Ethereum’s post-Merge energy usage shows how blockchain tech can align with national sustainability goals

The Cambridge Blockchain Network Sustainability Index shows Ethereum’s annual energy consumption is roughly equal to that of the Eiffel Tower

Ethereum did not have wide usage in China before it switched to a more sustainable token validation process, the data shows, but interest in the network is rising

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Souvenir tokens representing cryptocurrencies bitcoin and ether, the native token of Ethereum, plunge into water in this illustration taken May 17, 2022. Photo: Reuters

Published: 9:15pm, 26 Apr 2023

The Ethereum blockchain’s energy usage initially plummeted more than 99 per cent last year after a change to its architecture, a new report confirms, showing how a new token minting and validation process better aligns with sustainability goals two years after China’s crackdown on crypto mining.

Following a change from proof-of-work (PoW) to proof-of-stake (PoS) for creating new ether last September, power demand on the network cratered to 235 kilowatts from 2.44 gigawatts, according to the latest Cambridge Blockchain Network Sustainability Index released on Wednesday. Amid rising usage of the network, energy consumption reached 420,000 kilowatt hours in March, the index shows.

In its report on the index, the Cambridge Centre for Alternative Finance (CCAF) also notes that ether mining appeared to be of much less interest in China than bitcoin prior to the change. During Beijing’s crackdown on mining activity in May 2021, the bitcoin network’s hash rate, the measure of the network’s computational power, was “far more severely” affected than Ethereum’s, with each falling 71.1 per cent and 25.5 per cent, respectively.

Monthly proof-of-stake energy usage for Ethereum leading up and following the merge. This chart shows consumption on the Beacon Chain, a proof-of-stake blockchain that merged with the main Ethereum chain in September 2022. Chart: SCMP

China was once the world’s largest cryptocurrency mining hub owing to its relatively cheap electricity, despite the digital assets being banned in the mainland. The crackdown two years ago briefly pushed measurable bitcoin mining activity in the country to near zero, although later data suggested much of that activity had largely moved underground.

The success of Ethereum’s change in reducing energy usage shows how PoS blockchains can better align with green energy goals, which China has championed with a promise to reach peak carbon emissions by 2030 and carbon neutrality by 2060.

Concerns about the energy usage of cryptocurrency mining were widely seen as a potential factor in Beijing’s crackdown.

PoW blockchains like bitcoin’s are so energy intensive because the process requires hashing, or solving increasingly complex math problems, to add new tokens to the network and verify transactions. With PoS, users “stake” their own tokens, or put up a specified amount as collateral, to verify transactions.

Ether’s switch to PoS was teased for years before the stakeholders pushing the change were able to make it stick. The network went through multiple technical changes before the so-called Merge last year, according to the report.