Experts told AFP that the largest software upgrade in the short history of cryptocurrencies has fulfilled its promise to wipe out more than 99 percent of the electricity used by the second largest cryptocurrency.
This is not a feat, given that the Ethereum blockchain has been burning with electricity like New Zealand.
Skeptics expected errors in the upgrade, known as “merging,” but it ended up being a “rather boring event,” according to Alex de Vries of the Free University of Amsterdam.
De Vries, whose website Digiconomist models energy use in Bitcoin and Ethereum, said consumption has already fallen by more than 99 percent on Ethereum.
Moritz Platt, a researcher specializing in cryptocurrency at King’s College London, said the 99 percent estimate was realistic and heralded a positive step towards “crypto sustainability.”
So the Ethereum blockchain, which supports billions of dollars in trading in games, tokens, art and ethereum, has cleaned up its act.
But there are complications.
Ethereum is facing stiff opposition from those who lost out on the merger and could also come under more scrutiny by regulators.
The old system, known as “Proof of Work,” relied on people and companies to “mining” new coins — an industry worth $22 million a day before the merger, according to de Vries.
Miners used massive, energy-intensive computer platforms to compete with each other to solve complex equations, and the winner was awarded the prize for adding entries to the blockchain and generating coins.
The merger wiped out their business model overnight.
“These rigs don’t magically turn into venture capital,” said a crypto miner known only as “J” working between Singapore and Hong Kong.
He said it cost him between $30,000 and $40,000 a month to keep his staff and equipment idle while he considers his next move.
Many miners have sold their equipment, while others are putting their rigs to work on less profitable chains that still use the old system.
A miner using the name Leon Ravencoin, for example, has been tweeting nonstop about the “astronomical” growth of Ravencoin, one of the coins that got a boost after the merger.
The combined computing power these coins use is about one-fifth of the Ethereum blockchain that was previously integrated.
However, de Vries said they only generate about $500,000 in revenue per day, so only the most energy-efficient machines with the lowest energy costs will turn a profit.
As a result, one-fifth of computing power will work with much less than one-fifth of electricity usage.
Apart from the miners’ problem, the new system, known as “Proof of Stake”, has many problems.
Anyone wishing to share a large amount of ether can now “validate” new entries on the blockchain.
The higher your stake, the higher the chance to update the chain and earn coins.
The system gives an advantage to the biggest players, and just three companies now account for more than half of the “verifiers,” according to research by Dune Analytics.
Cryptocurrencies were envisioned as a decentralized alternative to banks, corporations, and governments that failed spectacularly during the global meltdown of 2008.
But cryptocurrency miner J said that the new Ethereum was “designed to be more centralized” and indicated that it no longer had a real purpose.
Regulators are also starting to pay attention, with US Securities and Exchange Commission Chairman Gary Gensler suggesting that proof of stake is like a stock market that falls under his purview.
A disaster scenario for Ethereum would be for enough disaffected fundamentalists to turn to one of the gas-guzzling Proof-of-Work alternatives, with Ethereum Classic being the main alternative.
“There is nothing limiting the price of Ethereum Classic,” de Vries said, which means that miners can make good profits if the market changes their way.
He said the rush from a greener blockchain was “certainly theoretically possible.”
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