Last week, hot off the heels of the Merge, a complicated plan to swap Ethereum’s infrastructure without interrupting the multibillion-dollar cryptocurrency network, Ethereum’s co-founder Vitalik Buterin reshared data suggesting “worldwide electricity consumption” could be reduced by 0.2% as a result.
This talking point, originally discussed by Ethereum researcher Justin Drake, was picked up by U.S. congressmen, technologists and Ethereum’s community, who are right to celebrate the network’s vastly smaller carbon footprint. Proof-of-stake, Ethereum’s new algorithm for processing transactions, would use approximately 99% less power than the proof-of-work (PoW) system Ethereum used to run.
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Drake estimated that Ethereum’s total energy consumption before the Merge was around 0.34% of the world’s total. It would be incorrect to say the Merge itself would reduce “worldwide electricity consumption” by that total amount, seeing as many mining machines that once supplied hash power to Ethereum were immediately pointed to alternative PoW blockchains.
Ethereum may be vastly more energy-efficient than it was just a week ago, but the question now becomes whether its PoW-based competitors will grow as large. Ethereum mining used approximately 72 terawatt-hours per year, about as much as the country of Austria, according to Digiconomist, a typically critical economics blog run by Alex de Vries.
Several blockchains saw their contributed hash power (and thus energy consumption) increase in the lead-up to the Merge, and vast bumps in that direction after the event. But judging by the figures shortly after the Merge, it seems these chains – including Ethereum Classic, Ravencoin and the newly forked Ethereum Proof-of-Work – will not be profitable enough to continue paying for their record high security/energy bills.
There are reports of crypto miners powering down less powerful and less efficient GPUs as competition to add blocks to those chains increased. But it’s premature to say that all the specialized EtHash ASIC hardware that once mined ether (ETH) will be turned off forever. Proof-of-work mining is an activity driven by pretty simple supply-and-demand curves: The inputs are the cost of electricity (and hardware) and the price of a network’s token.
Many miners paid upfront for these specially designed computer chips, and thus have an economic incentive to keep them plugged in so long as they’re profitable. That said, it’s unlikely the recent price appreciation in ETC, RVN and ETHW, coextensive with their networks’ increased hash power, is stable in the long term without meaningful user activity and development of those chains.
Ethan Vera, chief operations officer of mining services firm Luxor Technologies, tweeted last week that “20%-30% of ETH miners have found a temporary new home amongst other blockchains, the rest are shut down.” This is a figure that could go in either direction, as the market finds price stability after the Merge. It’s likely that after this weekend’s crypto market rout even more machines were turned off.
In fact, Chandler Guo, the primer backer of the ETHW fork, predicted last week 90% of PoW miners of these Ethereum alternatives will likely go “bankrupt,” on CoinDesk TV’s “First Mover” show.
What about Bitcoin?
Now that Ethereum has pulled off the first part of its multi-stage upgrade, there's increasing pressure on the proof-of-work Bitcoin to decarbonize. "All eyes will be on Bitcoin. It remains the largest polluter in the crypto space. Even today Bitcoin is responsible for as much electricity consumption as Sweden," De Vries told The Guardian.
This sentiment was repeated by the Environmental Working Group (EWG), which released a statement saying Bitcoin stands as the "lone cryptocurrency climate polluter" following the Merge. EWG plans to spend a further $1 million on propaganda meant to inspire or force the hand of the Bitcoin community to reduce the network's energy consumption.
EWG's "Change the Code, Not the Climate" initiative launched earlier this year with backing from Greenpeace USA, Ripple co-founder Chris Larsen and other small environmental organizations. This movement was taken as a serious affront by many in the Bitcoin community, which sees proof-of-work mining as a cornerstone of Bitcoin's security, decentralization and market neutrality.
It's unlikely Bitcoin will change its code anytime soon. Not that it should: Although proof-of-work mining is energy intensive, Bitcoin could counterintuitively help fund the build-out of net-zero or renewables infrastructure. Highly transportable Bitcoin mining machines can be spun up at stranded energy sources or wind farms, helping to earn revenue for power providers and possibly stabilize the grid, a theory that is at least worth putting into study.
According to the Bitcoin Mining Council, an industry data provider and advocate, Bitcoin uses 189 TWh, accounting for less than 0.2% of the world’s energy consumption, or about as much as Ethereum was estimated to save. That's less than half the energy consumed by either the gold or banking industry. And, unlike other PoW chains like Ethereum Classic or Ethereum PoW, Bitcoin is likely to be able to continue subsidizing its security spend.
The question about bitcoin mining always comes down to "is it worth it." Is it worth having a stable and censorship-resistant payments system that's accessible to anyone in the world, even if it uses as much energy as a medium-sized country? I know what I think.