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This is how Ethereum will now work, the cryptocurrency that went ‘green’

This is how Ethereum will now work, the cryptocurrency that went ‘green’

Updated

Moving to a proof-of-concept structure reduces Ethereum’s power consumption by 99.9%

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Until last September, keeping the cryptocurrency Ethereum running was a cost of energy. equivalent to a country like Austria. Almost 72,000 gigawatt hours per year were used to ‘mine’ the various tokens and to validate the movements made by their users in the blockchain.

Today, Ethereum is a very different cryptocurrency. On September 15, its managers completed the so-called “merger”, a transition planned for eight years and which changed the mechanism used by Ethereum users to guarantee its proper functioning.

The result? The energy cost of running the project – and therefore the associated CO2 emissions – 99.9% reduction. According to calculations from the Crypto Carbon Ratings Institute consultancy, with the level of activity expected in the currency, which is used as a protection for the so-called smart contracts and which is behind the recent NFT fever, it will hardly consume 2 gigawatt hours per. year.

This ‘merger’ is a change in the model in which the currency is structured. Ethereum began life in 2013 as a cryptocurrency based on in a proof of work model, like Bitcoin. In order to generate new tokens or register an operation on its public blockchain, it was necessary to perform complex calculations with a high computing cost.

This consensus mechanism is called mining in the crypto world, since the machine that manages to solve these calculations is given a coin or token. It’s like finding a nugget of gold after spending a day breaking stone.

This system makes it possible not to rely on a central entity that validates the various transactions and, in the case of digital money, confirms a coin has not been worn before. It is a way in which all parts of a decentralized system can operate without implicitly trusting each other.

But when Vitalik Buterin created Ethereum, I also raised the future evolution of this model to one called proof of participation. This consensus model is not based on solving complex calculations that require hundreds of computers to work at full capacity for days solving cryptographic problems, but the users of the network themselves earn the right to validate a certain transaction through some of the coins or to delegate the signs. already as collateral.

Although a proof-of-stake model still has computational proof, the difficulty of this varies based on the number of coins delegated and the time they are delegated. greatly simplifying the mining process and therefore reduce consumption.

Both models have advantages and disadvantages and in both cases a person with bad intentions can compromise the network if they manage to play an important role in the consensus process. In the case of a proof-of-work model, this means more than 51% of the network’s total processing capacity. In the case of a proof model, have more than 51% of the tokens or coins. According to Buterin, this last option is less likely to happen in a cryptocurrency, especially one as widespread and diverse as Ethereum, so the jump to the new model makes sense and in theory will also reduce the cost and commissions of operations within. the block chain (called gas in the case of Ethereum).

Now the question is whether the example encourages other currencies to follow a similar path. Above all to Bitcoin, which generates an abysmal energy cost due to its popularity and continuing to use a proof-of-work model. Despite the drop in price and use, it consumes between 90 and 145 terawatts per yearwhich is equivalent to the energy consumption of a country like Sweden.

There are a number of initiatives to try to ensure that some of that consumption comes from renewable sources, but it is a difficult problem to solve. It is very likely that Bitcoin will evolve into a proof-of-concept consensus system because the protocol was designed from the ground up with a proof-of-work model in mind and some of the features that its users consider essential depend on it. Such a drastic change would bring uncertainty to an already highly volatile currency even when everything is going according to plan.

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