Ethereum has said it wants to switch for years. The cryptocurrency already mentioned a date for this earlier this year: June 8. That deadline passed in silence. Will it happen now? According to technology website Gizmodo, the developers’ posts and blogs are encouraging. It appears that most stakeholders are ready for a switch.
In addition, there is a real countdown clock. According to that clock, the legendary moment seems to be coming even earlier: September 15th. Why did Ethereum take so long to make the long-announced switch? We’ll get to that in a moment. First, why this switch is good for the environment. (Or actually: less bad).
Why cryptocurrencies are so bad for the environment
The best known and largest cryptocurrencies are Bitcoin (with 40 percent of the market) and Ethereum (with 19 percent of the market). These crypto coins work with proof of work (PoW) to mine them via computers all over the world. As a result, PoW consumes a lot of energy. On his website, Digiconomist, crypto expert Alex de Vries estimates that Bitcoin’s energy consumption is equivalent to a country like Norway, and the CO2 emissions it produces are comparable to Greece’s. Because of these huge emissions, almost any cryptocurrency that works with a different system can call itself much more energy efficient. Proof of stake (PoS) is one of these alternatives.
The difference between proof of work and proof of effort
As proof of work, computers ‘mine’ the coins. The computers try to guess a winning number. If successful, a bitcoin is created and the computer owner receives a bitcoin as payment. These calculations ensure that your bitcoin payments or receipts will be valid. The more popular the system, the greater the value of the reward that miners get and the more computers they will use to solve the puzzles. When crypto prices peaked, parties sometimes bought entire (often coal- or gas-fired) power plants to keep their infrastructure running and to mine “tokens”. Most of the energy is wasted because there are many computers working on the same puzzle at the same time, but there is only one winner. All other computing power is for nothing. It also creates large amounts of electronic waste.
In Proof of stake (PoS), an algorithm designates certain members who get the chance to check the network for a fee and receive new coins in the process. This is also criticized because those who (longer) have many digital coins and therefore have a lot ‘at stake’ usually get priority. That would close the gap between arm and empire enlarge. That criticism also applies to PoW because people now have to build huge servers to have a chance of guessing the right number quickly.
Due to the high energy consumption of proof of work, some countries even ban mining. China, for example The combination of the bad impact on the environment and the threat of a ‘mining ban’ could increase the pressure to change the system, which Ethereum now (finally) seems to be doing. There are good reasons why it took so long.
Why is it taking so long?
“A task as complicated as transplanting the Empire State Building from Manhattan to the moon.” This is how the technology website Gizmodo describes the switch that Ethereum has in mind. Because of its decentralized nature, there are many people to consider. For example, there are the ‘node operators’ whose computers control the chain. They are the nodes, so they need to know when to switch to make sure everything runs smoothly. Then there are the developers and even regular Ethereum owners who all get to influence the process in one way or another.
Ethereum first built a testnet called the Beacon Chain. That system will merge it with the regular system. In the crypto world, the switch from Ethereum is therefore also called ‘Merge’. How much environmental benefit it will provide depends on a number of conditions, says De Vries in writing. “First of all, of course, the upgrade has to go well (there are no guarantees), and in addition, there will probably be an attempt to keep PoW alive on Ethereum.” But the more PoW, the worse for the environment.
Another question concerns the number of computers that remain active in the Ethereum network. De Vries: “Depending on this number and the (hardware) characteristics of these computers, it is likely that about 99 percent of the energy consumption can be reduced, because in any case mining and all the equipment used for it are no longer This means, that the savings will amount to approximately half of the total Dutch electricity consumption.”