An ether mining machine on display at a crypto convention in Thailand.Photo: Lauren DeCicca (Getty Images) If you type the phrase “the Merge” into Google today, it will countdown: At the time of writing, it’s coming in just over two days.The countdown is ticking down to one of the biggest shifts the crypto world has ever seen.Read:Andreessen Horowitz backs WeWork co-founder’s property venture The Merge refers to the transition of the Ethereum network from a proof of work mining system to a proof of stake system.Ether is the second largest cryptocurrency by market cap, which comes behind Bitcoin.
As of January, 80% of the world’s NFTs were on the Ethereum network.When people talk about Web3 applications in crypto, they often talk about developing on the Ethereum blockchain or related protocols.This shift could significantly reduce greenhouse gas emissions from blockchain technology, but there are some thorny issues ahead.
What is the difference between proof of work and proof of stake, in terms of climate technology? The massive energy consumption of the world’s cryptocurrencies comes from a mining process known as proof of work, which requires significant computing power.
In this proof-of-work system, miners use machines that expend enormous energy to race to solve an equation; whoever solves the equation first gets the privilege to create the next block on the blockchain.“I like to describe it as a huge guess-the-number game, where only the first to guess correctly can create the next block for the blockchain,” said Alex de Vries, the founder of Digiconomist, a website that monitors the CO2 emissions.emissions of cryptocurrencies.“The bitcoin network is currently generating 200 trillion of those guesses every second of the day – that’s 200 with 18 zeros.What they’re doing is actually going, is it 1? Is it 2? Is it 3? But they do it with a very high speed and hope to find the one that meets the requirements at some point.If you succeed, you are lucky: you get to create the next block in the blockchain, and you get the corresponding reward.” Read:Will the dollar’s recent rises end in whiplash? | Kenneth Rogoff Proof of stake, meanwhile, functions much more like a lottery.Instead of putting countless machines to work, miners submit some form of collateral — such as buying a lottery ticket — to compete for a chance to build the next block on the blockchain.G/O Media may receive a commission “As proof of commitment, someone is randomly picked from a hat, which takes no energy at all,” said David Yermack, a professor of finance at New York University’s Stern School of Business.
By switching to the lottery system represented by proof of stake, the network no longer needs the energy-guzzling computers that work out equations for proof of work systems.Some estimates predict that, if executed successfully, the Merger could eliminate more than 99% of the network’s carbon footprint.Since the Ethereum network currently has a carbon footprint approximately the size of Finland’sthat’s a pretty big upgrade.What exactly will happen this week? The leadership of the Ethereum blockchain said last week that the network would update its software between September 13 and 15.The update will affect what is known as ethereum’s difficulty – the amount of time it takes a miner to solve a problem to create a new block on the blockchain.
Crypto software is usually updated to ensure that issues can be resolved in a reasonable amount of time.But this week, the Ethereum network is increasing what is known as the difficulty of the currency, making it virtually impossible to mine under the old proof of work system.Read:UK minister questions sustainability of Drax biomass fuel “The difficulty will increase tremendously — the so-called ‘difficulty bomb’ will go off,” Yermack said.
“The people who do proof-of-work mining have no choice when you consider how difficult it will be to mine under the old system.They will have to put down their picks and shovels, stop mining the old way and move on to the new way.That change will, in theory, usher in a permanent new way of mining ethereum that doesn’t use all that energy.“Basically, all energy consumption will disappear,” Yermack said.
“It is very cheap to choose someone at random by means of a lottery.You compare that to people doing trillions of calculations per second, to hugely powerful computers that consume a lot of energy – it’s about cutting the energy consumption, and then it’s almost going to disappear.” Will everything go smoothly? That depends on several factors.
Ethereum’s leadership, De Vries noted, has often said in the past that they would switch to proof of stake, and have not made the switch.But this is the furthest they’ve gotten in the process and the first time they’ve given such a concrete date for a switch; the closer we get, the safer it is to assume that something will happen this week.As with any software change, there may be bugs in the actual material of the update that could hinder the transition.But a bigger problem could come from miners who decide not to cooperate with the new way of working.The proof-of-work method has led Ethereum miners, like all cryptocurrency miners, to invest a lot of money in physical processors to solve equations – an investment they would not be happy to give up when moving to proof of work.
stake.
Miners can make what is known as a fork, or a split of the main blockchain to create a separate version of the network.Both the Bitcoin and Ethereum networks have already experienced forks that have created different versions of the currency known as Bitcoin Cash and Ethereum Classic.If enough ether miners provide proof of work, many of the machines that had to be retired after the merger could still be running and causing emissions.A team of these miners say they have have already defused the difficulty bomb and are ready to creat a hard fork.if tthese miners keep their machines busy proof of work mining, just on another Ethereum fork – or by simply switching to other cryptocurrencies – that could mean that many of these energy-guzzling mining machines remain online, working and sucking energy even as the rest of the network switches over.“The miners have every reason to try,” said De Vries.
“They’re going to lose all their earnings, so why not try it?” If the merger goes well, will all crypto’s environmental problems be solved? Not quite.For starters, solving Ethereum’s emissions ignores the real crypto elephant in the room: Bitcoin.Even after the crypto crash earlier this year, the Bitcoin network is still sends estimated 71.5 megatons of CO2 per year, much smaller than Ethereum’s 46.8 megatons.De Vries said there is a chance that a successful Ethereum transition to proof-of-stake could trigger a similar process for Bitcoin, especially given a recent attempt by the EU Parliament and the leadership of some countries to ban dirty mining.“I fully expect that, at least in Europe, a ban on proof of work will be back on the table soon,” he said.But Yermack is skeptical.He pointed out that unlike Ethereum, which has a centralized leadership and recognizable public figures at the helm to encourage a major transition like the Merge, the Bitcoin network is run in a more decentralized way: the founder is famously anonymous and any switch to prove proof of stake would have to persuade the operators of the thousands of Bitcoin “nodes” to make the change.
“There was a political dimension to it [Ethereum] becoming eco-friendly, that was never an issue with the people who brought Bitcoin to market,” he said.“There will be a fantasy on the part of environmentalists like, okay, now Bitcoin can switch, but it’s a very difficult governance issue.“ If the Bitcoin network eventually transitions, that would be huge for crypto emissions, but still not quite a panacea.Cryptocurrency, as De Vries noted, is built at its core to provide stability over a decentralized network — the more machines on it, whether they’re running proof-of-stake or proof-of-work, the more secure that network is.That’s the opposite of what will be needed as the world shifts its systems to combat climate change.
“From a blockchain perspective, you always want more machines, but from a climate and efficiency perspective, less is more,” he said.“The point is that if you add proof of work to it, you can make things ten thousand times worse.I wouldn’t say that moving to proof-of-stake completely solves all the sustainability challenges related to crypto – I always tell people that if we didn’t have a proof of work and we only had a proof-of-stake today, we would probably be pretty would be frustrated at the amount of inefficiency it introduces.But now we have blockchains that run on proof of work and they make proof of stake look really good.” Still, De Vries said, any move to proof of stake is more than welcome before discussing these other issues.“Let’s solve most of the problem first.” (adsbygoogle = window.adsbygoogle || []).push({}); Alex de VriesBitcoinblockchaincryptocurrencyDavid YermacDigital currencyDraft: XinFinDraft:Bitcoin AttackersEconomyEthereumForkGizmodogoogleMoneyProof of stakeSimultaneous ComputingSurroundings.
