How Cardano uses significantly less energy while maintaining the same level of security as Bitcoin

How Cardano uses significantly less energy while maintaining the same level of security as Bitcoin.

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Similar to how a car engine makes the car drive, and different engines make the car more or less efficient, the same could be illustrated for cryptocurrencies. A cryptocurrency’s engine is its consensus protocol. A cryptocurrency’s blockchain is distributed, meaning there is no single entity that controls the network. Instead, it is spread across nodes who verify transactions. Consensus protocols make sure every node is in consensus (i.e. agreement) and that the information on the blockchain ledger is correct.

Here, we are going to take a fresh look at consensus protocols with our sustainability hats on!

Most Common Consensus Protocols: Proof of Work and Proof of Stake.

There are two most common types of consensus protocols, proof of work (PoW) made famous by Bitcoin, and proof of stake (PoS) made famous by Cardano’s Ouroboros. A consensus protocol has a few main functions; selecting a block producer, validating the block is correct, and rewarding the block producer. The biggest difference between PoW with Bitcoin and PoS with Cardano is how the block producer is selected.

PoW is based on a physical resource, which requires hardware machines such as ASIC. PoW validators (i.e. miners) use hashing power from the hardware devices to solve a computational puzzle. This act of using the machines is called “mining”. PoW miners are in a race to solve the puzzle, whoever figures it out first wins the right to produce the block. The miners with more hardware have more power, resulting in a greater probability of creating the next block.

PoS is based on a virtual resource. Cardano uses their native token, ADA, to assign which stake pool gets to produce the blocks in the blockchain. Each ada is equivalent to a lottery ticket. If your stake pool is chosen you are selected to create the block. Ada holders can participate by delegating their ada to stake pools to increase the probability of being selected. In return, delegators earn a portion of the rewards.

Significant Energy Savings

In Bitcoin’s and other proof of work protocols, 99% of the energy consumption is used to just select a block producer. Cardano uses a proof of stake protocol, much more energy efficient. In comparison, Cardano uses only six gigawatt-hours of energy annually compared to 115.85 terawatt-hours used by Bitcoin.

  • Cardano: 6 gigawatts = ~2 average power plants
  • Bitcoin: 115,850 gigawatts = Rank 31st in country’s energy consumption, surpassing the Netherlands.

So, as we can see, Cardano is many times more energy-efficient than Bitcoin. But two power plants’ worth of power is still a lot, right? Well, not particularly - especially as this doesn’t take into account our SPOs who use renewable energy; and considering the power required to mine, process, and produce raw materials for physical fiat cash!

Security at a Cost

The blocks in the blockchain are a ledger of the transactions and who has what. If the protocol fails, the ledger can be manipulated. This can have catastrophic consequences that result in people losing funds and taking over the network. Because of the severity of those consequences, the consensus protocol must have the highest level of security.

Bitcoin is one of the most secure protocols but what makes it incredibly secure is the physical resources and energy consumption required to take over the network. To distort and manipulate the blockchain, an attacker requires having the majority control of the hashing power. Security comes at a cost and the energy consumption will increase over time as the Bitcoin network grows.

But what if you can have your cake and eat it too? Use a fraction of the energy consumption with the same level of security.

Same Security, More Energy Efficient

Cardano provides the same high level of security as Bitcoin but uses its native token, ADA for consensus rather than hashing power from mining equipment. To distort Cardano’s network you would need to control the majority ada. Below is a calculation of the amount of money required to have majority control of Cardano’s network.

  • 31,948,309,441 ADA – Circulating supply
  • 16,293,637,815 ADA – 51% of the circulating supply
  • US$1.60 – Current price of ADA
  • US$26,069,820,504 – Amount of dollars to control 51% of ADA at the current price.

For an attacker to control 51% of the network it will cost over US$26 billion not factoring in the price appreciation that will occur with a buyer trying to purchase that much ada. Moreover, as the network grows and the value of ada appreciates, the cost to attack the network becomes more expensive but the cost to secure the network is relatively unchanged.

In addition, Cardano’s protocol goes through a rigorous peer-reviewed process and goes through the same high insurance code techniques that are used by developers to build jet engines and NASA where failure in the code results in catastrophic events like the Ethereum DAO hack.

Let us know your thoughts below!

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I can’t imagine why anyone would choose a Proof of Work model over Proof of Stake, what arguments exist in favor of the former?

Other than, “it was here first,” none that I can see.

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If they can make the PoW useful, I see a huge use case for it, like folding@home for example. However, as it is right now, it’s very wasteful.

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You also need to ask yourself, how do I get control of 51% of all ada?
Currently around 70% of all ada is delegated to stakepools and is actively securing the network.
The available ada freely tradeable on exchanges is quite scarce today.

All good info except the argument comparing power consumption to that of fiat cash…just stop using that argument. Bitcoin uses that argument and it’s not an apples to apples argument. Fiat cash is used everywhere and ADA is not.
Same with Bitcoin, they need to stop counting up all the electricity in the traditional banking sector because for now those sectors have usefulness and Bitcoin does not.

Dont think: One attacker who controls 51%. Think of a group attacking. Think of controlling/influencing the net.
Dollars are very decentral, too. There are so many of them. Look at the distribution now.
If Cardano is really secure at the same level as Bitcoin remains to be proven.
For Bitcoin, those, who earn some as miners also have to actively invest into it, while someone owning a good heap of Ada does not need to do anything, while the heap grows through staking.
Or where I am wrong?

Hey @Wolfgang

im not so into the technical thing but that what i know is:

one point why PoS is so secure because if you want to control 51% you need to pay much money. It is the way like it was mentioned in the main articel, you need to buy ada worth US$26billion.
If you would manipulate the system there will be two things happen:

At first the price of Ada will drop/crash, because no one want an cryptocurrency that can be manipulated. So you Ada that was worth 26billion will maybe crash down on 2$.
The other fact is that this would cause an hard fork or better: two realities of an blockchain. The one that was manipulated and the one that wasnt.
The one blockchain that wasnt manipulated will rise in their price, because much people want to sell the other one and buy the safe one.

So it could cause very crazy stuff but in fact i would see it as an self-repairing system.

Instead of crushing it, I would expect a group would influence the direction of development. Like in business and politics, strong interest do not necessarily kill the system (immediately), but form it to serve their interests, not that of the majority. Well, we will see.

Interesting idea.

So i see there an huge difference between business, politics and an cryptocurrency.
In fact the blockchain behind Ada is Open-Source, politics are not.

If the public sees the manipulation, the code could be separated.
If it is getting hard and we have two versions of code, the stake pool operators choose with which consens they work and cause an hard fork. Like i mentioned it is an self repairing system. :smiley:

No, the blockchain alternative in business and economics is “open source”, too. Powerful people know how to manipulate, or to influence, for the good or bad.
If one (group) gains power in Cardano through lots of Ada, they can control governance. It is plain open and democratic. One can bend democratic will. It is a different kind of attack.
Maybe as a very simple example, proposing and setting the fee to a special high value to exclude a certain set of people.
Anyway, currently, I am still hopeful and look forward that PoS à la Cardano will work sufficiently. I am just not convinced yet it is of same security quality as PoW. The next 3-5 years will show.

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