Crypto

How the carbon footprint of cryptocurrencies will be reduced with the help of Ethereum Merge – CNET France

Whether you own a cryptocurrency or not, The Merge for Ethereum is big news. This evolution, in preparation since 2014, will allow Ethereum, the second largest blockchain after Bitcoin, to become nearly carbon neutral. This is a major change.

Critics of cryptocurrencies often point out that they consume huge amounts of electricity. A reality that can no longer be ignored as climate change and pollutant emissions become a priority.

As part of The Merge, Ethereum will adopt a system known as proof-of-stake, which was developed in 2014. Due to its technical complexity and the growing amount of money in the game, its rollout has been repeatedly delayed. The deadline has been set for mid-September. “We have been working on proof of stake for about seven years,” said Vitalik Buterin, one of the founders of Ethereum.

Why is cryptocurrency bad for the environment?

To understand The Merge, one must first understand the role of cryptocurrency miners. Let’s say you want to mine cryptocurrencies. You install a powerful computer, a mining rig, to run software that tries to solve complex cryptographic puzzles. Your machine is competing with the machines of hundreds of thousands of miners around the world trying to solve the same puzzle. If your computer breaks the crypto first, you get the right to “validate” the block, i.e. add new data to the block chain. By doing this, you are rewarded: Bitcoin miners get 6.25 bitcoins (€137,586 at the current price) for each block they verify, and Ethereum miners get 2 Ether (€2,907 at the current price)).

You have to use massive computing power to stand a chance of winning this mining race. To do this, miners create warehouses filled with computers. This system is called “proof of work” and this is how the bitcoin and ethereum blockchains work. The advantage is that it allows the blockchain to be decentralized and secure.

Each blockchain must run on a limited resource that attackers cannot monopolize, says John Charbonneau, an analyst at Delphi Digital. For proof-of-work blockchains, this resource represents the electricity required to run a mining operation.

Currently, if an attacker tries to take control of Ethereum, he will have to monopolize 51% of the network’s power. Since the network consists of hundreds of thousands of computers around the world, this means that it must control 51% of the power of this huge mining pool. It will cost billions of dollars.

In addition, the system is secure. While scams and hacks are common in cryptocurrencies, neither bitcoin nor ethereum blockchains have been compromised in the past. But this medal has a downside. As cryptographic puzzles become more complex and more miners try to solve them, energy costs skyrocket.

How much energy does crypto use?

Extremely. It is estimated that Bitcoin consumes about 150 terawatt-hours per year, which is more electricity than the 45 million people in Argentina consume. Ethereum is closer to 9 million Swiss citizens, consuming about 62 million terawatt-hours.

Most of this energy comes from renewable sources. About 57% of the energy used to mine bitcoins comes from renewable sources, according to the Bitcoin Mining Council. This approach is motivated not by concern for the environment, but by self-interest: since renewable energy is cheap, mining is often carried out near wind, solar or hydroelectric power plants. However, the carbon footprint is significant. Ethereum is estimated to emit carbon dioxide on a scale similar to Denmark.

What will the merger bring?

The merger will see Ethereum completely abandon the power-hungry system it currently uses in favor of proof-of-stake. In the world of cryptocurrencies, this means depositing cryptocurrencies to earn interest. For example, the creators of the terraUSD stablecoin offered customers 19% per annum for staking TerraUSD: $10,000 invested can grow to $11,900 in a year.

Once proof of stake is in effect, miners will no longer have to solve cryptographic puzzles to validate new blocks. Instead, they will throw Ether tokens into the common cauldron. Imagine that each of these tokens is a lottery ticket: if your number comes up, you will get the right to confirm the next block and receive the rewards you received.

This is an expensive investment. Block validation candidates must deposit a minimum of 32 Ether (€46,602 at the current price) to be eligible. While proof-of-work bypass would require control of at least 51% of network capacity, proof-of-stake bypass would require 51% of total Ether. Since crypto puzzles are no longer part of the system, electricity costs will drop by about 99.65%, according to the Ethereum Foundation.

Why is it called “Confluence”?

How Ethereum will move from Proof-of-Work to Proof-of-Stake by merging two blockchains. The Ethereum blockchain that the general public uses is known as the “mainnet”, as opposed to the various “testnet” blockchains that are only used by developers. In December 2020, Ethereum developers created a new network called “beacon chain” which is based on proof of stake and has been operating in isolation since its inception 18 months ago. Validators added blocks to the chain, but these blocks contained no data or transactions. Before the official commissioning, the circuit was subjected to various stress tests. During the merge, the data stored on the main Ethereum network will be transferred to the beacon chain, which will then become the first block chain on the Ethereum network.

Are there any risks?

Absolutely. Ethereum critics compare The Merge to replacing an aircraft engine in flight. At stake are $140 billion worth of ethereum in circulation.

Technically, a new blockchain can face a lot of unforeseen bugs. Solana, another proof-of-stake blockchain, has experienced several major outages this year.

Critics also question whether proof of stake will be as secure as proof of work. John Charbonneau thinks it would be safer to use a feature called slash. Basically, validators can lose their ethers and lose access to the network if they are found to have acted maliciously. “Let’s say someone attacks Bitcoin 51% today, there’s nothing you can do about it,” he explains. “Proof of stake is very simple. If you attack the network, it is provable and we will cut you, and then your money will be lost. »

Will the price of ether go up?

Ether has lost nearly 70% of its value since the start of the year, and many are hoping the merger will bring back its value. More important than the impact on the price of Ether in the short term is how it shapes the long-term outlook for the cryptocurrency.

John Charbonneau believes reducing Ethereum’s carbon footprint for environmental reasons is “certainly an important part” of The Merge’s developers’ motivation. But beyond that, he notes, it’s also about making it easier for large corporations to adopt Ethereum.

“The reality is that if you take away some of the environmental protection, a lot of people won’t use it.
[l’ethereum] and who will not want to invest in it simply for ESG reasons,” the analyst continues, referring to environmental, social and corporate standards for ethical investing.

When will the merger take place?

The merger should take place in September. During a recent conference call between Ethereum developers, Tim Beiko of the Ethereum Foundation announced September 19 as the target date.

CNET.com article adapted by CNETFrance

Image: SOPA Images/Getty

Back to top button

Adblock Detected

Please consider supporting us by disabling your ad blocker.