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604 J. Sedlmeir et al.: The Energy Consumption of Blockchain Technology, Bus Inf Syst Eng 62(6):599–608 (2020) Proof-of-Stake (PoS) consensus mechanism. In this case, the weight of a participant’s vote is not tied to the scarce resource of computing power, but to the scarce resource of capital (see Sect. 2.1 on why coupling with a scarce resource is necessary). More precisely, there is a random mechanism (there are no truly random number generators for classical computers, but, as a first approximation, this heuristics provides a good indication. The pseudo-ran- domness typically comes from a subset of the previous blocks) that determines who is allowed to build (‘‘mint’’, ‘‘forge’’, ‘‘bake’’) and attach the next block. With the help of this mechanism, the probability of being selected is linked to the amount of cryptocurrency that the node has deposited and locked (‘‘staked’’) for this purpose. The deposit also incentivizes the node to stick to the rules of the network, as any misbehavior detected will lead to the node losing this deposit. The advantage of PoS is that it does not involve any computationally intensive steps such as solv- ing the cryptographic puzzles in PoW. The computational complexity of PoS consensus is low and, typically, insen- sitive to network size. It is, therefore, very energy-efficient for large-scale systems. Accordingly, based on our argu- ments regarding the energy consumption associated with operating transactions in Sect. 2, the energy consumption of PoS blockchains is several orders of magnitude lower than that of PoW. It is primarily for this reason that the community of the cryptocurrency with the currently sec- ond-highest market capitalization, Ethereum, is trying to switch from PoW to PoS. Other cryptocurrencies, such as EOS, Tezos, and TRON – all of which feature in the Top 20 cryptocurrencies in terms of market capitalization – are already successfully using PoS. There are, however, con- troversial discussions in the community. Some argue that getting rid of PoW’s energy consumption comes at the price of security, e.g., because one can only accrue voting weight (capital) from inside the system. However, one can also argue that PoS has less of a tendency to centralize (mining has economies of scale) and is, thus, more secure in the long run. We will not enter in this discussion up here but want to highlight that the outcome will likely decide which consensus-type for permissionless blockchains pre- vails and, therefore, impacts the energy consumption of future open decentralized applications. On the other hand, blockchain technology can also be useful in constellations in which only a restricted group of participants take part in consensus. These are referred to as permissioned blockchains. They are of particular interest to many industries and, also, to the public sector: participants usually build a consortium, and there is a registration process meaning that all of the participants in consensus are known (Fridgen et al. 2018b; Rieger et al. 2019). Therefore, it is not necessary to tie voting weight to a scarce resource here, and one can reach consensus using some kind of election in which everyone has a single vote. Therefore, this kind of consensus mechanism is sometimes called Proof-of-Identity or, very often, Proof-of-Authority (PoA). The term PoA usually involves different levels of security, from mathematically proven and long-established, fully fault-tolerant mechanisms (Paxos, PBFT) over heuristically-secure algorithms, such as Istanbul BFT and Aura, to basic crash-tolerant mechanisms such as RAFT (De Angelis et al. 2017). Popular implementations of such permissioned blockchains are Hyperledger Fabric and Quorum. The more secure these PoA consensus mecha- nisms are, the greater their complexity and, therefore, the greater their energy consumption. For example, PBFT consensus overhead scales at least quadratically with respect to the number of nodes in the network and is hence – by contrast to PoW and PoS – highly sensitive on the network size. This, in turn, correlates with the energy consumption associated with consensus. Beyond these popular consensus mechanisms, there are several more, an overview of which is provided by Eklund and Beck (2019). An example is Proof-of-elapsed-time, which intends to establish trusted random number genera- tors through secure hardware modules. As PoS and PoA, these further concepts typically do not involve a crypto- graphic puzzle, except for some concepts which try to establish some kind of ‘‘useful Proof-of-Work’’ which solves puzzles that are in some way meaningful for busi- ness or science. Since many of these types of consensus mechanisms are not currently prevalent in relevant appli- cations, and because they usually have low energy requirements compared to PoW, we will not investigate these consensus mechanisms in more detail. The main result of the discussion about blockchains with alternative consensus mechanisms is that, by getting rid of energy intensity by design, their energy consumption is orders of magnitude lower compared to PoW-blockchains. Consequently, the energy consumption of non-PoW blockchains can hardly be considered problematic for the climate. Yet, beyond PoW and, thus, on a completely dif- ferent scale, the type of consensus mechanism can have a significant impact on energy consumption. 4 The Impact of Redundancy on Energy Consumption We have already seen that a portion of blockchains’ energy consumption relates to consensus, and another portion relates to redundant operations. We have seen that for PoW blockchains, the energy consumption related to consensus outweighs the energy consumption associated with oper- ating transactions, so the redundancy aspect is usually not discussed in detail. For non-PoW blockchains, however, the energy consumption related to consensus is no more 123PDF Image | The Energy Consumption of Blockchain Technology
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