Ethereum Will Make A Radical Technological Shift That May Help Combat Climate Change
It can sometimes be difficult to distinguish what is important from the constant chatter around cryptocurrency. But if everything goes according to plan this month, the energy-hungry digital industry will experience its largest upheaval in years.
The second-largest cryptocurrency in the world, Ethereum, is anticipated to begin a technical transition that, once complete, should result in a 99 percent reduction in carbon emissions.
In recent years, cryptocurrencies have grown incredibly quickly.
Unfortunately, because of the massive quantity of electricity consumed by computers to control the buying and selling of crypto coins, they have also contributed significantly to climate change.
Consider Bitcoin, the largest cryptocurrency in the world. Bitcoin uses more energy annually than countries the size of Argentina, who are desperately attempting to cut their energy use.
If the Ethereum transition is successful, there will be tremendous pressure on Bitcoin and other cryptocurrencies to solve this issue.
Digital currency systems known as cryptocurrencies allow users to send money directly to one another online.
Cryptocurrencies are not controlled from a single location, like a central bank, like traditional currencies are. They are instead run by a “blockchain,” which is a decentralized worldwide network of powerful computers. These devices are referred to as “miners.”
The Reserve Bank of Australia offers the following concise explanation of how everything operates:
Let’s say Jen wishes to send John one bitcoin unit. A digital message containing Jen’s instructions is sent to the network, where it is visible to all users, to begin the transaction.
The transaction is waiting to be assembled with a collection of other recent transactions into a block (or collection) of the most recent transactions.
To add the new block of transactions to the blockchain, miners compete to crack a cryptographic code created from the information within the block.
The network’s other users verify the answer when a miner has successfully cracked the code, and they agree that it is correct. The transaction made by Jen is confirmed, and the new block of transactions is added to the end of the blockchain.
The majority of cryptocurrencies employ this method, which is known as “proof-of-work mining.” The utilization of calculations, which take a lot of computer time and electricity to complete, is the main design element.
Around 150 terawatt-hours of electricity are used annually only by Bitcoin. About 65 million tonnes of carbon dioxide are released into the atmosphere each year as a result of producing that energy, which is comparable to Greece’s emissions.
According to research, emissions from Bitcoin last year were likely to cause 19,000 more fatalities in the future.
How Bitcoin’s electricity usage compares with selected countries. (Cambridge Bitcoin Electricity Consumption Index and US Energy Information Administration)
The proof-of-work methodology purposefully wastes energy. A blockchain’s data is meaningless by nature. Its primary function is to save challenging but unnecessary calculations that serve as the foundation for assigning fresh crypto currencies.
Cryptocurrency proponents have offered a variety of justifications for the enormous energy usage, but none are convincing.
For instance, some people try to justify the carbon impact of cryptocurrencies by claiming certain miners use renewable energy. That might be the case, but doing so might also force some other prospective energy consumers to use coal- or gas-fired energy.
However, Ethereum, the most prominent competitor to Bitcoin, is currently adopting a new strategy. It plans to transition to much less polluting computing technologies this month.
The Technological Switch
In Ethereum’s initiative, the “proof of work” concept will be replaced with the “proof of stake” approach.
According to this concept, users stake sizable amounts of blockchain tokens (in this case, Ethereum coins) as collateral to authenticate cryptocurrency transactions. Users forfeit their stake if they are dishonest.
Importantly, it will eliminate the need for the extensive network of supercomputers currently used to verify transactions because consumers will be performing the very simple task of verifying transactions themselves. The amount of electricity used by Ethereum will shrink by, on average, 99 percent after the computer “miners” are eliminated.
Proof of stake is used by certain minor cryptocurrencies, but it has only been used on the margins up until now. One example is the Ada token, which is traded on the Cardano platform.
Ethereum has been using test blockchains to execute the new concept for the past year. However, the model will be integrated into the primary platform this month.
What does this mean, then?
The Ethereum project might not succeed, for example, if some stakeholders manage to corrupt the system.
However, if the transfer is successful, there will be pressure on Bitcoin and other cryptocurrencies to drop the proof-of-work concept or risk going offline.
This stress has already started. Elon Musk, the inventor of Tesla, declared last year that due to Bitcoin’s ecological footprint, his company would no longer accept payments for its electric vehicles.
In June, the New York state legislature approved a bill that would have outlawed some Bitcoin activities that rely on carbon-based energy. (However, the choice must be approved by the governor of New York and could be vetoed.)
Additionally, the European Parliament approved a proposal to outlaw the proof-of-work model in March of this year. The motion was rejected.
Energy-guzzling cryptocurrencies will still be under attack as Europe enters the cooler months and struggles with an energy crisis brought on by sanctions on Russian gas suppliers.
One thing is certain: Cryptocurrencies will run out of justifications for their outrageous energy demand as the need to reduce global emissions grows more urgent.
Source: Science Alert