It’s no secret that blockchain technology is targeted as one of the most energy inefficient peer-to-peer transactional models to date. The proof-of-work system devised by the proponents of blockchain technology was put in place initially to discourage hackers and dissenters from attempting to alter the global ledgers, by introducing complex mathematical problems that require powerful machines to decode.
Because of this failsafe, it is estimated that Blockchain-based cryptocurrencies like Bitcoin consume about 133.65 terawatts every year. That is more than countries like Ukraine or Sweden used in the same period.
Ethereum, the second most popular cryptocurrency in existence, also uses blockchain’s proof-of-work system to update its ledgers and keep hackers out. However, it could be switching over to a less energy-intensive method of ledgering.
Ethereum is amidst a complete overhaul of its original proof-of-work system, and adopting a more energy-efficient model its developers introduced several years back – Proof-of-stake.
Proof-of-stake operates a little bit differently from proof-of-work. Whereas proof-of-work depends on computational speed and power to keep the ledger safe, accurate, and protected, proof-of-stake relies on the perceived value of the cryptocurrency.
Mining nodes of the blockchain models are replaced by validators who have to stake a substantial sum in ether- 32 ethers or $74,946 in fiat.
The mathematical problems of the Proof-of-work are replaced with an algorithm that appointed random validators to confirm transactions. Validators’ initial investment of 32 ethers accrues interest over time, so people are encouraged to join the network.
The network authorities regulate activities on the network by meting out fines whenever a validator green lights irregular transactions. They could lose a small chunk of their stake, and in the worst cases, their entire stake is absorbed and they are booted from the network.
The proof-of-stake model received pushback during the earlier days of its development. Compared to proof-of-work, it is untested, however, it has overcome most of those hurdles when it rolled out in the new Ethereum 2.0 update.
It is believed to be even more secure than Proof-of-work, requiring the attackers to stake twice the entire network in ether for the attack to be successful, which would be incredibly inefficient. The entire network would dip post-attack, and they would lose far more than they stand to gain.
Roll out Figures
The biggest advantage of the new PoW network is that anybody could virtually run it. Hypothetically you could run a PoW algorithm on your laptop without much issue, which means it consumes a lot less power. How much exactly?
According to Digieconomist, Ethereum miners consume about 5.13 gigawatt continually, which means the new network might be 2000x more energy-efficient than its earlier system. Ethereum could end up using 99.95% less power than it used to.
The average Ethereum validator setup takes only 15 watts or sometimes less to run a beacon node (BN), 5.4 validator clients, and an eth1 full-node? In 10 hours or so, it should consume about 100W. Considering that there are about 104,592 validators from 16,405 unique addresses currently on the network, you could estimate that the network consumes about 2.62 megawatts. This is the equivalent of about 2100 American homes. This should sum up to less than 44.99 TWh per year, which is what Ethereum currently uses.
When It becomes official
These numbers are not absolute, and the network is still very much growing and changing. Ethereum is in an exciting transitional phase right now where it has not quite fully shifted to the new PoS network yet. Currently, several teams of experienced engineers are working non-stop to make the change happen sooner. They call the complete change to a Proof-of-stake network The Merge.
For now, they are working on maintaining a balance between both networks and ensuring that the Ethereum blockchain remains relatively stable during this transition period.
When the merger is complete, we should expect to see renewed interest in blockchain technology, the Proof-of-stake network, and Ethereum as a whole. This could mean the value of ether reaching new highs and appealing to more investors, an institution that wants to go the more energy-efficient route. It could set a new precedent for cryptocurrency, and help reduce their operational cost and carbon footprint.