Proof of Stake (Ethereum) Explained

Today I want to talk about Ethereum and Proof-of-Stake. So you might have heard that Ethereum is going to switch a mechanism in the coming months to something called Proof-of-Stake. And I want to explain to you guys what Proof-of-Stake is in this video. So Proof-of-Stake, really you can only understand it in terms of what's currently happening now, which is called Proof-of-Work. So basically when Ethereum is transferred, miners group that up into a ledger called the blockchain. And to do this, they have to solve a puzzle. So that's the current mechanisms right now. They have to use kind of a lot of computational power to solve this puzzle and then create a blockchain. The amount of reward you get for creating a blockchain is a transaction reward and a reward. But it depends on how much work you do. It depends on how fast you calculate. Also known as hash rate. So this is all going to go away once Proof-of-Stake comes along. So with Proof-of-Stake, you actually don't solve any puzzles. You remove the puzzle solving element. You don't use this mechanism to distribute reward. So instead of proving how fast you can calculate with hash rate, you're going to prove how much Ethereum you own. So this is something called master nodes. So when you create a master node, you have to lock up a certain amount of Ethereum to prove that you have it. And rewards are distributed according to how much proof of stake you have, how much Ethereum you have in there. So you can create multiple, many, many master nodes with a lot of Ethereum inside and you'll earn more. You'll earn more of this block rate. So that's going to be extremely interesting for everyone, really. We see proof of stake currencies before. And that's with something popular in Dash, where 50% of the mining is done by mining and 50% of the rewards are done by proof of stake. And you have PIFX, which is 100% proof of stake. The advantage of this is huge. One advantage is that you no longer have to actually do the calculations, which means you save a lot of energy. So you save up on energy. And the second advantage is that you actually lock up Ethereum. So by locking up Ethereum, you actually create a scarcity of Ethereum, which will mean the price will go up for everyone else. So hopefully, it's going to happen sometime this year. And to do so, the Ethereum group, the foundation, has to make sure the code's ready. You have to make sure it's stable. Because it's a huge change. You're moving away from mining. And also, you have to make sure the miners support you. That's going to be an interesting thing to see in the coming months. Because if the miners don't support this move, then what's going to happen is it might break up Ethereum again. Just like last year with Ethereum and Ethereum Classic. Like if there are people who don't support this change, then maybe another currency might be created, which is probably the worst thing that can happen. But there are mechanisms to help along this process because Ethereum actually has kind of a time bomb that will blow up if the switch is not made. The switch has always been planned and it's always hard-coded to happen sometime. So that's kind of interesting to see how this will progress. But I'm very excited. And obviously, miners won't be without a job. There's other currencies you can mine with the current hardware. For example, if you use AMD GPUs, you can start mining Zcash, which is also extremely profitable right now. So I do see this being very exciting for everyone. What are your views on it? Are you excited about proof of stake for Ethereum? What are your views? Comment on the sections below. And if you like this video, please like and subscribe to my channel. Thanks for watching.