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Ethereum: Navigating the Blockchain's Sustainability Versus Profit Dilemma

Dal Bó, Ernesto , and Guo Xu
Publication date: 11/1/2020, pages 1-7

The popularity of Blockchain - and its application to cryptocurrencies in particular - has soared in recent years. Blockchain platforms are completely decentralized, relying on networks of participants to securely validate transactions without a central authority. Existing cryptocurrencies use a validation process called Proof of Work (PoW), a form of cryptography that requires a network of "miners" to commit their own computing power by solving complex cryptographic puzzles. Miners who create and publish new blocks are rewarded. But there is now a growing concern that the amount of electricity required to run PoW networks has become unsustainable: the Bitcoin network, for instance, requires the same amount of electricity as a small country. Vitalik Buterin, the co-founder of Ethereum, has proposed a new validation model called Proof-of-Stake (PoS). This case explores the challenges associated with incentivizing participants to transition in a more sustainable, but unproven new model.
 
 



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