Bitcoin should consider changing the current consensus mechanism from Proof of Work (PoW) to energy-intensive Proof of Stake (Proof of Participation – PoS). This according to Chris Larsen, the co-founder, former CEO and current president of Ripple. Larsen believes that PoW is eating away at all the good that Bitcoin is doing to the global financial system. In one publication, Larsen acknowledged that cryptocurrencies have exploded in the market and are changing lives. "This means that hundreds of millions of people will have access to more efficient and affordable financial services," he noted. However, he believes that Bitcoin's PoW consensus mechanism is undoing most of that asset.
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Although many newer cryptocurrencies are already low-energy or even carbon-neutral consumers, early protocols, such as Bitcoin, use a central technology called Proof of Work (PoW) to validate transactions, which is not just a huge and growing source of CO2 emissions but also uses large amounts of energy, both from fossil fuels and from green sources.
Larsen said that even those who were involved in Bitcoin in the early days of cryptocurrency, like Hal Finney, knew that PoW could be a problem.
Thinking about how to reduce CO2 emissions from a widespread Bitcoin implementation— halfin (@halfin) January 27, 2009
"Thinking about how to reduce CO2 emissions from a widespread implementation of Bitcoin," said the pioneer in January 2009. Ethereum, the second largest cryptocurrency on the market, is moving to PoS. "It is clear which way the trend is moving," he noted.
We must see PoW as it is – brilliantly designed technology that is becoming out of date in today's world. (…) Cryptocurrencies that use PoW should consider a code change to another validation method, such as Proof of Participation (PoS) or Federated Consensus (or something yet to be developed), which have also proved effective in protecting their stored value by use a small fraction of the energy.
"I know it is a bold proposal, but it is worth considering," he said. "He (XRP) closed more than 62 million ledgers without shutdown, and uses the equivalent of just 50 U.S. homes a year and is already carbon neutral," he said. PoW advocates also claimed that Bitcoin it mainly uses “trapped energy” that could not be reused, such as energy from surplus oil and gas extraction.
Those who argue that PoW is the best use of renewable energy are also wrong (…) Until we become globally carbon neutral, PoW will be in direct competition with more urgent energy needs that must make the switch to renewable energy; industries like concrete and steel, air travel and agriculture, said Chris.
Bitcoin has attracted many institutional investors in recent years. However, it runs the risk of losing them in the future if it does not improve its energy consumption, according to the executive.
Undoubtedly, they will face pressure (both from consumers and regulators) to reduce or alienate their holdings of PoW-based cryptocurrencies – including bitcoin. The Bitcoin community must see this as a significant risk and work to resolve it.
Ripple CEO Brad Garlinghouse also criticized Bitcoin's energy consumption. In a recent interview, he stated that a Bitcoin transaction requires 75 gallons of gasoline.Read more: Bitcoin is not an enemy of the environment, as traditional media points out