Representing the entire cryptocurrency market, the climate debate continues to rage on Bitcoin. The grid consumes as much electricity as Sweden and pumps as much CO₂ into the air as New Zealand – there is no shortage of dramatic comparisons. What often happens: Ethereum is not a child of sadness either. Currently, the grid consumes 104 terawatt hours (TWh) per year, and therefore roughly as much as Kazakhstan. With an emission of nearly 50 megatons (Mt) CO₂, Ethereum spews as much carbon dioxide into Earth’s atmosphere as Bulgaria, it still does. Because the transition from Ethereum to Proof of Stake significantly accelerates the power requirement.
Discontinued Model: Proof of Work
As with Bitcoin, the high energy requirement is due to the Proof of Work (PoW) consensus procedure used. Miners group transactions into blocks, verify them, and attach them to the blockchain. As an incentive, they receive two Ether rewards per block, in addition to tips that can be sent with transactions. Its use: computing power. Those that contribute the most to the hash power of a network increase the chances of finding a valid block.
The advantage: a high hash rate permeates networks against attacks. To rewrite the history of a blockchain or execute double spending, more than half of the total computing power would have to be used. It is true that the so-called 51 percent attacks have occurred over and over again in the past. However, due to their high hash rate, Ethereum and Bitcoin are not targets of attack. The computing power required for an attack is too high.
The downside, however, is that the mining mechanism leads to a global hardware arms race, with drastic effects on power consumption. In 2021 alone, the estimated energy demand for Ethereum increased from less than 15 to more than 100 terawatt hours (TWh) per year, according to data from Digiconomist Show.
Nothing can be overlooked about that: the power consumption gets out of control. Even the developers: Inside admit in a blog post “that Ethereum’s current power consumption is too high and unsustainable.” Ben Edgington, principal product owner for quorum protocol development at software company Ethereum ConsenSys, told BTC-ECHO that “many potential newcomers to cryptocurrencies, for example in the NFT ecosystem, are rightly shocked by the Excessive power consumption of proof of work. ” .
But Ethereum has an ace up its sleeve. Because proof of work was never designed as a permanent concept, but rather as a temporary solution until the proof of stake process has been tested and implemented, which requires far fewer resources. “The Ethereum community has been working on this for a long time,” says Ben Edgington, “and we are happy that it is this year.”
A matter of consensus
In the second quarter, the time will finally come when the current main chain will merge with the PoS-based beacon chain. After the “merger”, the proof of work is a thing of the past in Ethereum and the network is no longer secured by computing power, but by deposited ether deposits – the gamble.
Since it is no longer the miners and therefore the computing power, but the validators that are responsible for the production of blocks, Ethereum significantly reduces its power consumption. According to Ben Edington, the new network architecture uses 99.95 percent less energy than before. In the future, the need will be reduced to the operation of nodes and will no longer be unleashed by mining systems in industrial buildings.
More performance with less effort
As long as Ethereum has already introduced sharding, a scaling solution that increases transaction throughput by dividing them into parallel networks, the performance of the current 15 transactions per second (TPS) will increase 64 times in the future. With the help of the Shard Chains, which are planned for 2023, and which Ben Edgington says will “continue to support the future growth of the Layer 2 ecosystem,” Ethereum is expected to achieve a throughput of 25,000 TPS. Mind you, without scale solutions like layer 2 stacks. With them, Ethereum could get around 100,000 TPS.
Layer 2 cumulative packages, which run transactions off the Ethereum backbone, play an important role not just for performance. In addition, because scaling solutions reduce transaction costs (gas fees), Ben Edgington is assuming increasing usage: “More and more users are migrating to Layer 2 roll-ups, enjoying all the benefits. of the security and flexibility of Ethereum and at the same time, the lowest They offer transaction fees. We assume that the majority of users in the future will handle most of their transactions in Layer 2 and no more in the Base Chain ”.
Greener than Visa?
An example calculation shows how significant the energy savings are with a single transaction per second. Currently Beacon Chain already has 250,000 validators, but most of them run on the same nodes. There are currently between 3,000 and 4,000 individual nodes, with a daily consumption per node of around 1.44 kilowatt hours (kWh). Even if the number of nodes increased to 10,000 after the “merge”, that is, when switching to Proof of Stake, the daily consumption would stabilize at 14,400 kWh per day. Calculated to the second, this results in a consumption of 0.1667 kWh, with 100,000 transactions 0.667 kWh.
For comparison: 100,000 Visa transactions use 149 kWh. So Ethereum only uses 0.4 percent of the energy it needs for the same number of transactions. Compared to the current consumption of Proof of Work Mainchain, the demand is reduced by a factor of 225. And that is only if the fragmentation function is taken into account. Layer 2 cumulative packages could increase performance by a factor of four: Ethereum would only use 0.1 percent of Visa’s power consumption and save 894 times its current resource consumption.
Such comparisons naturally lag behind. With Ethereum, if only because the network, regardless of transaction performance, consumes the same amount of power per block, regardless of whether one, one hundred, or one thousand transactions are taking place. But it is also a fact that the possibilities of Ethereum Blockchain are not limited to transaction processing, as is the case with Visa. As by far the largest smart contract platform, Ethereum is the center of a multi-layered ecosystem of decentralized applications, from decentralized exchanges and blockchain games to NFT markets. Improving energy efficiency shouldn’t exactly slow this growth.