A new article published in the peer-reviewed journal “Patterns” has caught the attention of various mainstream media such as the BBC and Bloomberg. The article by Digiconomist-founder Alex de Vries, titled “Cryptocurrencies on the road to sustainability: Ethereum paving the way for Bitcoin,” discusses the progress that Ethereum has made in reducing its electrical energy consumption.
According to the article, Ethereum has achieved a reduction of at least 99.84% (and possibly up to 99.9996%) in its energy consumption through a event called “The Merge,” which took place on September 15, 2022. This event involved replacing Ethereum’s energy-intensive proof-of-work mining mechanism with a more sustainable proof-of-stake system.
Proof-of-work versus proof-of-stake
Proof-of-work (PoW) is the original mechanism used by cryptocurrencies like Bitcoin. In a PoW system, miners engage in what is effectively a massive numeric guessing game to produce the next block in the blockchain. The miner who guesses the correct number first gets to create the next block, and is rewarded with a certain amount of the cryptocurrency. This process consumes a significant amount of energy, as miners use powerful computers to make as many guesses as possible in a short amount of time.
In contrast, proof-of-stake (PoS) is a mechanism in which the network achieves distributed consensus by choosing the next block producer proportional to their stake (the number of coins locked up as collateral in the block creation process) in the network. This means that the bigger the stake, the more likely they are to be chosen to produce the next block. Because PoS does not require miners to compete against each other, it is much less energy-intensive than PoW. In absolute terms, the reduction in power demand of the Ethereum network could be equivalent to the electrical power requirement of a country such as Ireland or even Austria.
Limitations and way forward for cryptocurrencies
However, the article also notes that the electrical energy savings from The Merge may not have a global impact, as many of the machines used for Ethereum mining may have been repurposed for other tasks or switched to mining other PoW coins. In fact, it’s also possible that previously unused Bitcoin miners have claimed the data center space that Ethereum miners were using.
Despite this, the article suggests that Ethereum’s success in reducing its power demand is a positive sign for the future of cryptocurrency sustainability, even though Bitcoin, the largest polluter in the crypto world, continues to run on energy-intensive PoW mining. The article argues that the Bitcoin community could follow in Ethereum’s footsteps and work towards sustainability as well, but it may require a push from the outside to make it happen.