Ethereum is the world’s second-largest cryptocurrency
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The world’s second-largest cryptocurrency, Ethereum, has successfully slashed its emissions by 99.99 per cent after an unprecedented experiment to ditch power-hungry mining in favour of a new approach, according to researchers. But experts say there is little appetite for such a change among users of bitcoin, the largest digital currency, which has no central body to steer development.
Like bitcoin and many other cryptocurrencies, Ethereum used to rely on “proof of work” to secure its network, meaning that computers performed huge numbers of calculations to “mine” new currency and verify transactions. This process uses vast amounts of electricity. But in September 2022, Ethereum switched to a new technique called “proof of stake” during a period of change known as the Merge.
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. Alexander Neumüller at the University of Cambridge, who worked on the project, says the experimental update has been a technological success, achieving a “staggering” reduction in electricity consumption.
Under the new system, instead of using computer hardware to mine new currency to get a reward, validators lodge money with the network to gain the right to validate transactions and be rewarded. Before the Merge took place, the Ethereum Foundation, a non-profit organisation that oversees the development of Ethereum, estimated that this would cut energy use by 99 per cent, but the results of the switch were unpredictable, as nothing on the same scale had been attempted before.
Ethereum had, like bitcoin, been using more energy each year since its launch in 2015. According to CCAF’s data, it used 16.4 terrawatt hours in 2021. By 14 September 2022 – the day before the Merge – it had already used 17.6TWh, and was on course to end the year at 21.4TWh.
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. In contrast, Ethereum’s previous consumption from its launch to the Merge totalled 58.3 TWh – comparable to Switzerland’s annual electricity consumption.
Neumüller says success was far from guaranteed due to the scale of the challenge. “An often-used anecdote in that regard was changing a jet engine during flight,” he says. “It has been executed very well. No one knew exactly what was going to happen.”
Some analysis has suggested that although Ethereum’s power consumption has dropped, the hardware that used to account for it is now being used for other purposes. Kyle McDonald, who carried out his own research on the energy use of the Ethereum network before the Merge, says large numbers of disgruntled miners who were left with hugely expensive, specialised hardware and no source of income decided to continue harvesting other coins.
But Neumüller says not all miners switched and there is evidence that many sold off their hardware. His research looked at the other cryptocurrencies that miners could have profitably switched to and calculated that, between 8 September 2022 and 4 March 2023, nearly 80 per cent of the computational power used for mining had simply disappeared, as miners gave up and sold their hardware.
Despite the success of Ethereum’s switch, Neumüller says that the bitcoin network is too attached to its current proof-of-work approach to follow suit.
Ethan Vera, co-founder of cryptocurrency firm Luxor Mining, also believes that a similar change in bitcoin is unlikely. “Proof of work is fundamental to bitcoin. The use of energy is critical to its security mechanism,” he says.
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