Which Blockchain Challenge is Skale Helping the Ethereum Ecosystem Overcome

Which Blockchain Challenge is Skale Helping the Ethereum Ecosystem Overcome

The market for NFTs—tokens that represent digital versions of artwork, music, movies, and other such items—exploded to $44 billion in 2017. This brought quite a lot of interest in Ethereum, the blockchain network where the majority of NFTs are traded.

It also brought to light another concern, namely the energy waste associated with mining cryptocurrency.

Blockchains do not have a central gatekeeper, like a bank, to authenticate transactions. Instead of using a consensus method known as “proof of work,” the two biggest cryptocurrencies, Bitcoin and Ethereum, rely on it to maintain a chronological record of transactions. Crypto miners are at the center of such processes.

The cost of decentralization is high. In the case of work proof, this cost is computer power. Miners compete against one another in Proof of Work to solve a difficult mathematical puzzle.

In exchange for updating the ledger by adding a new block to the chain, the first person to remedy the problem gets rewarded with newly minted coins. This requires a considerable amount of computer power, and as a result, electricity.

Ethereum uses 113 terawatt-hours of energy yearly, the same as the Netherlands, according to Digiconomist. More energy can be consumed in a single Ethereum transaction than a typical US home uses in over a week. Bitcoin uses even more electricity than usual.

Which Blockchain Challenge is Skale Helping the Ethereum Ecosystem Overcome

Why is the Blockchain facing a challenge?

The present power crisis, which contributed to China’s ban on cryptocurrency mining last year as well as the expulsion of miners from places like Kosovo and Kazakhstan and the shut-off of their energy, is to some extent to blame for the current state of affairs. These countries need energy to keep their homes warm and their businesses running.

Proof of employment wastes power and produces electronic trash. Rarely, after 1.5 years, can specialized computer systems used for cryptocurrency mining remain in operation and end up in landfills.

In addition to these issues, Ethereum’s system has a painfully slow average transaction rate of 15 transactions per second. And it cannot be scaled. The 2017 release of the video game CryptoKitties, which allows users to breed and trade cartoon cats, caused a transaction backlog on the network.

Given the cash venture capital firms are pouring into Web3, a futuristic paradigm where apps will all operate on decentralized blockchains, most of it powered by Ethereum itself, now is an opportune time for Ethereum to remove itself from proof-of-work mining. And that is the plan of action.

In a dramatic event known as “The Merge,” Ethereum plans to transition its whole network to proof of stake, which it claims would require 99 percent less energy and allow the network to expand and maybe help it reach 100,000 transactions per second, sometime in the first half of 2022.

In actuality, the switch to proof of stake for Ethereum has been planned for six months. “[We] anticipated [POS implementation] would require a year… but it actually [has] taken around six years,” Ethereum’s founder Vitalik Buterin told Fortune in May 2021. This is true since it is challenging to create such a model.

What is proof of work?

Bitcoin was the first blockchain. Its creator wanted to do rid of the impact third parties, like states or big banks, frequently had on financial systems.

In a blockchain where users keep a shared record, the creator of Bitcoin had to devise a way to stop anyone from trying to rig the system and spend the same coins again. A clever workaround provided as proof of concept; although it wasn’t perfect, it was sufficient.

By requiring a significant up-front investment, “Proof of something” deters bad actors from setting up a considerable number of purportedly independent virtual nodes and using them to control the network. Essentially, you have to pay to play.

Hardware is the investment in Bitcoin’s proof of work. Every ten minutes or so, bitcoin miners compete to solve a challenge. The winner earns the block reward, which is new bitcoins, and adds the next block to the chain.

But trying to find the solution is like trying to hit the jackpot. Up until you are successful, you must keep speculating. The more powerful the machine is, the more accurate estimates you can produce.

Large server farms are utilized for this purpose all around the world, making trillions of guesses per second. Larger mining operations also save more money, which raises their market share. The idea of decentralization is undermined by this. Any proof-of-work system must necessarily become more centralized.

In the case of Bitcoin, this ultimately resulted in a small number of powerful corporations controlling the network.

Crypto aficionados, however, have been looking for alternative consensus methods since the beginning of Bitcoin’s existence that can maintain some kind of decentralization and are less wasteful and environmentally damaging than proof of work.

This finally led to a few strong firms controlling the network in the case of Bitcoin.

However, from the birth of Bitcoin, crypto enthusiasts have been searching for alternate consensus mechanisms that can maintain some level of decentralization and are less wasteful and harmful to the environment than proof of work.

How does it work?

Proof of stake, which was first offered on the online forum BitcoinTalk on July 11, 2011, has become one of the most popular solutions. In reality, the new blockchain was designed with the intention of serving as Ethereum’s initial security mechanism when it was first announced in a white paper in 2013.

Buterin said in 2014 that developing such a system was “so non-trivial that some even deem it impossible.” Ethereum began developing a proof-of-stake algorithm but ultimately decided to adopt a proof-of-work architecture for its initial launch.

When there is proof of stake, “validators” act as miners. Instead of buying energy-hungry computer farms, you invest in the native money of the system.

To become a validator and receive the block rewards, you must stake—or lock up—your tokens in a smart contract, a piece of blockchain-based computer code. When you send bitcoin to the smart contract’s wallet address, it is received and stored there like cash in a safe.


The transition of Ethereum to proof of stake has taken a lot of work. On the Ethereum blockchain, thousands of smart contracts are presently in use, putting billions of dollars’ worth of assets at risk.

Furthermore, despite the fact that staking does not instantly harm the environment in the same way as computer storage facilities do, opponents point out that proof of stake and proof of work are equally good at sustaining decentralization. The highest stakes yield the highest payouts.


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