Blockchain technology is an exciting new technology with a lot of unexplored potentials. Since the technology’s inception in Bitcoin in 2009, the application of blockchain technology has expanded significantly, with new use cases for the technology entering the market almost daily. However, the current adoption rate of blockchain technology has raised a few concerns within the space. One of these concerns is the sustainability of blockchain technology. In this article, we will take a look at the topic of blockchain sustainability by looking at how a blockchain’s consensus protocol can impact its sustainability.
What Is A Consensus Protocol
A consensus protocol is a critical part of every blockchain network. It is mainly a set of rules and parameters that define how transactions are processed within a network and stipulate how nodes in the network communicate.
The Most Popular Consensus Protocols
To date, the most popular consensus protocols are Proof of Work and Proof of Stake. Each one has its set of challenges, and for the sake of this article, we will look at how these challenges restrict a blockchain’s sustainability. Before we proceed, let us look at what is meant by blockchain sustainability.
Both Sides of Blockchain Sustainability
The term blockchain sustainability is a bit vague. When looking at how to make blockchains more sustainable, the two primary focus areas are the environmental impact of a blockchain network and the transaction throughput (transactions per second) of a blockchain. By designing and implementing solutions that address both areas of blockchain sustainability, blockchains will be able to unlock their true potential and go fully mainstream. Let us now look at some of the challenges of the two most popular blockchain consensus protocols.
Limited Throughput
As you may recall, one of the responsibilities of a consensus protocol is to define how transactions are processed within the network. It mainly defines how the network of decentralized nodes reaches consensus regarding the formation of each block before finality. With the current adoption rate of blockchain technology, blockchains using Proof of Work and Proof of Stake are starting to create a backlog in unprocessed transactions on their networks. This has to do with the nodes in a network not being able to process transactions at the rate required to meet the current network traffic.
Environmental Impact
Another issue is the negative environmental impact of a blockchain network. This applies more to Proof of Work blockchain networks as more computing power is required to process transactions on a Proof of Work blockchain than a blockchain using any other consensus protocol.
The negative environmental impact of Bitcoin shows the magnitude that a Proof of Work blockchain can have on the environment once it reaches a certain number of daily transactions. At the time of writing, the Bitcoin network uses more energy than Switzerland, and as the number of daily transactions on the network grows, so will the magnitude of its environmental impact. This is a big reason why Proof of Work blockchains are not considered sustainable. Hence, most Proof of Work blockchains, most notably Ethereum, are switching to Proof of Stake.
Risk of Centralization
This last point applies to both Proof of Work and Proof of Stake blockchain networks, which is the risk of centralization. The main motivation behind blockchain networks is to enable distributed, decentralized networks. However, the Proof of Stake and Proof of Work consensus protocols run the risk of becoming majorly centralized. With Proof of Work, the network can lose its degree of decentralization if one person or company is able to acquire large amounts of the computing power in the network. This can be seen by large companies that buy cryptocurrency mining equipment in bulk. In doing so, they skew the block reward payments to themselves, making the network less fair. This is why Proof of Stake was created.
Proof of Stake has a more protected degree of decentralization than Proof of Work. This is because network validators are not selected according to the amount of computing power they contribute to the network but rather by the amount of the native cryptocurrency they stake in the network combined with some more randomized selection logic. However, there have been some concerns about how randomized the selection logic of a Proof of Stake network is, with some people saying that validators with more staked cryptocurrency get more chances to validate transactions, and therefore earn more block rewards. So, Proof of Stake blockchains may also not achieve the desired decentralization in a blockchain network.
If the desired decentralization for a blockchain network cannot be achieved, then it is only a matter of time before it becomes completely decentralized.
To Summarize
Blockchain sustainability can be broken up into two main parts: a blockchain’s environmental impact and the transaction throughput. Both are somewhat reliant on the consensus protocol of the network, which defines how transactions are processed and how nodes interact with each other on the network. To date, the two most popular consensus protocols are Proof of Work and Proof of Stake. Each of these consensus protocols has its limitations that restrict the sustainability of blockchain networks. If these limitations are not addressed, blockchains will not be sustainable enough to go mainstream.
CORE MultiChain
CORE MultiChain provides a promising solution to blockchain sustainability. CORE MultiChain is a blockchain ecosystem that enables the scalability and interoperability of blockchain networks, but the ecosystem also achieves sustainability by increasing a blockchain network’s throughput and decreasing its environmental impact. This is made possible by combining the ecosystem’s AI-enabled consensus protocol and other blockchain technologies such as side chains, ZK-Snarks, and the Proof of History protocol. Together, these technologies create a fast, decentralized, super-performant blockchain ecosystem with a shallow environmental impact.
