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Proof of Stake Won’t Reduce Fees
The Merge is coming, and there are massive misunderstandings around its purpose and value.
“The Merge” is steadily approaching — the term for the Ethereum blockchain’s switch from Proof of Work to Proof of Stake for consensus, by merging the “Beacon” staking chain with Ethereum itself. Two patterns keep appearing in the discourse — expectations that this will reduce “gas costs,” i.e. the transaction fees to use the blockchain, or commentators pointing out that it will not reduce them as some sort of controversial indictment of the value of Proof of Stake. Neither is quite right: Proof of Stake won’t reduce fees — and that’s completely fine. Proof of Stake is largely about reduced power consumption.
Ethereum’s transaction fees can certainly get quite expensive — even more so during booms than during bear markets like the present. This is a problem that needs solving, and the fact that The Merge does not solve it does not mean it should not or will not be solved. This is why there is ever-increasing discussions of “L2” chains and “rollups” — basically enabling additional blockchains to store cryptographic proof of their data on Ethereum, making use of its security, while having their own ledger.
This is because transaction fees in cryptocurrency transactions are largely based on bidding over limited “block space.” The name “blockchain” is as it sounds — the data is stored as a chain of blocks, and new blocks are added regularly as new transactions come in. In Ethereum’s case, it adds a new block up to 1.875 MB every 12-14 seconds. This is not that much data. The Merge will not change the rate new data is added to the chain at all, and the exact same scenarios where people competitively drive up the cost of block space in times of demand will arise.
The value of Proof of Stake largely is its massively reduced power consumption — more than 99.9%. The broader public tends to associate blockchains with excessive power waste. Though the power consumed by a Proof of Work chain is unaffected by the volume of transactions — the warehouses of GPUs or ASICs run 24/7, producing that fixed rate of new space regardless — when one looks at the rather limited number of transactions that such a massive expenditure of power supports, the sustainability issues are self-evident.
Though I dream of a world powered entirely by sustainable energy sources like solar, wind, or nuclear, we simply do not live in that world. Using more electricity puts more carbon in the atmosphere — and the more energy we spend in the meantime, the more of a mountain we have to climb in terms of decarbonizing the power grid. Though highly popular chains like Solana and Tezos already use Proof of Stake, most people are aware first and foremost of the notoriously high power consumption of Ethereum and Bitcoin.
To those apathetic about our ever-worsening climate problems, it might seem as if Proof of Stake adds little value, but as humanity rightly becomes increasingly climate-conscious, not using it will becoming an insurmountable barrier to mainstream adoption. There are plenty of arguments for how Proof of Stake chains are better besides this — for instance, they make it so anyone can participate in blockchain validation with minimal hardware — breaking the association with excessive power consumption is likely the most massive boon in and of itself.
Following the success of the Dastardly Ducks, we have even had a lot of people express interest in working with us — but so many want to see sustainability issues addressed first. Even though one can make use of power-efficient chains that already exist, there is a concern of even being tangentially associated with Proof of Work — that they will get the kind of unwarranted but intense scorn that Kickstarter got for trying to use a power-efficient chain.
For web3 to truly thrive, we must recognize not just what appeals to us about these technologies but what deters others. While these problems go far beyond the power efficiencies of various ways to form consensus on a blockchain, environmental concerns are one of the loudest and most valid concerns raised by critics and skeptics. The Merge is incredibly important — even if it will not save you money.
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