Ethereum has successfully reduced its energy consumption by 99.99% after an experimental update switched its verification process from “proof of work” to “proof of stake”. The update was made during a period of change known as the Merge, which took place in September 2022. The move to “proof of stake” means that validators now lodge money with the network to gain the right to validate transactions and be rewarded, rather than using computer hardware to mine new currency. Researchers have called the reduction in electricity consumption “staggering”.
The Cambridge Centre for Alternative Finance (CCAF) has published comprehensive data on bitcoin’s energy use over the past four years, and has now released similar data for Ethereum. Ethereum had been using more energy each year since its launch in 2015, and had used 17.6TWh by 14 September 2022, the day before the Merge. The CCAF now estimates that Ethereum will consume just 6.6 gigawatt hours of electricity annually, equivalent to about 2000 typical homes in the UK.
Although Ethereum’s power consumption has dropped, some analysis has suggested that the hardware that used to account for it is now being used for other purposes. However, research indicates that nearly 80% of the computational power used for mining had simply disappeared, as miners gave up and sold their hardware.
While Ethereum’s switch to “proof of stake” has been successful, experts believe that there is little appetite for a similar change among users of bitcoin, the largest digital currency, which has no central body to steer development. Ethan Vera, co-founder of cryptocurrency firm Luxor Mining, believes that a change in bitcoin is unlikely, stating that “proof of work is fundamental to bitcoin. The use of energy is critical to its security mechanism”.
Nevertheless, the success of Ethereum’s experimental update demonstrates that cryptocurrencies can reduce their energy consumption through technical innovation, and offers hope that the sector can play a role in mitigating climate change.
