The cryptocurrency Ethereum can significantly cut its energy consumption and climate-related emissions with a problematic software upgrade. However, “the merge” as a transition won’t be sufficient.
The energy-intensive process of “mining” new coins on Ethereum’s blockchain has now been wholly ended, thanks to the modification implemented late Wednesday. Ethereum is currently the second most valued cryptocurrency behind bitcoin. Massive energy consumption and, in many cases, higher greenhouse gas emissions at older power plants are directly related to mining, which demands immense processing capacity.
The Ethereum adjustment is likely to reduce the expected environmental impact of crypto significantly, but it won’t remove it altogether. The proponents of bitcoin haven’t expressed much interest in doing away with mining.
The digital currency known as cryptocurrency is protected by encryption in a form that everyone can see and is ostensibly unchangeable. Individuals can conduct direct financial transactions with these currencies without the aid of a bank or other financial intermediaries.
They function on systems known as blockchains, which are collections of records of digitally signed transactions that show each time a cryptocurrency is transferred or spent. Due to the synchronized copies that are kept on computers worldwide, which also make it incredibly impossible to change, add, or remove blockchain entries, blockchains are sometimes referred to as distributed ledgers.
The massive amount of energy that cryptocurrency uses alarms researchers who have studied it. According to studies referenced in a recent report by the White House Office of Science and Technology Policy, as of August 2022, the yearly electricity usage for cryptocurrencies was greater than that of individual countries like Argentina or Australia.
But this issue isn’t unique to cryptocurrencies. Most of that energy is required for mining, a computationally demanding procedure for authenticating blockchain transactions and distributing new coins as compensation to rival miners. The mining of cryptocurrencies is favored by well-funded organizations that can assemble numerous specialized computers and provide them with electricity as cheaply as possible.
That might cause unforeseen external impacts. Before the collapse in cryptocurrency prices earlier this year, there was a massive increase in demand for computer graphics cards, driving up costs and depleting shop inventories, much to the dismay of gamers. These cards ended up being perfect for crypto mining rigs. Along with concerns about power usage and noise, American cities and states have opposed cryptocurrency companies’ intentions to erect mining operations within their borders.
Benefit to Environment
Although the Ethereum merging may not seem like much, it might have significant consequences. According to calculations made by economist and creator of the Digiconomist consultancy, Alex de Vries, the change will save Ethereum between 99% and 99.99% of its current energy use. (De Vries underlines that no peers have yet reviewed his work.)
He claimed that a relatively minor alteration to the code would significantly affect environmental sustainability. Ethereum was doing up to 900 billion calculations per second before the integration. However, these calculations are no longer required.
He calculated that the annual carbon dioxide emissions caused by Ethereum were around 44 million metric tons. If he’s right, these will now be significantly diminished.
However, compared to Ethereum, bitcoin uses substantially more energy and emits more greenhouse gases, and there doesn’t seem to be much interest in abandoning bitcoin mining.
According to Lena Klaassen, co-founder of the German company Crypto Carbon Ratings Institute, which specializes in calculating the environmental effects of cryptocurrencies, the Ethereum merger was long anticipated and required years of planning by its developer teams. She claimed that because Bitcoin has never had such aspirations, “I don’t expect that Bitcoin will move” away from mining anytime soon.
First and foremost, the software upgrade does away with the necessity for miners. Ethereum now asks parties that want to assist in transaction validation to put some skin in the game by “staking” a particular quantity of ether, the Ethereum coin, when previously it pitted miners against one another to solve complex cryptographic problems and earn new coin as incentives.
A more comprehensive set of Ether holders will verify their work once parties from this pool are randomly selected to validate a block of transactions. A payment in ether is given to successful validators, typically inversely correlated to the quantity of their stake and the amount of time they have held it.