PoW Dominance Weakens
As we already know, the Bitcoin’s PoW consensus algorithm was first of its kind, and it has laid the strong foundation for the whole cryptocurrency industry. Later we have seen how such new protocols as PoS were created and used towards the cryptocurrency development.
According to Everstake data, going back to 2015 we can find that Proof-of-Stake market share was only 0,4% and was accounted to $25,000,000. 4 years later, PoS cryptocurrencies have taken 9.6% ($29B) in January 2019 and 23.5%($48B) just 5 months later in May 2019.
The Proof-of-Work algorithm loses the competition faster than anyone could ever imagine, and in just 4 years, it has almost lost 25% of the total market share. The reason for this is the possibility of energy-efficient mining, which doesn’t require any hashing powers to participate in the validation process.
For example, the estimated annual electricity mining consumption of Bitcoin reaches 61.736 TWh per year as of 27 May 2019, which results in billions of dollars in expenses for electricity only.
The cost is constantly growing due to the increase in mining activities globally. Moreover, we have to add here the hardware and rental costs, which may result in a few billions more.
That’s not something everyone is looking for, especially if you can mine cryptocurrency without any additional hardware, and using your tokens only.
PoS Skyrocketing Rise
Besides the financial factors mentioned above, the PoS cryptocurrencies offer higher transaction throughput that crosses 3,000 tp/s on average, compared with PoW cryptocurrencies such as Bitcoin and Ethereum that merely reach 20 tp/s on average.
These factors, accompanied with low mining costs and higher returns due to the absence of the need to deploy specific hardware, slowly push people who get into the mining to choose the cryptocurrencies for staking. Currently, the most popular PoS cryptocurrencies are Tezos, IOST by IOS Foundation, Cosmos, IRIS Network, Waves, Dash, Qtum and Decred.
In PoS algorithms, the staking process is considered as an action of freezing a portion of digital assets for a certain period in return for the right to participate in block production. Every stakeholder has different chances of creating the block, and this chance is calculated through the amount and age of staked cryptocurrency in some blockchain networks.
At the moment, the value of annually issued PoS cryptocurrencies has reached $1.2 billion, and after Ethereum finishes the transition to PoS along with Telegram’s TON and Polkadot networks launch, the annual value in staking rewards should reach $1.3 billion.
At the moment there are not so many companies which can provide a robust and stable infrastructure for PoS cryptocurrencies staking, and unfortunately there are many companies that call themselves a “staking service”, but in fact they don’t improve the ecosystem at all and can’t provide a reliable infrastructure, so that more people could store millions in PoS cryptocurrencies.
One of the most well-performing players in this field is Everstake, that has an advanced infrastructure which offers a 99.6% uptime, comparing to other staking services that simply can’t provide that. And the reason for this is the exponential growth of infrastructure and maintenance costs associated with uptime growth that exceeds 95%.
The overall situation around PoS cryptocurrency market and staking as the replacement to mining looks very promising, and soon we can see an even more significant increase in total market share along with new solutions and better services presented in this niche.