed its position as the second best cryptocurrency as per market capitalization. Interestingly, the gaining token resulted in a market-wide enthusiasm that saw the whole market gain value. Notably, XRP and bitcoin followed in the New Year rally that is giving back hope to crypto holders.
In the past month, Ethereum has registered a cumulative rally of over 80%. Interestingly, it is possible that the spiking demand is in anticipation of the much-awaited transition from PoW to PoS. Notably, the 24-hour trading period ended 1 January saw Ethereum gain over 12% in a single day. This was a huge rally compared to bitcoin’s 4% and XRP’s 3%.