Ethereum Switch Reduces Demand for Cryptocurrency Power

An image of computers mining cryptocurrency

A change in how the Ethereum cryptocurrency works may have reduced its energy consumption by the size of a country.

The amount of electricity saved is similar to that used by Ireland or even Austria, according to work published in the data science journal Patterns.

Bitcoin, the biggest crypto, is believed to use more electricity than Finland.

It has even been suggested that bitcoin emissions could exceed the global savings currently achieved by driving electric vehicles, the article notes.

Fossil fuels

Like all crypto-currencies, Ethereum is based on a blockchain, a giant database, constantly updated, recording each transaction.

Previously, this was maintained and verified by a system called Proof of Work, used by many cryptocurrencies, including Bitcoin.

Companies and volunteers whose computers helped run the network were rewarded with new cryptocurrency coins.

The more they worked, the more likely they were to create new pieces.

This has encouraged companies to set up huge warehouses of computers running 24/7, often on power derived from fossil fuels, the article suggests.

But on September 15, in an event known as The Merge, Ethereum moved to a system called Proof of Stake, where the ability to create a new coin no longer depends on the amount of computer work done.

Legal limits

The technical complexity of the switch has been compared to rebuilding the foundations of a skyscraper while it remained standing.

But it reduced Ethereum’s electrical power consumption by at least 99.84%, the peer-reviewed “perspective” article suggests.

The Ethereum blockchain also supports hundreds of millions of other crypto coins and products such as non-fungible tokens (NFTs).

But the author of the article, Alex De Vries, a researcher in data science and economics at Vrije Universiteit Amsterdam, the Netherlands, warns that computers could simply have moved on to creating other cryptocurrencies.

In September 2022, the White House Office of Science and Technology Policy stated that legal limits on energy-intensive cryptocurrency mining should be considered.

Mr. De Vries said: “The Bitcoin community has been very anti-change – but the Ethereum community has shown that despite concerns and resistance, it is possible to make the necessary changes on a live blockchain, which means that the bitcoin community may need a little help from the outside to get things moving.”

Environmental concerns

Gavin Brown, an associate professor at the University of Liverpool, told BBC News: “Sustainability is a critical issue to be addressed in the crypto space. To achieve this, the prospect of new regulation is an important lever.”

But it was in the interests of Bitcoin and Ethereum enthusiasts to clean up their own act to attract money from institutional investors such as banks or pension funds.

“A lot of that money may currently want to invest in crypto, but may not be able to until crypto becomes more sustainable,” he said.

And Mr. De Vries warned that it would be premature for the Ethereum community to declare “total victory” over the environmental concerns facing crypto assets “because the blockchain-based system remains relatively inefficient compared to more centralized”.

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