Did you know that each Ethereum transaction under the proof-of-work (PoW) consensus mechanism generated approximately 103.42 kilograms of carbon dioxide?
In recent years, developers, regulators, and policymakers have shown concern over the impact of crypto mining on the environment. These concerns have been key drivers towards Ethereum’s transition from a proof-of-work (PoW) to a proof-of-stake (PoS) ecosystem through “the Merge.”
The Merge Mainnet, the original execution layer of Ethereum, was replaced by the new Beacon Chain, the PoS consensus layer. This process eliminated the energy-intensive ETH mining and replaced it with staked ETH. As a result, energy consumption was reduced by 99.95%.
To understand why PoS has been applauded as a sustainable consensus mechanism, let us look at the process of creating cryptocurrencies.
Since blockchain networks lack a central authority, they rely on users to validate transactions and update new blocks of information. However, transactions can only occur within the decentralized network if all participants (nodes) reach a consensus. Under PoW, this process includes a vast network of decentralized computers used by individual miners competing to solve complex mathematical problems based on cryptographic hashing algorithms. The vast computational work results in substantial consumption of energy.
For example, Ethereum’s carbon emissions in 2021 were 47 million tonnes for more than 460 million transactions on the network.
The new PoS consensus mechanism solves this emission problem by eliminating ETH mining. PoS requires ETH owners to offer their coins as collateral by staking for a chance to become validators and verify transactions. Each transaction is validated by various validators selected randomly by the system and collects fees rather than the PoW competitive rewards. To become a validator, each ETH owner must stake a capital of 32 ETH into a smart contract on Ethereum to be destroyed if they are deemed dishonest or lazy.
By eliminating the computational work characterizing cryptocurrency mining, the new PoS consensus reduces energy consumption.
While the Merge is a step towards sustainable cryptocurrencies, there have been questions on whether the Merge was the right solution. For instance, research shows that successful reduction of energy consumption, even under the PoS ecosystem, depends on the number of validators, design choices in network architecture, and the efficiency of hardware used. This means that the time validators spend verifying transactions, and the energy-consumption rate of their equipment can significantly impact the new PoS system’s environmental impact.
Besides, the PoS consensus increases systematic inequalities, making it more beneficial to people with more benefits. For instance, for an ETH owner to become a validator, they should put 32 ETH into the deposit contract and engage three different software. These are the execution client, the consensus client, and the validator. This means that people incapable of depositing this amount of ETH and installing the software cannot benefit from transaction fees gained by becoming a validator.
Also, validating requires ETH owners to lock the funds. Currently, there are no measures in place to withdraw these funds. While the upcoming Shanghai update is expected to support withdrawals, ETH validators should be prepared to keep their funds locked for the next one to two years. These issues indicate that making Ethereum the most sustainable digital currency will take more than transitioning to PoS.
It is possible to achieve sustainable PoW, which would save Ethereum from conducting a complete transition to the PoS consensus. For instance, Bitcoin Mining Council found that approximately 59.5% of BTC mining energy in Q2 2022 was from renewable sources. This shows that a sustainable PoW system that empowers miners to embrace sustainable energy can help solve crypto’s energy consumption issue while upholding the original blockchain values of decentralization and democratization of cryptocurrencies.
Pulsar Chain is an example of an Ethereum PoW fork that achieves sustainability by upgrading to a sustainable PoW ecosystem instead of replacing it. Pulsar Chain offers incentives and double-block rewards to miners using green energy, thus encouraging miners to invest in a sustainable blockchain infrastructure.
Learn more about sustainable PoW systems and Pulsar Chain by clicking on the link https://www.pulsarchain.org/
Disclaimer: Readers should keep in mind that the information contained in this article does not constitute investment advice. The ideas and strategies presented should not be used to make any investment before assessing your financial situation and consulting a financial professional.