The time of the Merge is nigh.
“The Merge” refers to Ethereum shifting from a proof-of-work system to validate its blockchain to proof of stake. That change could have huge ramifications for the planet, in a very good way.
Crypto mining has been under intense scrutiny for years due to its high energy use. While bitcoin has attracted most of said scrutiny, Ethereum has used the same energy-intensive process to not just validate transactions but also operate smart contracts, software code that runs autonomously on top of the blockchain, such as the ones that mint NFTs.
But when the switch flips on Ethereum 2.0 next month, it will dramatically cut the amount of energy needed to keep the cryptocurrency secure and run all that code. That will in turn cut carbon pollution. Here’s what you need to know about the Merge, particularly its climate impact.
When is the Ethereum Merge?
A key software upgrade happens Sept. 6, and the Ethereum Foundation expects the Merge to occur on or before Sept. 20, or whenever block 58750000000000000000000 is mined. Please add it to your calendar slash watch the blockchain.
What happens to my ether?
The short answer: nothing. Assuming the Merge goes off without a hitch, ether, the native cryptocurrency of Ethereum, will keep being ether, and other Ethereum-based tokens like USDC will likewise stay unchanged. Sara Xi, chief product officer of Prime Trust, told Protocol earlier this month that the Merge is essentially like taking cargo from one moving train and plopping it onto another one.
OK, so what’s the deal with proof of work vs. proof of stake?
Both are systems that keep a blockchain secure. What differs is how they do that. For a proof-of-work system, a bunch of computers around the world race each other to solve a math equation. The first one to do it mints a block. Importantly, the owner of said computer also gets rewards in the form of tokens.
Proof of stake switches things up by having a bunch of computers ready to solve a problem. But only one is actually chosen at random to do it, mint a block and earn tokens. In essence, the former is like competitors repeatedly running the 100-meter dash at the same time while the latter is like the same race but telling competitors to run one at a time, then take a breather.
Not just anyone can compete in Ethereum’s proof-of-stake system. Instead, it will require those competitors to have at least 32 ether on hand in order to get a spot at the starting line, whether on their own or as part of a pool of ether holders.
How will the Ethereum Merge benefit the climate?
A bunch of people running the 100-meter dash ad infinitum burns a lot of energy. So it is with proof-of-work mining. Ethereum’s current setup uses vast amounts of electricity, much of it provided by fossil fuel power plants. Mining it emits as much carbon dioxide in a year as Switzerland, according to calculations from Digiconomist.
Switching to proof of stake will slash that energy usage by 99% or more. In a world where emissions need to peak no later than the middle of this decade and then fall precipitously over the coming years to keep the climate habitable, taking a Switzerland-sized chunk out of the crypto world’s carbon emissions is no small deal.
What about all those computers currently mining ether?
Ah yes. Well here’s where things could get tricky. Mining companies have a lot invested in their machines. The Merge will essentially make these mining rigs stranded assets. That could lead to a few outcomes. One, they could put their GPUs to use mining Ethereum Classic, which split off in a hard fork from the Ethereum blockchain in 2016. At least one mining company is already planning to do just that. (For technical reasons, switching to mining bitcoin would be hard because different hardware is optimal for that cryptocurrency.)
Miners could also decide to create another hard fork where they keep using proof of work. There’s already a nascent movement on that front as well. Both these outcomes would almost certainly generate less revenue for miners unless they persuade software developers, validators and others to stick with their forked blockchain. Such an outcome would be decidedly not great for the climate because it would keep those GPUs humming along and hoovering up power. It could also end up creating an environment ripe for scammers, which the crypto world is no stranger to.
For miners who give up the ghost, their rigs could well end up in the trash. The world saw 53.6 million metric tons of e-waste accumulate in 2019, the last year with United Nations data available. That harms both the local environment and people living near e-waste dumps. Also not ideal!
Could bitcoin switch to proof of stake?
LOL. Maybe but it’s hard to see that happening. Besides the vested interest of miners who profit off of the current system, some bitcoin advocates argue that proof of work is superior to proof of stake because it’s more decentralized and resistant to central control.
A handful of environmental groups started a campaign earlier this year targeting bitcoin investors since miners aren’t likely to suddenly have a change of heart. But so far, that effort has amounted to yelling into the deep, dark void of cyberspace. There are other efforts to create a certification process for bitcoin miners that purchase clean energy, though it would be entirely voluntary.
So while the world’s second-biggest cryptocurrency is set to transition to a more environmentally friendly validation method, its bigger and more polluting sibling is still likely to keep damaging the climate for the foreseeable future.
The best hope to lower bitcoin’s impact may be the Lightning Network, which can process transactions on a layer on top of the bitcoin protocol much more quickly and efficiently. Block is investing heavily in Lightning Network technology and has integrated it into Cash App.
Of course, the Merge could end up making Ethereum a more enticing option to climate-conscious crypto investors (assuming it goes off without a hitch). Whether that group is enough to rocket it past bitcoin is TBD, though.