How Green Is Ethereum?

Ethereum’s update in September 2022 was called the Merge. In this update, among other issues, developers integrated the long-anticipated transition to proof-of-stake, significantly reducing the blockchain’s energy requirement.

The new Ethereum chain (called Ethereum 2.0 until the Ethereum Foundation requested that it not be) reduced energy use and promised faster transactions and lower gas fees. Read on to discover how green Ethereum is and learn about its plans that may be even more environmentally friendly.

Key Takeaways

• The Ethereum blockchain upgrade “The Merge” enhanced the network and reduced energy consumption.
• Its proof-of-stake validation mechanism is more environmentally friendly than proof-of-work mechanisms.
• Gas fees fell after The Merge, but not because of it. They are also not as low as from 2017 to 2020.
• The Merge set the stage for further scalability enhancements to the Ethereum Virtual Machine.

Ethereum and Energy Use

Ethereum mining is no longer possible after the move from the proof-of-work (PoW) model to proof-of-stake (PoS). Proof-of-stake reduced the blockchain’s energy use by more than 99%.

PoS differs from PoW in that it is not a network-wide competitive process of encrypting information through a hashing algorithm. PoS still uses a hashing algorithm and verifies transactions through a consensus layer, but the validators are randomly chosen by the network based on the amount of ether they have staked. Staking is basically offering ether as collateral to become a network validator so the participant can earn ether rewards.

Selecting one semi-trusted validator to hash the information in a block and verify it uses far less energy than a competition. So, Ethereum is much more “green” in terms of energy consumption than it used to be.

Were Ethereum Gas Fees Reduced?

Transaction fees had risen on the Ethereum network in 2020 because of increased network activity. At the time, the transactions whose originators offered the most in fees were placed in front of those who paid less. This created a fee war of sorts, with users trying to get their transactions validated quicker and miners charging more for prime validation spots.

An earlier attempt to fix rising costs tried to remove the transaction auction mentality from the network by imposing a base fee and a priority fee. The priority fee is similar to a tip to validators for them to choose to process one transaction instead of another. This was ineffective at lowering transaction fees because users still increased their tips to get transactions approved faster.

Important

Ethereum is on its way to becoming a greener blockchain and network. Future upgrades are expected to make it more efficient, scalable, and less costly.

Ethereum Transaction Speeds

The Merge, an upgrade to the Ethereum blockchain to a different version many people called Ethereum 2.0, set the stage for future upgrades. This significant update didn’t improve transaction speeds at the time or even a few years later, but future upgrades will introduce improvements in network speed and scalability.

Is Ethereum Green?

According to the Ethereum Foundation, the blockchain and network consume 0.0026 terawatt-hours per year (TWh/yr), compared to Bitcoin’s 149 TWh/yr and global data centers’ 190 TWh/yr. It also consumes less energy than video gaming in the U.S. (34 TWh/yr) and less than Google (19 TWh/yr).

The University of Cambridge’s Judge Business School researched the energy sources for the Ethereum network after The Merge. According to its findings, 48% of Ethereum’s energy comes from sustainable sources like wind power, nuclear power, and other renewables. The remaining 52% is powered by natural gas (30%), coal (19%), and oil (3%).

According to reports like this, Ethereum is greener than it was before switching to PoS. However, there are many more upgrades planned that have the potential to make it even more efficient and eco-friendly.

The Green Future of Ethereum

Ethereum has posted plans for upgrades that will bring a new concept to the blockchain, which is expected to allow it to scale and increase transaction processing speeds. In March 2024, the Dencun Upgrade was released.

This upgrade introduced proto-danksharding, a process where second-layer rollup providers can send Binary Objects (BLOBs) to the Ethereum main chain. Blobs are much cheaper to send than rollups, so transaction fees are expected to drop when full danksharding is released.

The full upgrade to danksharding is expected to allow Ethereum to scale up to more than 100,000 transactions per second and be cheaper, both of which will contribute to its greenness.

Future upgrades will address issues regarding:

• Censorship resistance
• Decentralization
• Protocol risks from Maximal Extractable Value
• Block verification
• Computational costs

Note

Maximal Extractable Value (MEV) is the maximum amount of value a validator or miner can get from a block in excess of the block reward and usual fees.

The fewer costs the blockchain has, and the more decentralized it becomes, the more efficient it will be. However, there are concerns whether decentralized applications built on Ethereum will consume more energy. Ethereum has positioned itself as the platform of choice for Web3 development.

Web3 is a concept of restructuring the backend of the internet, where control of people’s information, data, and digital creations are returned to them. Many steps must be taken and hurdles overcome before blockchain technology can be used to create the new internet infrastructure conceived by developers.

If Ethereum is the platform used to create applications for this emerging and in-development restructuring, its eco-friendlier network might not be as environmentally friendly. However, it could be even more so—there is no way to tell.

Does Ethereum Use Energy?

Yes. It is a blockchain, a distributed ledger secured by cryptography, which requires energy to run and use.

Is Ethereum Environmentally Friendly?

Ethereum’s carbon footprint is much less than before September 2022 but it still uses energy. Nearly half of its network is located in developed areas that use sustainable energy sources. About 30% of the remaining half is powered by natural gas, 10% by coal, and 3% by oil.

How Much Energy Did Ethereum Use Before the Merge?

According to data from the University of Cambridge’s Sustainability Index, Ethereum used about 21.41 THh of electricity per year and released 10.26 million tons of carbon dioxide.

The Bottom Line

For Ethereum, the evolution to a better-performing, more accessible network has begun. Continued updates promise to cut back on emissions and make the network more energy-efficient while improving speeds and cutting transaction costs. However, Ethereum has much ground to cover to get to the levels of efficiency it wants, both in speed and environmental friendliness.

Read the original article on Investopedia.