Answering Vitalik Buterin's 7 Hard Questions For the Blockchain World Part 5: Proof of Waste

Of all the different consensus methods, PoW consumes the most energy and therefore consumes the most value - or money.

Bitcoin, the most valuable and widely used cryptocurrency, uses PoW to secure the Bitcoin blockchain and ensure consensus is reached.

PoW is relatively simple in theory - network participants that validate blocks in the Bitcoin blockchain are required to demonstrate that they have invested a significant amount of work in order to keep them honest.

The expenditure of large amounts of computational power requires a significant amount of energy and represents a substantial financial investment.

In addition to keeping network participants economically disincentivized from acting in a malicious manner, PoW also makes it difficult for malicious parties to attack the Bitcoin network.

While the PoW consensus method is an effective solution for gaining consensus and keeping a blockchain network secure, it does have one major drawback - it's extremely costly.

While PoW does consume vast amounts of power, it's arguable that using energy to establish a decentralized, public, secure, wholly independent, and incorruptible method of transferring value between individuals outside of the centralized institutional financial power structure is justified.

PoW serves to attach a cost to mining to prevent networks that use it as a consensus method from being compromised.

Within the current blockchain paradigm, PoW is - and has been - essential to the proliferation of cryptocurrencies around the world.

Outside of the sheer scale of energy directed toward PoW consensus methods there are a number of other issues generated by PoW. Consensus methods such as PoW that require intense computation will inevitably lead to the development of specialized hardware, which disincentivizes individual operators and encourages the pooling of resources which, in turn, leads to monopolization - an issue highlighted by Buterin in his first "Hard question for the blockchain world."