One of the biggest criticisms leveled against cryptocurrencies is their high energy usage and carbon footprint. However, developers at the Ethereum Foundation have published a proposal for reducing Ether’s energy costs.
Danny Ryan, a researcher at the Ethereum Foundation, said the proof-of-work (PoW) mechanism is estimated to use around 45,000 gigawatt-hours per year. However, this figure could drop massively and decline by more than 99% after Ethereum transitions to proof-of-stake (PoS).
Energy Secures the Ethereum Network
Ethereum’s massive energy consumption comes from miners, who are an integral part of the network because they validate transactions and secure the network. In simple terms, miners bundle transactions into blocks and add them to the Ethereum blockchain.
In order to verify transactions, node operators run the transactions independently and broadcast new blocks, making sure they are valid. After this, honest blocks are added to the blockchain while dishonest ones show up as an inconsistency between different nodes.
Notably, Ethereum imposes a mechanism called PoW, which is beneficial for two reasons. First, it makes sure that there is a cost associated with mining in the form of energy expenditure, which might drive away some dishonest miners. Second, the mechanism brings a factor of unpredictability, as it is not clear which node might submit the next block.
Miners are required to solve a random computational puzzle faster than any other miner, which creates energy expenditure issues. That is because miners tend to bring additional computational power to increase their chance of winning, creating costs in the form of energy usage.
For perspective, Ethereum’s PoW protocol “currently has a total annualized power consumption approximately equal to that of Finland and…
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