Ethereum Merge to crush power consumption by 99.95%

Today the cryptocurrency community saw a long-awaited update to Ethereum, the second-largest blockchain project in the world.

 

Today’s Ethereum Merge software update went ahead, with a promise that it would massively decrease the energy required to operate the Ethereum blockchain and the instruments that run on it, such as the native cryptocurrency Ether (ETH), smart contracts, and Non-Fungible Tokens (NFTs).

According to the Ethereum Foundation, Ethereum’s energy requirements  will drop by “at least 99.95%” post-Merge.


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Proof of Work versus Proof of Stake

To process Ethereum transactions, computers attached to its network race to be the first to solve difficult computer-generated maths problems – to show Proof of Work. These competing “miners” use staggering amounts of power, often in places where that power is generated by fossil fuels.

Researcher Alex de Vries, founder of Digiconomist, estimates that the Ethereum blockchain consumes nearly 80 terawatt-hours of electricity a year, the equivalent of a small country.

The Ethereum Merge replaces that network of power-hungry miners with a system in which existing owners of ETH put it up as collateral – showing Proof of Stake – to validate transactions and confirm additions to the blockchain.

Proof of Stake verification requires fewer people and fewer computers than Proof of Work… and a lot less electricity.

Technicians monitor a wall of computers at a commercial cryptocurrency mining operation

 

Ethereum Merge leaves other problems unsolved

Since its creation in 2015, Ethereum has been criticised for being too energy-hungry, too expensive, and too slow to form the basis of a global financial network. The Ethereum Merge only addresses the first of those problems.

Reality check: the Ethereum Merge won’t make transactions happen FASTER.

“Though some slight changes exist, transaction speed will mostly remain the same,“ says the Ethereum Foundation.

The number of transactions that Ethereum can carry out will remain approximately 15 per second – by comparison, VISA claims to average 1,700 transactions per second.

 

Reality check: the Ethereum Merge won’t make transactions CHEAPER.

“The Merge is a change of consensus mechanism, not an expansion of network capacity, and will not result in lower fees,” continues the foundation.

At the time of writing, the cost of performing a single Ethereum transaction is AUD $2.57. That’s not so bad if you’re buying a house, but it means Ethereum isn’t ready for day-to-day transactions like buying a coffee.

However, assuming today’s Merge goes without a hitch, at least your transaction won’t be setting the planet on fire.

 

The Royal Institution of Australia has an Education resource related to this subject. You can access it here

Disclosure: the author of this article holds ETH, among other cryptocurrencies, as part of an investment portfolio. For the sake of gods old and new, do not consider this article investment advice.