Ethereum’s PoS Or Algorand’s PPoS; Which is Better?


Amid the ongoing bear, Ether jumped from $1,250 to nearly $1,500 over the weekend following news of a confirmed date on ‘the Merge’, which will merge the current Ethereum Mainnet with the Beacon Chain proof-of-stake system.

This in turn will mark the end of proof-of-work for the OG DeFi chain, and the full transition to proof-of-stake to facilitate cheaper, faster, and environment-friendly blockchain operations. Nevertheless, the less popular chain — Algorand is pushing its crypto extraction mechanism of pure proof-of-stake (PPoS) as “the best tech in crypto”. 

In a recent interview with the Block, Algorand Foundation CEO Staci Warden emphasized that upcoming developments will “harness the power of Algorand’s technology for global good”. She highlighted that the foreseeable advancements will take Algorand chain’s current status of supporting 1,000 transactions per second and 4.5 second settlement time to 10,000 transactions per second and 2.5 second settlement time by the end of 2022.

Algorand PPoS protocol, which is built on Byzantine consensus, picks validators randomly, irrespective of the size of the assets they have pledged to the blockchain, furthering the distributed consensus concept. As opposed to Algorand’s PPoS, Ethereum and its PoS requires validators to lock up or bond their stake in order to influence block generation, furthering the economical polarisation.

In light of this difference, Algorand’s CEO asserted that they can solve issues like lack of financial inclusion with their blockchain tech. She said,

“When you’ve got a machine like that, of course, you start thinking big — and so we think in terms of very big global problems”.

Following this, she also declared that Algorand Foundation’s upcoming partnership with an organization that will make 4G mobile phones preloaded with Algorand’s tech available to people in Africa will allow them easy access to financial services.

A Bitcoin-PoW is a no-go but Ethereum-PoS for the win?

The European Central Bank (ECB) recently addressed the two crypto extraction mechanisms — Proof of Work (PoW) and Proof of Stake (PoS), weighing them against their carbon footprint. The report highlighted that consensus mechanisms like PoW require vast amounts of computational power. Following this, the financial institution noted that,

“Public authorities need to evaluate whether the outsized carbon footprint of certain crypto-assets undermines the achievement of their green transition to net zero greenhouse gas emissions”. 

The Central Bank argued that while public authorities like the European Union (EU) should not stifle innovation, “the benefit for the society of bitcoin itself is doubtful”, given the in-principle benefits and technological applications of blockchain technology still remain unknown. Furthermore, the ECB compared PoS to the crypto version of an electric vehicle while contrasting PoW as a fossil fuel car. 

Source: ECB

ECB stated that

“It is difficult to see how authorities could opt to ban petrol cars over a transition period but turn a blind eye to bitcoin-type assets built on PoW technology, with country-sized energy consumption footprints and yearly carbon emissions that currently negate most euro area countries’ past and target GHG savings”.

In an attempt to resolve the environmental effects of crypto mining while promoting innovation, the bank suggests that authorities should either restrict or ban PoW, or incentivize energy-efficient consensus mechanisms like PoS.