How Cosmos Proof-Of-Stake Helps Create a More Sustainable Blockchain Environment

The energy debate surrounding Proof-of-Work (PoW) blockchains like Bitcoin and Ethereum is nothing new. While the world’s wealthiest man might have rekindled the flames with his sudden about-turn on Bitcoin, Elon Musk is hardly the first person to be concerned over the high amount of energy that Bitcoin mining and other similar POW chains require.

In fact, Tendermint co-founders and the authors of the Cosmos Network whitepaper, Jae Kwon and Ethan Buchman recognized this problem in 2014 when their research into Proof-of-Stake (PoS) and blockchain consensus mechanisms led them to develop Tendermint Core — the first and most widely used implementation of a Byzantine Fault Tolerance (BFT) consensus engine and PoS crypto-economics to date.

At the very heart of their mission was the need to address the throughput, scalability, and, most importantly, environmental issues associated with Proof of Work blockchains. As Jae tweeted out on May 20:

“We solved this first in 2014, so we were ahead of the curve by 7 years. @cosmos was among the first chains built on Tendermint BFT, and today Tendermint powers many of the world’s top blockchains.”

Ethan corroborated his point, in a reply to Musk’s now-infamous tweet:

“Cosmos pioneered energy efficient Proof-of-Stake. We’re the Tesla of blockchains.”

But let’s back this up a little for the uninitiated. In this article, we’ll take a look at the environmental

issues surrounding Proof-of-Work blockchains, the dramatically reduced carbon footprint of Proof-of-Stake networks, and how Cosmos fits into it all.

Proof of Work

Blockchains need to come to a consensus over how to validate new blocks that are added to the chain. This means that, in order to prevent fraudulent transactions, double spends, or other errors, there must be a mechanism in place that allows network nodes to agree on the accuracy of each new block before it is added to the chain.

Proof-of-Work is the original consensus method adopted by the Bitcoin blockchain in order to achieve this. In a Proof-of-Work system, miners compete to solve complex mathematical equations to add new blocks to the chain. The first miner to solve the equation receives a block reward which consists of freshly minted Bitcoins (BTC) and a share of the transaction fees generated by the network. Once the answer is found by a miner, it can be easily verified by the rest of the network, and the new block is then added to the existing chain of previous blocks.

In order to ensure the sustainability of such a system, the equations that miners have to solve are extraordinarily difficult and must be done by using a very high amount of computational power — and energy. The Bitcoin network also periodically adjusts the difficulty of the equations every 2,016 blocks (around every 14 days) based on the average block production intervals throughout the period.

If the average interval is less than 10 minutes, that means that more hash rate than usual has been plugged in and the network increases the difficulty rate. If the average block interval is longer than 10 minutes, then the difficulty rate is reduced. In just over 12 years, the Proof-of-Work system has kept the Bitcoin network autonomous, decentralized, and secure. So, what’s the problem?

The Problem with Proof-of-Work

The (main) problem with Proof-of-Work is the high amount of computational power required to solve the mathematical equations and secure the network. For some perspective, running the Bitcoin network for one year uses approximately the same amount of energy as the Netherlands or Argentina. That’s an awful lot. And it’s caused Bitcoin to fall afoul of many environmentalists, with Elon Musk being just the latest in a long line.

However, their statements about “boiling the oceans” may not be entirely accurate. Bitcoin mining gets a substantial amount of its energy from renewable sources. In fact, many of its supporters were quick to point out that some 75% of BTC is mined using renewable energy. Others still, including the likes of Twitter’s Jack Dorsey and (rather curiously) Elon Musk himself, have claimed that Bitcoin incentivizes renewable energy. A recent article by Nasdaq even suggests that Bitcoin adoption may speed up the green transition as it can be mined from anywhere — and using any source.

Moreover, when you consider the constant attack on Bitcoin for its energy consumption, you have to ask whether the argument is really fair. After all, if you compare the energy spent on Bitcoin mining to gold mining or the existing banking system, it’s barely a drop in the bucket. And while we’re on the subject of comparing apples and oranges, North Americans consume more energy lighting up their Christmas decorations every year than Bitcoin consumes in mining.

