The Environmental Impact of The Merge
Ethereum Is on Its Way To Using Less Power Than Mastercard
The “one-sentence philosophy” of proof-of-stake is thus not “security comes from burning energy”, but rather “security comes from putting up economic value-at-loss.” — Vitalik Buterin
What Is The Merge?
The Merge was one of the most anticipated and complex transitions in the history of blockchain. The term refers to the upgrade of Ethereum’s consensus mechanism from proof-of-work (PoW) to proof-of-stake (PoS), which, among other things, enabled improved scalability and energy efficiency, lowered costs to entry, reduced centralization risk, and increased attack costs.
The Merge took place on September 15, 2022. It’s called The Merge because this is the point when Ethereum’s main consensus layer merged with the Beacon chain, a separate network with PoS consensus which had been successfully running alongside the Mainnet.
The possibility for The Merge had existed since 2015, but was meticulously planned over several years to ensure a seamless transition without affecting the operations of the network. Post-Merge, Ethereum has now become what it stated it would: “the most powerful, most used, most credibly-neutral, and most energy-efficient blockchain network in the world.”
Change of Power Dynamics
In a PoW consensus mechanism, miners maintain the network by running and managing nodes. Miners direct nodes to expend electricity in the form of computational power to solve complex mathematical problems. PoW is a race; whoever solves the block first gets the reward. The miners are more likely to win if they have better computer hardware, implying higher energy demand.
In PoS, consensus validators commit their stake to attest blocks into existence. Validators stake ETH on the network and are chosen at random to propose a block. Other validators then attest that they have seen this block. PoS is not a race, as the likelihood of choosing the validators is random and not computational-power based. This significantly reduces the energy consumption of the Ethereum network — by as much as 99.95 percent.
PoW’s cost structure involves high operational costs in the form of electricity and also capital costs in the form of GPUs. These costs are borne by both the miner and by the environment.
In contrast, PoS’s cost structure has a very limited operational cost of running the node, which is equal to the cost of running a modest laptop. The only capital expenditure here is the staked cryptocurrency (32 ETH).
Pre-Merge Energy Estimation
The total historical ETH emissions prior to The Merge amounted to approximately 18.1 Megatonnes of CO2, which is comparable to the annual CO2 emissions of Sri Lanka. Although PoW Ethereum only used one-third of the energy consumption of Bitcoin, the absolute value of emissions was high and worrying.
Pre-Merge, the carbon footprint of a single Ethereum transaction was equivalent to 44 Visa card transactions or three hours of watching YouTube.
This is an overview of results for Ethereum PoW network, annualized values as of August 2022 (pre-Merge):
Post-Merge Energy Estimation
The estimated energy consumption of ETH PoS is 0.01 TWh/yr. To put this into perspective, the estimated energy consumption for gold mining is 240 TWh/yr; gaming is 34 TWh/yr, and YouTube is 244 TWh/yr. Bitcoin, the largest blockchain in terms of market capitalization, consumes an estimated 95TWh/yr.
The best-guess estimate for electrical power and electricity consumption of the Ethereum PoS network per single node is 547 kWh/year. This is within the same range as other PoS-based blockchains. However, it is worth noting that in terms of the number of transactions, Ethereum leads all other PoS blockchains by a large margin, and therefore emerges as the greener blockchain per transaction.
How The Merge Benefits Ethereum
With Ethereum’s move towards greater sustainability through its Merge, the protocol is poised for wider adoption, despite its previous negative environmental impact. Some prominent organizations such as Mozilla, Discord, and Tesla had halted their blockchain adoption, citing environmental concerns. The Merge is expected to re-ignite adoption of Ethereum.
Web3 organizations based in regenerative finance (ReFi) mostly choose PoS blockchains due to their energy efficiency. Ethereum will become a strong contender for building ReFi products.
The Merge could alleviate Environment, Social and Governance concerns over investment in Ethereum-based protocols or products.
The greener the blockchain ecosystem gets, the more governments will be inclined toward favourable blockchain policy. A report by the White House Office of Science and Technology recommends promoting environmentally responsible crypto assets while limiting or eliminating energy-intensive cryptocurrency mining.
As Ethereum is now green, the community can now focus on other major problems like increasing transaction speed and reducing transaction costs.
Offsetting Historical Emissions
The Merge is just the start of a greener future for the network, as outlined by Vitalik Buterin in the Ethereum roadmap. However, the Ethereum community is well aware of the historical carbon emissions created by the proof-of-work consensus mechanism and recognizes the need to offset those emissions. This responsibility extends not only to the base layer of Ethereum, but also to the side chains and Layer 2 protocols that rely on Ethereum for security.
Interestingly, several initiatives have been launched by the ReFi movement to offset the historically Ethereum emissions. Block.garden is a platform that decarbonizes emissions of blockchains through fun community competition. Web3 entities in the ReFi scene are collectively working towards mitigating and offsetting the carbon emission from Gitcoin grants. COP27 also witnessed leading web3 entities coming together to offset pre-Merge emissions by investing in ongoing science-based climate projects.
ETH4 Climate is a more comprehensive initiative that focuses on offsetting emissions prior to The Merge, as well as offsetting residual emissions associated with PoS and other off-chain infrastructure. ETH4 Climate tries to achieve this through retiring existing verified carbon credits, funding projects that generate environmental assets such as carbon credits, and are considering the use of Renewable Energy Certificates.
The Future of Web3 Looks Greener
The estimated emission rates of Ethereum PoS are in the same range as those of other PoS networks, making the blockchain ecosystem greener. The Merge will have a positive environmental impact on Ethereum’s side chains, Layer 2 rollups, and applications built on top of Ethereum.
Regulators have been imposing stricter regulations on PoW-based blockchains, putting the entire industry at risk of being controlled and dominated by these regulations. The Merge is a great step towards building a sustainable future for the industry and a strong case study for regulators to consider. After The Merge, the Ethereum community has turned its attention to increasing the efficiency of the protocol by addressing transaction speed and cost. To become a successful and sustainable protocol Ethereum should look to further lower its energy consumption which presently stands between 0.8 to 14.7 Wh, when compared to Mastercard’s 0.7 Wh average.
Collection of data and research on energy consumption after The Merge is still in the early days. Gauging the actual environmental impact will take time, but it’s safe to say that Ethereum’s PoS is a big step in the right direction.
Author Bio
Marathonmind is a web3 writer with a background in business development.
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