According to researchers, Ethereum, the world’s second-largest cryptocurrency, has successfully slashed its emissions by 99.99% through a groundbreaking experiment that abandoned energy-intensive mining in favor of a new approach. However, experts believe that users of bitcoin, the largest digital currency, are unlikely to embrace such a change, as it lacks a central governing body to drive development.
Traditionally, Ethereum, like bitcoin, relied on a “proof of work” mechanism, where computers performed extensive calculations to mine new currency and validate transactions, consuming enormous amounts of electricity. However, in September 2022, Ethereum transitioned to a new technique called “proof of stake” during a significant transformation known as the Merge.
The Cambridge Centre for Alternative Finance (CCAF) has released comprehensive data on bitcoin’s energy usage over the past four years and has now provided similar data for Ethereum. Alexander Neumüller from the University of Cambridge, involved in the project, describes the experimental update as a technological success, achieving a “staggering” reduction in electricity consumption.
Under the new system, validators deposit funds with the network instead of relying on computer hardware to mine new currency and receive rewards. This change was expected to reduce energy usage by 99%, as estimated by the Ethereum Foundation, the non-profit organization overseeing Ethereum’s development. However, the results of the transition were uncertain, as such a large-scale attempt had not been made before.
Prior to the Merge, Ethereum’s energy consumption had been increasing each year since its launch in 2015. CCAF’s data reveals that it consumed 16.4 terawatt hours in 2021. By September 14, 2022, just before the Merge, the consumption had reached 17.6 TWh and was projected to reach 21.4 TWh by the end of the year.
CCAF now estimates that Ethereum’s annual electricity consumption will be only 6.6 gigawatt hours, equivalent to about 2,000 typical homes in the UK. In contrast, Ethereum’s cumulative consumption from its launch to the Merge amounted to 58.3 TWh, comparable to Switzerland’s annual electricity usage.
Neumüller acknowledges the scale of the challenge and the uncertainty of success, likening it to changing a jet engine during flight. He states that the execution was well done, with unexpected outcomes.
While some analysis suggests that the hardware previously used for Ethereum mining is now being repurposed, Neumüller counters that not all miners switched and evidence shows many sold their hardware. His research indicates that nearly 80% of the computational power used for mining vanished between September 8, 2022, and March 4, 2023, as miners abandoned their activities and sold their equipment.
Despite Ethereum’s successful transition, Neumüller believes that the bitcoin network is too entrenched in its proof-of-work approach to adopt a similar change.
Ethan Vera, co-founder of cryptocurrency firm Luxor Mining, shares the sentiment, stating that proof of work is fundamental to bitcoin and the use of energy is critical to its security mechanism.
