The crypto industry has been weaving its way into almost every industry known to mankind. Though its popularity is increasing, the energy consumed by it to facilitate transactions has been turning heads. As the whole world is facing challenges of climate change and energy crisis, Ethereum has taken a bold step towards making the future of the crypto industry more green and sustainable.
Not too long ago, the power-consuming PoW mining model of Ethereum was replaced with an eco-friendly POS consensus. This technological breakthrough was achieved in an event ‘merge’ on September 15, 2022. The groundbreaking change reduced the energy consumption and carbon footprint of Ethereum by 99.98% and 99.992% respectively.
Ethereum’s Upgrade from PoW to PoS model
Cryptocurrency networks use enormous amounts of energy in order to ensure their security. Since the world is amidst an energy crunch, environmentalists have increased pressure on crypto networks to reduce their power demand.
With a market capitalization surpassed only by Bitcoin, Ethereum quickly came under the radar of environmental regulators. Before it switched to PoS model, Ethereum relied on the PoW mechanism for securing its network. In the energy-intensive PoW system, the miners solve complex mathematical puzzles in return for rewards.
In this system, the miners leverage the computational power of powerful computers to produce a correct ‘guess’ of the puzzle. All the miners on the network compete with one another in this numeric guessing game. The miner that correctly solves the puzzle creates the next block in the network and gets rewarded with newly minted ether (ETH).
On a PoW employed network, this process repeats indefinitely for the creation of every new block. As per an estimate, Ethereum would generate nearly 900 Billion of these numeric guesses per second in a day before the merge.
To prevent the extreme wastage of energy through a PoW model, Ethereum shifted towards an eco-friendly PoS mechanism. Instead of the highly advanced computing equipment, the PoS model secures the network with its own native currency.
Under the PoS system, validator nodes stake (or lock) a minimum of 32 ETH on the Ethereum network as a collateral. The algorithm randomly selects a “staker” to perform the addition of new blocks on the blockchain.
It is worth noting the chances of a node becoming a validator increase in proportion with their staked capital. While the networks relying on PoS require devices to perform necessary functions, their computational power is irrelevant to the staking mechanism.
Energy Savings Before and After Ethereum’s Merge
On September 15, 2022, Ethereum achieved the greatest technological feat in the history of the crypto industry. The network changed its consensus model by merging the mainnet based on PoW with a parallel running PoS mechanism-based beacon chain (launched on December 1, 2020). This upgrade has transformed Ethereum from a polluter to a net-zero technology poised to move towards sustainable growth.
The switch of Ethereum from PoW to PoS has removed the need for users to compete on energy-intensive computing devices. This step has considerably reduced the electric energy consumption, power demand, and thereby, the carbon footprint of the Ethereum network.
There are various approaches for estimating Ethereum’s power consumption before the merge. The top-down approach estimates the electricity consumed by assessing the share of the miner’s income spent on electricity.
Contrastingly, the bottom-down approach provides a more realistic estimate of energy consumption by determining the network’s hash rate, and the amount and type of hardware that can perform profitably. Other factors included while gauging the power consumption of Ethereum are the number of validators, GPU efficiency, IP addresses, and location of the miners.
Before the merge, a tracker by Kyle McDonald estimated that Ethereum’s daily power demand was around 2.46 gigawatt (GW), which roughly translates to an annual demand of nearly 23 terawatt hours per year (TWh/year). On comparing it with a digital giant like Facebook that consumes nearly 7.2 TWh/year, Ethereum consumes more energy.
Moreover, the research estimated that the carbon footprint of pre-merge Ethereum was close to 20 Kilotons CO2 per day (KtCO2/day). On an annual basis, it equals nearly 7 Megatons CO2 per day (MtCO2/day), a rough equivalent to carbon emissions done by around 500,000 U.S. citizens every year.
Likewise, in a recent report by the Crypto Carbon Ratings Institute (CCRI), Ethereum’s power consumption and carbon footprint was estimated to be 24.10 TWh/year and 13.64 MtCO2/day, respectively. The data was estimated for the period ranging from August 1, 2021 to July 31st, 2022.
However, in the same report, CCRI mentioned the electricity consumption of the post-merge Ethereum has been reduced by around 99.98%. Switching from an energy hungry PoW mechanism to a PoS model has reduced the annualized electricity consumption from 24.10 TWh/year to nearly 2,600.86 MWh.
Furthermore, the CO2 emissions from the post-merge Ethereum has tumbled down to nearly 870 tCO2/day. This represents a near 99.992% reduction from its previously estimated value of 13.64 MtCO2/day.
The historic transition from the PoW to PoS consensus has proved to be a milestone for Ethereum. The merge has reduced the electric energy consumption of the PoS Ethereum by 99.98%, while its carbon emissions have fallen down by 99.992%.
To put things in perspective, post-merge Ethereum’s annual power consumption is not equivalent to an entire country’s, but a few hundred homes in the U.S. Although the road to innovation is quite long, it can be said the success Ethereum achieved in cutting down its power demand is paving the way for a sustainable cryptocurrency future.
