With the change that took effect late Wednesday, ethereum — the world’s second most valuable cryptocurrency after bitcoin — has effectively eliminated the energy-intensive work of “mining” new coins on its blockchain. Mining requires enormous computing power, which translates into huge energy consumption and, in many areas, greater greenhouse gas emissions in older power plants. By itself, however, the ethereum change will not eliminate the expected environmental impact of crypto, although it is expected to help a lot. Bitcoin supporters have so far shown little interest in abolishing mining. Cryptocurrency is a type of digital money that is secured through encryption in a publicly visible and supposedly immutable way. Using these currencies, people can make instant financial transactions without any need for a bank or other financial intermediaries. They operate on constructs called blockchains, which consist of digitally signed transaction records that document every time a cryptocurrency is transferred or spent. Blockchains are also known as distributed ledgers because synchronized copies are stored on computers around the world. These copies also make it extremely difficult to change, insert or destroy blockchain records.
Environmental tolls
Researchers who have studied cryptocurrencies are concerned about the huge energy consumption. A recent report by the White House Office of Science and Technology Policy cited research findings that as of August 2022, annual electricity consumption for cryptocurrencies has surpassed that of individual nations such as Argentina or Australia. This problem, however, is not inherent to cryptocurrencies. Most of this energy is used for mining, a computationally intensive process for verifying blockchain transactions that also distributes new coins as rewards for competing miners. Crypto mining favors well-resourced groups who can assemble many specialized computers and supply them with electricity as cheaply as possible. This can have unexpected external effects. Before the plunge in cryptocurrency prices earlier this year, demand for PC graphics cards skyrocketed, driving up prices and emptying store shelves – much to the chagrin of gamers. Such cards proved to be ideal for cryptocurrency mining. Cities and states in the US have also pushed back on crypto companies’ plans to set up mining sites in their jurisdictions, citing not only energy use but also noise.
Merger to reduce computing needs
Primarily, the software update eliminates the need for miners. Where ethereum previously pitted miners against each other to solve complex cryptographic puzzles and earn new coins as a reward, it now requires parties who want to help validate transactions to put some skin in the game by “staking” a certain amount of ether, the coin ethereum . Parties from this group are randomly selected to validate a block of transactions. A wider group of ether holders will then review their work. Successful validators are paid an ether reward that is generally proportional to the size of their stake and the length of time they have held it. The new ethereum validation setup is called a “proof of stake” system, while mining-based cryptocurrencies like bitcoin are said to use “proof of work”. And we’re done! Happy merging everyone. This is a great moment for the Ethereum ecosystem. Everyone who helped make the merger happen should feel very proud today. —@VitalikButerin The ethereum merger of many doesn’t sound like much, but it could have dramatic results. Alex de Vries, an economist and founder of the consultancy Digiconomist that focuses on the environmental impact of cryptocurrencies, estimates that the change will result in between 99% and 99.99% energy savings for ethereum, although De Vries stresses that the work of has not yet been peer-reviewed. “It’s a really small change to the code that will have a very big impact on environmental sustainability,” he said. Before the merger, ethereum did up to 900 billion calculations per second that are no longer needed. According to his calculations, ethereum was responsible for about 44 million metric tons of carbon dioxide emissions annually. If he is right, these will now be drastically reduced. On the other hand, bitcoin’s energy use and greenhouse gas emissions are significantly greater than ethereum’s – and no move away from bitcoin mining seems to have gained much traction.
