What is the Consensus Mechanism Used by Ethereum?
Ethereum initially operated on a Proof of Work (PoW) consensus mechanism, similar to Bitcoin. In this model, miners compete to solve complex mathematical problems to validate transactions and create new blocks. However, Ethereum has transitioned to Proof of Stake (PoS) with the Ethereum 2.0 upgrade, fundamentally altering how the network operates.
Proof of Stake (PoS)
Under PoS, validators replace miners in the process of block creation and transaction validation. Validators are chosen to create new blocks based on the amount of Ether they hold and are willing to "stake" as collateral. This method is more energy-efficient compared to PoW, as it does not require massive computational power to secure the network.
Benefits of PoS
- Reduces energy consumption significantly.
- Improves transaction throughput and scalability.
- Encourages long-term investment in the Ethereum network.
- Enhances network security through staking mechanisms.
As Ethereum continues to evolve, the PoS consensus mechanism is designed to support future scalability solutions and decentralized applications (dApps), making it an integral part of the Ethereum ecosystem and its approach to blockchain technology.