How Ethereum’s ‘Merge’ will slash its climate pollution

Ethereum just kicked off The Merge – and the stakes are huge for the planet. The Merge is arguably one of the most anticipated events yet in cryptocurrency history, as the Ethereum blockchain will transition from a disturbingly energy-guzzling method of validating transactions to a new strategy that uses a fraction of the electricity the network uses. rather swallowed.
The transition would reduce Ethereum’s energy consumption by a whopping 99.95 percent. That’s a serious problem because last week the cryptocurrency network was estimated to use the same amount of electricity annually as the country of Bangladesh. All that energy, of course, comes with a lot of carbon dioxide pollution that exacerbates climate change. Ethereum’s native token, Ether, is the world’s second largest cryptocurrency by market capitalization after Bitcoin.

How come almost all of the pollution that Ethereum previously pumped out would virtually disappear? It’s complicated, so let’s break it down as simply as possible.
What is The Merge?
It amounts to a dramatic change in the way transactions are recorded on the Ethereum blockchain. A blockchain is a record of transactions that is held collectively rather than by a single institution such as a bank (check out The edge‘s handy blockchain explanation here). “Blocks” of transaction records are added to the chain by many different players, which is why blockchains are often described as “distributed ledgers”.
Because there are so many players – known as nodes – involved, blockchains need a security system to make sure no one messes with the ledger or takes it over. Ethereum’s old version of a security system is intentionally energy-intensive, so the network switches to a new one via The Merge.
What made Ethereum so polluting in the first place?
Energy inefficiency was built into the network from the start, thanks to that old “security system” that Ethereum ran on the so-called proof of work. With proof of work, “miners” validate blocks of new transactions by solving computer puzzles. This should avoid double spending, and miners will earn new tokens in return. To prevent too many new tokens from flooding the market, solving puzzles becomes more difficult over time and takes more energy.
The cost of solving those puzzles, in equipment and electricity bills, is meant to make it harder for an entity to gain too much leverage over the ledger. If that were to happen, it would defeat the purpose of a decentralized financial system in the first place. Plus, it carries the risk of a bully coming along and manipulating the ledger for his own benefit.
With proof of work, energy consumption and pollution balloon as miners can earn more tokens by adding more powerful computers to their operations. Crypto mines are essentially giant data farms filled with hardware that runs around the clock to solve puzzles. When miners settle in a new place, they usually do: drive up electricity bill for nearby communities. In addition, they leave e-waste of the hardware they use to solve those puzzles.

Besides Ethereum, Bitcoin is the other major cryptocurrency that is notorious for its problems associated with proof-of-work. Bitcoin miners’ quest for abundant, affordable energy to power their operations has revived fossil fuel power plants that were dying out. Those plants then spew even more pollution into the air.
Policy makers struggle with dealing with all those consequences that come from proof of work. State lawmakers in New York, which became a hub for crypto mining after China cracked down on it in 2021, have moratorium this year on cryptocurrency mining operations using proof of work. Nationally, Democratic lawmakers have polled crypto mining companies on their energy use and asked federal regulators to enact new rules for crypto mining in the US.
There is even a campaign called Change the Code, Not the Climate, led by the nonprofits Greenpeace USA and Environmental Working Group, which is pushing the Bitcoin network to follow Ethereum’s move.
Will The Merge Solve Ethereum’s Environmental Problems?
The merger, if all goes well, is expected to significantly reduce Ethereum’s carbon footprint. To leave proof of work, Ethereum is moving to a new transaction validation process called proof of stake. This method removes all those pesky puzzles altogether – eliminating the need for powerful hardware and massive amounts of electricity to keep the blockchain running.
Rather than using huge energy costs as a deterrent to bad behavior, proof of stake requires validators to lock down crypto tokens as collateral. That way, the validators have an interest in keeping the ledger accurate. If someone else on the network discovers that someone has added defective blocks to the chain, the guilty party will lose the tokens they staked. In the case of Ethereum, you have to bet 32 ETH tokens to get started as a validator. With every token worth around $1,600 today, bad actors risk losing a hefty amount of cash.
Validators are still rewarded with new tokens for doing the job well. Staking tokens puts them in a new kind of lottery to verify transaction blocks and receive that reward. An algorithm randomly picks which validators, among those who have deployed tokens, to create the next block in the chain. To increase the chances of being the one chosen to add the block, you’ll need more tokens – not more computing power.

