As a crypto-flounder, Ethereum reduces energy consumption by 99.95%

On Wednesday, September 13, Ethereum – the world’s second largest blockchain – switched its so-called “proof-of-work” system to a proof-of-stake protocol in a move called “the merge” that is expected to reduce its carbon footprint by 99.95 %. Ethereum, which builds on Bitcoin by incorporating smart contracts, allows the ledger to record data, creating the rise of non-fungible tokens (NFTs).

Ethereum’s previous proof-of-work system—one currently used by Bitcoin, which remains the leading cryptocurrency—secured its blockchain by requiring “miners” to solve difficult puzzles that consumed exponentially increasing amounts of computing power to modify it. Simply put, high levels of energy consumption were the basis for the integrity of Ethereum’s network. The new proof-of-stake system instead relies on “validators” who, instead of fronting computational power, front ETH – the cryptocurrency associated with the Ethereum blockchain – as collateral for the ability to validate the next block in the chain. The energy efficiency advantage that proof-of-stake systems have comes from the fact that the problems that validators solve are simpler than those miners have to solve in proof-of-work systems; by requiring users to put skin in the game, they are theoretically discouraged from cheating even though they don’t have to spend as many resources solving difficult problems.

Ethereum’s hefty carbon footprint led to vocal criticism of the minting of NFTs, which some saw as environmentally irresponsible. By some estimates, each transaction on Ethereum’s old proof-of-work network — including NFT-related transactions — consumed over 260 kilowatt-hours of electricity, roughly equivalent to the total power consumption of the average American household over nine days. This translated into emissions of around 150 kilograms of carbon dioxide. (Ethereum’s official website disputes per-transaction estimates of the blockchain’s energy use, which it calls “misleading.”)

Champions of “the merge” are hopeful that this major upgrade for Ethereum can finally put concerns about the cryptocurrency’s sustainability to rest.

Ethereum’s eventual transition to proof-of-stake was expected before the cryptocurrency even launched in 2015, but the technical difficulty of the task led to several delays that led to skepticism about whether the switch would be made and sharp criticism of the entire system. Ethereum developers say they are planning several other updates over the next few years that will improve the security and scalability of the currency.

Ethereum’s switch, long awaited by some in the crypto community, has taken place at a time when the outlook for the value of Bitcoin, Ethereum and other cryptocurrencies remains depressed. Bitcoin’s price has fallen by almost 70% in the past year, and in June Ethereum saw its lowest price since late 2020. Early indications suggest that the “merger” has not been able to effect a dramatic reassessment of ETH’s value: It fell with 8% the day after the transition.

And according to Web 3 Is Going Great, a crypto-critical citizen journalism project, scammers have reportedly taken advantage of the hype surrounding the “merger” to tweet out links to fraudulent giveaways celebrating the event, with at least 36 Twitter accounts hacked and $300,000 stolen in the attack.