With the cryptocurrency industry entering the mainstream this past year, its underlying issues have also come to the limelight alongside it.
Among the most frequently cited is the high energy consumed by the oldest and most popular blockchains including Bitcoin and Ethereum, due to their use of the Proof of Work consensus mechanism.
Sustainability or security?
These issues were especially exasperated this year when the rise of DeFi and NFT sectors led to skyrocketing usage of Ethereum. In fact, it brought traffic that the network was perhaps not prepared to handle.
In a recent blog post, the platform noted,
“Ethereum’s current energy expenditure is too high and unsustainable. Resolving energy expenditure concerns without sacrificing security and decentralization is a significant technical challenge.”
Amidst severe backlash, Ethereum is now pushing towards a greener ecosystem, with its shift to the Proof of Stake consensus mechanism which utilizes significantly less energy compared to PoW.
Since it eradicates the need for miners and instead replaces them with validators that stake their own ETH as a form of trust, the need for high computational power becomes meaningless.
Several rival blockchains including Polkadot, Cardano, and Avanalche have already employed this mechanism and are thus recording much lower transaction fees and time.
Ethereum’s PoS-based Beacon Chain has already been running since the end of 2020 and the network is supposed to fully adopt the same by the second quarter of 2022. In the meantime, the chain has provided Ethereum with insights on how scalable and energy-efficient the network will be post-Merge.
PoW to PoS is the way ahead
Furthermore, according to the aforementioned blog post, the merge to PoS could result in a 99.95% reduction in total energy use, and that the mechanism will be 2000x more efficient when compared to PoW.
“The energy expenditure of Ethereum will be roughly equal to the cost of running a home computer for each node on the network.”
In comparison, an ETH transaction in PoW is equivalent to the power consumption of an average U.S household over 7.44 days, according to a report by Digiconomist.
The post also suggested a “realistic estimate” for post-Merge sharded Ethereum transactions with Rollups, which came out to be 25,000-100,000 transactions per second (tps). This means that the network would take around 4 seconds to complete 100,000 transactions, which would use about 0.667 kWh of energy.
“This is ~0.4% of the energy used by Visa for the same number of transactions, or a reduction in energy expenditure by a factor of ~225 compared to Ethereum’s current proof-of-work network.”
Interestingly, a single ETH transaction currently uses as much energy as 100,000 VISA transactions.
While it is impossible to estimate what the future holds for the network post-Merge in terms of its ESG goals, the Beacon Chain has stirred up trouble in a different lane.
A Twitter user recently highlighted that the chain’s contract is the single largest Ethereum contract containing 8,641,954 Ether, worth over $34 billion at press time. This can reportedly not be “sent or spent.”
Even as the network might require an unspecified hard fork to rescue the funds, the huge amount of ETH that has already been staked does indicate high demand and trust for the ETH 2.0 merge.