The world’s second most popular cryptocurrency, ether, is about to switch to a new, greener operating model.
Currently, for its “mining” it consumes the same amount of energy as a medium-sized country. For example, the Ethereum Foundation said that the platform consumed as much electricity as the Netherlands in June.
Now, what is known as “the meltdown” will see its carbon emissions reduced by 99.9%.
Although cryptocurrencies have been a revolution in the world of the economy, their contribution to climate change is unfortunate due to the amount of electricity used by the computers that manage their trading.
The plan to switch to the new model, says Vitalik Buterin, co-founder of Ethereum (the digital platform whose currency is ether)was on the horizon since the cryptocurrency was launched in 2014, but has been postponed due to the technical complexity involved.
It’s kind of like rebuilding the foundations of a skyscraper while it’s still standing.
The change is expected to be completed during the early hours of this Thursday.
If something goes wrong, it could jeopardize possibly the most important ecosystem of cryptocurrencies, which would affect large and small investors around the world. If all goes well, consumers shouldn’t notice any changes.
Why are cryptocurrencies so polluting?
Unlike traditional currencies, cryptocurrencies are a digital currency system where people make direct online payments to each other and where there is no such thing as a central bank. Instead, they are administered with what is known as a “block chain”.
This “blockchain” is a decentralized global network of high-powered computers that allows the creation, or “mining,” of digital currencies.
And, until now, the model known as “proof of work” or PoW system.
The model works as follows: for A to make a transfer to B in cryptocurrencies, it sends a message to the network that joins other messages from other transactions. Together they make a “block” which is converted into a cryptographic code. In turn, each “miner” competes with others for trying to solve that code and they are rewarded for this work with new coins.
Once the operation is resolved, it is verified by other miners and the transaction is confirmed.
Beyond this complexity, the process it requires a lot of calculations and a lot of computer time. Therefore, a lot of electricity use.
How Ethereum is changing to be more ecological
What will change from now on is that the PoW system blockchain will be merged (what they have called The Merge or “the merger”), with a carbon copy called beaconchain (beacon chain). Behind this name appears a new coding system for the cryptocurrencies of the Ethereum system: the “proof of stake” or PoS system.
The PoS system It greatly reduces the number of computers needed to maintain the blockchain. The crypto miners are replaced by a smaller number of “validators” of the transaction.
In addition to reducing the energy load of Ethereum, the PoS system reduces the amount of coins given as rewards (which is how digital currencies are generated) and the organizers say that it will decrease the total amount of existing currencies.
Another change is that laptops and desktops can be used with this system, instead of the powerful GPUs (data processing units) that were used until now.
Skip to proof of stake it will reduce power consumption by about 112 terrawatt hours per year to 0.01 terawatt hours per year.
A clean face and increased value
Those who defend cryptocurrencies always find a great stumbling block: the monstrous energy consumption they entail.
In the case of Ethereum, with “the merger” and the change in the mining system, the hope they have is that this will be sustainable in the future and more energy efficient.
The change is expected to save a large amount of energy per year, around Chile’s energy consumption.
“It’s really exciting and a great achievement. Yes, there are nerves in the sense that things probably won’t go 100% right, but that’s to be expected,” says Ethereum Foundation researcher Justin Drake. “We have an infrastructure now that allows us to keep going even if parts of the network go down for whatever reason.”
As a result of the merger, some analysts expect ether to outperform bitcointhe leading cryptocurrency by market value, as the leader in terms of the total value of all coins.
“Miners” in the air
The other side of the coin is that of the “crypto miners” who must find a new way to earn money with your team or sell it.
Some reports suggest that a GPU sell-off has already started.
In a crypto mining company based in Dubai, they are investing tens of thousands of dollars in replace your computers GPU to mine ether for others that are even more expensive and consume even more energy but are capable of extracting bitcoin.
“It’s tough, as no other proof-of-work coin is as profitable as Ethereum,” spokesperson Ammar Lashkari said. “We’ll keep some of our Ethereum computers and start mining altcoins, but it won’t be the same, so we’ll slowly diversify into bitcoin mining.”
In Staffordshire, UK, Ash Andrews hopes to continue to make a profit by mining other coins with his current team.
“I have mixed feelings about ‘the merger’. It’s been an easy time for us miners who only mine ether. Now we will have to change to another currency. There are a lot of changes,” says Andrews.
Some are more optimistic about the future of GPU mining.
Josh Riddett, CEO of Manchester-based Easy Crypto Hunter, believes that mining less popular coins will eventually become profitable.
“During Ethereum’s price spike, every mining rig we had was making $150 a day, which is pretty crazy. Yes, we’re going through a period of low numbers, but who’s to say what the value of other coins might be in a period of three to five years.