Ethereum, the second largest cryptocurrency after bitcoin, is just “months” away from shifting its underlying infrastructure to a new model that would slash its carbon emissions a thousandfold, the project has announced.
Since Ethereum also provides the infrastructure for a host of other cryptocurrency-related projects, including many non-fungible token platforms, the change could radically improve the energy efficiency of the sector.
At its heart, the plan involves shifting the way Ethereum’s underlying blockchain works. Currently, Ethereum uses a “proof-of-work” system, like the model used by Bitcoin and most other cryptocurrencies. The security of the system as a whole is guaranteed by a requirement that members burn electricity doing complex but pointless mathematics, in order to ensure that no single user can dominate the system.
When the switch is complete, Ethereum will instead use a model called “proof-of-stake”. Under that approach, rather than handing out internal responsibilities based on how much electricity is burned, the system instead allocates power based on how much Ethereum existing users already hold – requiring them to “stake” a portion of their currency every time they make a decision.
The switch to proof of stake has been planned for several years, with a host of problems, both technical and organisational, delaying implementation. But now, according to Carl Beekhuizen, a research and development staffer at the Ethereum Foundation, which leads development on the cryptocurrency, the change will be complete “in the upcoming months”.
Where the existing Ethereum network uses about 5.13 gigawatts of power – around the consumption of Peru – Beekhuizen estimates the network will drop to just 2.62 megawatts after the switch. “This is not on the scale of countries, provinces, or even cities, but that of a small town (around 2,100 American homes).”
And, Beekhuizen adds, the benefits increase as the value of the cryptocurrency does. “Under PoW [proof-of-work] … as the price increases, in equilibrium so too does the power consumed by the network. Under proof-of-stake, when the price of ETH [Ethereum] increases, the security of the network does too (the value of the ETH at-stake is worth more), but the energy requirements remain unchanged.”
While proof-of-work has lasted more than a decade, it has come under increasing criticism for the extreme resource demands that it imposes on cryptocurrencies. Bitcoin, still the largest cryptocurrency and one with no advanced plans to switch to proof of stake, uses the same amount of power every year as the Netherlands, and has a carbon footprint the size of Portugal’s, according to estimates from Digiconomist.
As well as consuming large amounts of electricity, proof-of-work also creates huge demand for fast computer hardware. That has led to shortages, both at the consumer and industrial levels. Nvidia, which makes graphics cards for PC gamers that can be repurposed into efficient cryptocurrency hardware, has even started to sell special versions of its products that are artificially weakened when it comes to running Ethereum’s software on them,to try to retain some stock for its core market.
Even if Bitcoin doesn’t follow Ethereum and switch away from proof-of-work soon, there may be another solution to the system’s energy usage: bitcoin’s price has tumbled in recent days, and is now 40% off all-time highs, after powerful players including China and Elon Musk signalled their dissatisfaction with the currency.