(AFP / INA FASSBENDER)
By eliminating the “blockchain miners”, we could reduce “99%” the electricity consumption of Ethereum, estimates Lennart Ante, researcher of the Blockchain Research Lab: “there is no infrastructure left, just software”, he explains. Also, this process could increase the speed of transactions.
Objective: to drastically reduce its energy consumption. Ethereum, the second largest cryptocurrency, plans to change the operation of its “blockchain” in mid-September to
drastically reduce its energy consumption.
It is a revolution for the network on which a large part of the NFTs (non-fungible digital tokens) or other cryptoassets depend.
How did this technical change that allowed ethereum to
curb the plunge in cryptocurrency prices,
could it cause electricity demand to plummet, and why is it controversial?
Bitcoin, the first of the cryptocurrencies, was imagined in 2008, in the wake of the financial crisis, to be able to do without banks. To validate transactions,
the bitcoin goes through a “blockchain”,
a decentralized registry.
prove their participation by “mining”,
a mechanism called “Proof of Work” or PoW: “they try to guess a random number” and are rewarded in Bitcoins, explains Lennart Ante, a researcher at the Blockchain Research Lab.
With the rise of cryptocurrencies – despite a dip since the beginning of the year, the whole sector still represents
1 trillion dollars
– the activity becomes lucrative, and is carried out from warehouses full of servers around the world, often near inexpensive electricity sources.
Electric balance of bitcoin:
approximately 95 terawatt hours (TWh) per year,
according to an index from the University of Cambridge, almost equivalent to the annual consumption of Pakistan. According to the figures cited by the creators of Ethereum, the second cryptocurrency would consume
around 45 TWh per year.
Ethereum: towards an evolution
With a decentralized system, it is difficult to assess the carbon footprint of the different blockchains since the sources of electricity are not always identified, but this mode of operation is
“environmentally destructive, costly, and inefficient”,
says Eswar Prasad of Cornell University. Ethereum is different from Bitcoin: its blockchain allows
validate transactions in Ether,
its cryptocurrency, but also to issue “smart contracts”, that is to say lines of code.
This allows certain “stablecoins”, these cryptocurrencies pegged to the dollar,
to use the Ethereum blockchain,
like a large part of NFT issuers, these digital tokens which represent, for example, works of art.
Apart from Bitcoin,
“everything is based on Ethereum” in the world of cryptocurrencies,
summarizes Lennart Ante: “there are other similar platforms, but none with so many projects and developers”. However, the carbon footprint of the blockchain pushes certain artists and industrialists
to boycott it.
The creator of Ethereum Vitalik Buterin and his community therefore defend an evolution of the cryptocurrency towards a system of Proof of Stake (PoS or Proof of stake): participation in the network is no longer proven by the use of electricity but
by placing an Ether bet.
Towards “99%” less electricity consumption
By eliminating “blockchain miners”, we could make
reduce “99%” electricity consumption
of Ethereum, believes Lennart Ante: “there is no infrastructure left, just software”, he explains. Additionally, this process could
increase the speed of transactions.
“The Proof of Stake is not perfect either”, observes Eswar Prasad: “Liquidity in the market is reduced, because some users prefer
use their assets as a stake
rather than selling them”. But above all, “there could be
a governance problem,
with a small number of users who would deposit large bets to change the rules to their advantage”, he warns.
A project well received by investors
Ethereum transition started since December 2020, with trial blockchains. That’s why market players talk about “The Merge”: the Ethereum mainnet should be incorporated into the test version
. Such an update, which requires decentralized users to keep pace without stopping transactions, is not without risk: some observers compare the exercise to that of replacing a diesel engine with an electric motor on a vehicle in walking.
Investors, in any case, have so far welcomed the project:
Ether price holds up better than Bitcoin
to the shock that is shaking the cryptocurrency market. At 1,650 dollars for Ether for a capitalization of more than 200 billion dollars, Ethereum represents nearly 20% of the cryptocurrency market, which is still half as much as Bitcoin.