All these arguments are certainly valid yet they do not detract from the fact that this high energy consumption is a problem — especially if you share the Cosmos vision of a multichain future. Bitcoin may be able to inspire a shift toward renewable energy, but what about a million blockchains with a yearly energy output similar to that of a medium-sized country?

Proof of Stake and Cosmos

Proof-of-Stake, the consensus method that Cosmos is built on, is a different blockchain consensus model that is infinitely more energy-efficient than Proof-of-Work. Proof-of-Stake uses validators rather than miners to validate transactions and verify the accuracy of new blocks to be added to the existing chain. Rather than having to solve mathematical puzzles by lending the most computational power to the network, in a Proof-of-Stake model, validators (rather than miners) validate based on how much of the cryptocurrency they own (their ‘stake’).

The more of a cryptocurrency the validator stakes, the more mining capacity they have. This means that, in Proof-of-Stake, validators validate the percentage of transactions equal to the stake of their holdings. So, for example, if a validator has 2% of crypto assets staked or delegated to them on a network, they can only validate 2% of the blocks, keeping the system distributed and, at the same time, removing the need for vast amounts of energy to solve equations.

Unlike Proof of Work-based consensus blockchains like Bitcoin or Ethereum, a Proof-of-Stake blockchain like Cosmos Hub uses a different method for thwarting potential attackers that relies on economic incentives rather than energy. The validator receives a block reward, just like miners, but, if any potentially fraudulent behavior is detected, like a double signing, they are “slashed” and removed from the network.

How Cosmos Proof-of-Stake Solves the Energy Issue

Cosmos solves the problem of high energy consumption by using a Proof-of-Stake consensus mechanism that relies on our Tendermint Core engine that achieves high performance with a low carbon footprint. We also enable blockchains to scale and connect through our groundbreaking IBC protocol.

The current estimated annual energy consumption (measured in TWh) of running the Bitcoin network for a year is 121.86 TWh, while Ethereum consumes around 52.27 TWh per year. By comparison, the estimated yearly consumption of a Cosmos-based blockchain is less than the energy consumed by Bitcoin and Ethereum in a single day (0.00046647 TWh).

Now, consider Cosmos as an expanding ecosystem of blockchains. Even 100,000 Cosmos blockchains combined would still use less energy than Ethereum per year (46.647 TWh). That’s not a subtle difference. We’re talking about 5–6 orders of magnitude of difference across multiple energy-efficient blockchains.

These approximations are based on the energy consumption of SSDs and single-socket servers. However, some Cosmos validators run cloud-only setups, which reduces the numbers even further.

When faced with clear comparisons like this, it’s hard to justify the energy-guzzling Proof-of-Work consensus method, particularly in a multichain future. Ethereum developers realized this early on and have been on a lengthy path to transition to Proof-of-Stake for some years now. Evidence suggests that the switch will pay dividends as far as the environment is concerned. According to recent research from the Ethereum Foundation, ETH 2.0 will consume more than 99.95% less energy than its current PoW consensus.

In addition to the low-energy and greenhouse gas requirements of running a Cosmos Proof-of-Stake chain, participants in the Cosmos network can offset their much smaller carbon impacts to become climate-positive blockchains using Regen Network. CEO and co-founder of Regen Network Development, Gregory Landua, explains, “The Cosmos ecosystem offers the opportunity for automatically offsetting validator and even protocol-level emissions with Regen Network’s carbon offsetting protocol. This power is unlocked by the Inter Blockchain Communication protocol and the interoperable nature of the Cosmos ecosystem.”

The future development of blockchains is clear. If we want a greener environment while fostering innovative technology, we must adopt sustainable solutions like Cosmos Proof of Stake, blockchain interoperability, and carbon offsetting.

Cosmos makes it easy for blockchain developers to build a chain in minutes and connect to a vast network of interconnected chains that includes some of the world’s largest blockchains like Binance, Crypto.com, Cosmos Hub, and Terra. Our vision is for a sustainable future multichain that doesn’t compromise the environment to achieve its goals. Will you join us?

Cosmos Proof of Stake for a Sustainable Environment, a report by Christina Comben, Tendermint Inc.

Previously published here.