LOS ANGELES: Ethereum, the blockchain underpinning the world’s second-largest crypto token ether, is poised for a software upgrade that will slash the amount of energy it uses – a step that could increase pressure on bitcoin to take similar climate-friendly action.
The software switch, known as “the merge”, comes amid growing debate over the environmental impact of crypto mining in the United States, with green groups saying its use of fossil fuels undermines efforts to cut planet-heating emissions.
“Cars are shifting from diesel fuel to electric cars – so why can’t we do the same with crypto?” said Carmine Russo, a researcher at the Center for Climate Finance & Investment at Imperial College Business School, and the author of a recent report on cryptocurrencies and climate change.
The switch from an energy intensive process known as proof-of-work (PoW) to the more energy efficient proof-of-stake (PoS) method should cut the digital currency’s power consumption by more than 99%, according to the Ethereum Foundation, a nonprofit that says it supports ethereum.
It has estimated that ethereum uses nearly 6 gigawatts – roughly enough to power more than one million US homes.
Ethereum, as well as the largest cryptocurrency bitcoin, currently uses the PoW mechanism to secure its networks and distribute new tokens.
That requires miners to run millions of powerful, energy-hungry computers that compete to verify blocks of data, earning new crypto tokens.
With the PoS system, ether owners will lock up set amounts of their coins to check new records on the blockchain, earning new coins on top of their “staked” crypto.
Aside from bitcoin and ethereum, most other cryptocurrencies rely on mechanisms other than PoW, Russo said, even as the two networks comprise the majority of value in the crypto economy.
The merge, which has been in the works since 2020, is set to be implemented between Sept 13 and 15, Ethereum founder Vitalik Buterin said on Twitter.
Move ‘exposes bitcoin’
There has been growing criticism from investors and climate campaigners about the large amounts of energy devoured by most blockchain transactions, prompting policymakers to take note.
New York State is considering a partial moratorium on certain kinds of fossil fuel-intensive cryptocurrency mining, and US Senators are pressing firms to disclose their climate impact.
“For the last couple of years, the energy use from bitcoin and ethereum has cast a pretty dark shadow from a climate perspective over much of the crypto industry,” said Mike Brune, the former executive director of the Sierra Club, an environmental nonprofit.
Brune is part of a coalition of green groups – including Greenpeace and the Environmental Working Group – calling on bitcoin to execute a similar energy-saving code change.
“In just one day ethereum will cut its energy use by up to 99% – it’s pretty significant and it exposes bitcoin as the biggest outlier in the industry,” Brune said.
“It’s exciting,” he said, adding that the move shows that other cryptocurrencies can follow suit.
Researchers at Cambridge University estimate that the bitcoin network uses about 100 terawatt hours of electricity per year, roughly the amount consumed by Malaysia or Sweden.
Bitcoin defenders say the industry is being unfairly singled out over its energy usage, which a recent White House report estimated at between 0.09% and 1.7% of total US electricity consumption.
Industry groups have released data showing that more than half of the power used by miners comes from renewable sources, and say the sector has the potential to help expand renewable energy grids by financing new green power projects.
Margot Paez, a fellow with the Bitcoin Policy Institute, a pro-bitcoin think-tank, acknowledged that ethereum’s code change would likely lead to more pressure on bitcoin to make a similar shift.
“People who say: ‘if they did it why can’t you do it’,” she said, but defended the PoW mechanism currently in use as a way to keep the system safe and democratic.
“These people don’t understand the social benefit of bitcoin and proof-of-work,” she said, noting that the system makes it harder for one wealthy player to take over the network by simply buying up a large portion of existing tokens.
“A choice to move away from PoW to PoS is putting less value on the ability to secure your network in a way that doesn't lead to unfair power dynamics,” she said. – Thomson Reuters Foundation