On Wednesday, September 13, Ethereum — the world’s second-largest blockchain — swapped its so-called “proof-of-work” system to a proof-of-stake protocol in a move dubbed “the merge” that is expected to reduce its carbon emissions by 99.95%. Ethereum, which builds on Bitcoin by incorporating smart contracts, allows its ledger to record data, spawning the rise of non-fungible tokens (NFTs).
Ethereum’s former proof-of-work system — one currently used by Bitcoin, which remains the leading cryptocurrency — secured its blockchain by requiring “miners” to solve difficult puzzles that consumed exponentially increasing amounts of computational power in order to modify it. In simple terms, high levels of energy consumption were the basis of the integrity of Ethereum’s network. The new proof-of-stake system relies instead on “validators” who, instead of fronting computational power, front ETH — the cryptocurrency associated with the Ethereum blockchain — as collateral for the opportunity to validate the next block on the chain. The energy efficiency advantage that proof-of-stake systems have comes from the fact that the problems validators solve are easier than those miners must solve in proof-of-work systems; by requiring users to put skin in the game, they are theoretically disincentivized from cheating even if they do not have to devote as many resources toward solving hard problems.
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Ethereum’s hefty carbon footprint led to vocal criticism of the minting of NFTs, which some viewed as environmentally irresponsible. By some estimates, each transaction on Ethereum’s old proof-of-work network — including NFT-related transactions — consumed over 260 kilowatt-hours of electricity, roughly equivalent to the total electricity consumption of the average American household over nine days. That translated to the emission of about 150 kilograms of carbon dioxide. (Ethereum’s official website disputes per-transaction estimates of the blockchain’s energy use, which it calls “misleading.”)
Champions of “the merge” are hopeful that this major upgrade for Ethereum might finally put concerns about the cryptocurrency’s sustainability to rest.
Ethereum’s eventual transition to proof-of-stake was anticipated before the cryptocurrency even launched in 2015, but the technical difficulty of the task led to several delays that led to skepticism of whether the switch would be made and sharp criticism of the entire system. Ethereum developers say they are planning several other updates over the next few years that will improve the security and scalability of the currency.
Ethereum’s switch, long awaited by some in the crypto community, has taken place at a time when the outlook for the value of Bitcoin, Ethereum, and other cryptocurrencies remains depressed. Bitcoin’s price has declined by almost 70% over the past year, and in June, Ethereum saw its lowest price since late 2020. Early indications suggest that “the merge” has not been able to effect a dramatic reappraisal of ETH’s value: It dropped by 8% in the day following the transition.
And according to Web 3 Is Going Great, a crypto-critical citizen journalist project, scammers reportedly took advantage of the hype surrounding “the merge” to tweet out links to fraudulent giveaways celebrating the event, with at least 36 Twitter accounts hacked and $300,000 stolen in the attack.
Source: Hyperallergic.com