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| Fig. 1: A cryptocurrency mining farm. (Source: Wikimedia Commons) |
Ethereum is a blockchain with smart contract functionality released in 2015. Unlike its predecessor Bitcoin, Ethereum can be used for more than just transferring cryptocurrency. Ethereum supports smart contracts, which are computer programs that live on the blockchain and automatically execute based on if-then logic.
Prior to September 15, 2022, Ethereum's consensus mechanism was proof-of-work (PoW). PoW required miners to go through a race to find a number called the nonce of a block. When racing to create a block, a miner repeatedly performed a mathematical function until they arrived at the correct number through trial and error. The first miner to do so received two ETH as a reward, serving as an incentive for miners to perform the expensive and energy-intensive mining process. Many miners stacked multiple mining rigs together to form mining farms (see Fig. 1).
On September 15, 2022, Ethereum went through an upgrade known as the merge. This transitioned its consensus mechanism from PoW to proof-of-stake (PoS). Under PoS miners are replaced by validators. Validators stake their ETH and are randomly chosen pro-rata based on their staked amount. This greatly reduced the energy consumption associated with PoW.
To calculate the electricity usage of Ethereum mining pre-merge, we can multiply the hashrate by the power consumption per hash by miners. The hash rate refers to the total combined computational power that is being used for mining. The maximum hash rate in the year prior to the merge was 625 terahashes per second. [1] Energy consumption among miners varies considerably, but the average power efficiency of a mining rig on the Ethereum network was approximately 4.7 joules per megahash. [2]
Thus the total annual consumption of the Ethereum network pre-merge was approximately
Following Ethereum's transition to PoS, the networks annual energy consumption dropped to 1.67 × 1013 J y-1. [3] Subtracting this from the pre-merge figure, we conclude that the merge reduced Ethereum's energy consumption by 25.7 TWh per year. This is roughly equal to the annual energy consumption of Ireland. [4] For reference, annual global energy consumption is 22,848 TWh. [5] Thus, the merge reduced global energy consumption by 0.11%.
The energy consumption of cryptocurrency has been a recurring criticism of the technology since its inception. Ethereum's transition to proof-of-stake eliminated the energy intensive proof-of-work mining consensus mechanism. This demonstrates that cryptocurrency doesn't necessarily need to require energy intensive consensus to be secure and decentralized, providing a path forward for other networks that wish to reduce their emissions.
© Sam Forman. The author warrants that the work is the author's own and that Stanford University provided no input other than typesetting and referencing guidelines. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.
[1] C. Bellon and I. Figuerola-Ferretti, "Bubbles in Ethereum," Finance Res. Lett. 46, 102387 (2021).
[2] M. J. Krause and T. Tolaymat, "Quantification of Energy and Carbon Costs for Mining Cryptocurrencies," Nat Sustain. 1, 711 (2018).
[3] D. Saingre, T. Ledoux, and J.-M. Menaud, "Measuring Performances and Footprint of Blockchains With BCTMark: A Case Study on Ethereum Smart Contracts Energy Consumption," Cluster Comput. 25, 2819 (2022).
[4] D. Connolly et al., "Modelling the Existing Irish Energy-System to Identify Future Energy Costs and the Maximum Wind Penetration Feasible," Energy 35, 2164 (2010).
[5] M. Z. Ali Khan, H. Ali Khan, and M. Aziz, "Harvesting Energy from Ocean: Technologies and Perspectives," Energies 15, 3456 (2022).