As a result, a successful transition to proof-of-stake is expected to reduce Ethereum’s power consumption by at least 99 percent. The Ethereum Foundation estimated the number to be around 99.95 percent. There is about one percent of leeway based on how much energy is used after The Merge by the computers still needed to store data and verify transactions. Validators still want computers to run 24/7, but they won’t use that much juice to solve those pesky puzzles.
All in all, we are talking about serious energy savings. According to Alex de Vries, a researcher who manages the website, that corresponds to about as much electricity as a quarter of the world’s data centers use annually. Digiconomist that encourages Bitcoin and Ethereum energy consumption. de Vries expects that the drastic reduction in energy consumption will lead to 30 to 35 million tons of CO2 emissions per year if The Merge is successful.
How is this all going to end?
In a nutshell, all computers running the blockchain software must update that software to the latest version that uses proof of stake. That is of course easier said than done when you have hundreds of thousands of nodes in the network. But we’ll come back to that later.
To get to this point, researchers developed a new “Beacon Chain” that leverages proof of stake that parallels Ethereum’s main proof of work blockchain. The old blockchain should eventually merge with the Beacon Chain, eliminating proof of work. The merger will take place in two phases, and the first has just launched after years of delay. The Bellatrix upgrade went live today, putting the Beacon chain ready for its final transition in the coming weeks. In the second phase, the Paris upgrade, crypto mining for Ethereum using proof of work, should finally stop.
What could go wrong?
The big concern is that too many miners will mutiny and decide to stick with proof of work. They have already invested in setting up their crypto mining businesses, and many will probably have a hard time letting go of their hardware. There are a few different ways this mutiny can unfold.
If enough of them decide to forgo the software update, they can keep Ethereum’s old proof of work blockchain alive. there is already a push by some miners to do this. If that blockchain continues to exist, the pollution it produces will also continue to exist. How much pollution, in turn, depends on how many miners mutiny and how much value the tokens on that zombie chain, called a ‘fork’, retain. They will essentially only be able to support as much mining as the value of the token allows, as they need to be able to pay off their electricity bills and still make a profit.

Or the miners can choose to find another more established proof-of-work blockchain. The Ethereum network has already split in two in the past in response to a hack in 2016, who created two blockchains: Ethereum and Ethereum Classic (both use proof of work). Now It Looks Like Some Ethereum Miners Are Already Switching to Classic in response to The Merge, stick to their energy-guzzling ways.
There are also security risks to Ethereum if ultimately not enough validators participate in the new proof of stake blockchain. “If you have very, very few validators, it’s easy to attack the network. So we want to make sure that the participation rate of hundreds of thousands of validators is close to 99 percent,” said Leonardo Bautista Gomez, founder of the blockchain research group Miga Labs, who also worked with the Ethereum Foundation to help develop the Beacon. chain.
For Bautista Gomez, The Merge demonstrates “that while it can be technically difficult to implement, we make the effort to do it because we are aware of our responsibilities to the environment.”
But even if all goes well with The Merge, blockchains are still inherently inefficient, says de Vries, who also works as a data scientist for De Nederlandsche Bank. Being a distributed database, data is replicated across many devices, which: consumes more energy. Still, De Vries acknowledges that proof of stake orders of magnitude are less wasteful than proof of work.
The merger is expected to be done by the end of the month. Then we will see how successful the transition was and what new challenges could have arisen.


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