Ethereum Blockchain’s Energy Usage Plummets 99% After Architecture Change

The Cambridge Blockchain Network Sustainability Index has confirmed that Ethereum's energy usage has decreased by 99% since its switch from proof-of-work to proof-of-stake, demonstrating the network's commitment to sustainability.

The Ethereum blockchain’s energy usage dropped by more than 99 per cent last year after a change to its architecture. This is according to a new report from the Cambridge Blockchain Network Sustainability Index. The change from proof-of-work (PoW) to proof-of-stake (PoS) for creating new ether last September resulted in a dramatic decrease in power demand on the network, from 2.44 gigawatts to 235 kilowatts. Despite increasing usage of the network, energy consumption remained low, reaching 420,000 kilowatt hours in March. This shows how the new token minting and validation process better aligns with sustainability goals two years after China’s crackdown on crypto mining.

China’s Cryptocurrency Mining Activity

The Cambridge Centre for Alternative Finance (CCAF) recently released a report on the index of cryptocurrency mining activity in China. Prior to the crackdown in May 2021, the report noted that Ether mining was of much less interest in China than Bitcoin. The Bitcoin network’s hash rate fell 71.1 per cent while Ethereum’s fell 25.5 per cent. China was once the world’s largest cryptocurrency mining hub due to its relatively cheap electricity, but the crackdown briefly pushed measurable bitcoin mining activity to near zero. However, data suggests that much of the activity has since moved underground. This report provides insight into the current state of cryptocurrency mining activity in China.

Ethereum’s Transition to PoS: Aligning with Green Energy Goals

Ethereum’s recent transition from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) blockchain has been a success in reducing energy usage. This change has enabled Ethereum to better align with China’s green energy goals, which include a promise to reach peak carbon emissions by 2030 and carbon neutrality by 2060. PoW blockchains, such as Bitcoin, are energy intensive due to the process of hashing, or solving complex math problems, to add new tokens and verify transactions.

PoS blockchains, on the other hand, require users to “stake” their own tokens as collateral to verify transactions. After years of planning, Ethereum’s Merge last year finally enabled the switch to PoS. Also, the network has seen a significant reduction in energy usage since.

Ethereum’s Energy Consumption Drops Dramatically

The Ethereum network has seen a dramatic decrease in energy consumption since the Merge. According to the Cambridge Centre for Alternative Finance (CCAF), Ethereum’s energy consumption has dropped from 58.3 terawatt hours to 6.56 gigawatt hours annually. This is comparable to the energy consumption of iconic structures such as the Eiffel Tower or the British Museum.

While Ethereum’s energy consumption has increased over the past several months due to the addition of more nodes and validators, it is still a far cry from what it used to consume and what the Bitcoin network still consumes. This is a major step forward for Ethereum and its commitment to sustainability.

Bitcoin’s Energy Consumption: Innovation vs Sustainability

As Bitcoin’s price continues to surge, the Cambridge Bitcoin Electricity Consumption Index has revealed that the cryptocurrency’s annual energy usage is equivalent to that of the entire country of Norway. This has raised questions about the sustainability of digital assets. Moreover, governments around the world are trying to find a balance between innovation and environmental concerns.

China has been at the forefront of blockchain technology, but due to its ban on cryptocurrency, many projects are focusing on other uses of distributed ledger technologies. This highlights the need for a global consensus on how to ensure the sustainability of digital assets while still allowing for innovation.

Hong Kong’s Digital Asset Hub: A Balancing Act of Sustainability and Innovation

Hong Kong is making strides to become a regional hub for virtual assets, with a new licensing scheme set to go into effect in June that will allow retail investors to participate in the market. This pro-digital asset stance has led some to speculate that it could be used as an experimental zone for crypto development in China. However, Hong Kong must also balance its Web3 initiatives with its own sustainability goals, such as its pledge to become carbon neutral by 2050 and its goal to become a green technology and finance centre. With the right balance, Hong Kong could become a leader in the digital asset market while also achieving its sustainability goals.

Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.