Late 2020 saw the initial stage Ethereum 2.0 release aiming to solve its scalability issues, making it more sustainable and secure. By doing so, — arguably one of the biggest blockchains — will be made more mainstream and enable mass adoption of the entire space.
Could it perhaps overtake Bitcoin as the most dominant platform and cryptocurrency with the highest liquidity? Only time will tell.
One of the problems this massive code overhaul is aiming to solve is the blockchain ecosystem’s impact on the environment and greenhouse gas emissions.
“Will Ethereum 2.0 be a more environmentally friendly platform?’ is a question yet to be answered, and the solution may not be a clear-cut one.
Nevertheless, put in the context of examining whether human-made technology can help stall the environment’s decay, there is a lot to be discussed.
So, let’s see what effects we can expect from the new Ethereum upgrade.
No More Proof of Work, Moving on to Proof of Stake
In order to make Ethereum better for the environment, this blockchain is looking to cut down power consumption and its impact. Hence the shift to a completely new transaction validation and recording process with Ethereum 2.0 — Proof of Stake called Casper.
Early blockchain implementations, including both Ethereum and Blockchain, were — and largely still are — notoriously affected by performance issues like high transaction costs and long periods of delivery — caused by network congestion.
This is due to their reliance on a processing-power-intensive validation method known as Proof of Work.
In DeFi, there is no single entity responsible for ascertaining the truth of any given information contributed to the blockchain, this is done via a consensus of autonomous authoritative participants.
Unlike Ethereum 2.0 blockchain Proof of Stake, the Proof of Work consensus mechanism requires the computer nodes that are participating in the blockchain to compete to generate cryptographic hashes — essentially solving a puzzle — to verify new information being introduced and recorded to the blockchain.
Another word for this process is crypto mining as participants are rewarded with blockchain’s native coins for their efforts.
Hash generation is an extremely complex process as determined by the network to secure the infrastructure from external attacks, as well as prevent spending a cryptocurrency more than once.
While both Proof of Work and Ethereum 2.0 Proof of Stake tackle the double-spending issue of digital assets, the old consensus mechanism does it by making it too costly for anyone to try to add incorrect hashes or malicious blocks to the chain.
And while this approach has kept the Ethereum blockchain secure so far, it has also been very inefficient by design — especially in terms of computational power and energy consumption.
With a large number of powerful computers — thousands and thousands of them — are involved in the process of maintaining a platform as robust as Ethereum, massive amounts of electrical energy are consumed in the process.
Additionally, as time goes on, the difficulty for generating these hashes continues to get harder as well, consuming even more power per block validated. But, new Ethereum 2.0 features solve this problem.
Ethereum Energy Consumption Is Sky-High
Let’s put this into perspective.
Since Ethereum has yet to fully transition to the new consensus mechanism, it’s still consuming more energy than entire countries.
According to Digiconomist, if the Ethereum blockchain was a country, it would take 74th place based on its energy consumption — with 18.9 TWh/year, which is comparable to Lebanon.
Moreover, when compared to other payment systems, like VISA, the amount of energy consumed by the Ethereum blockchain could power 1,750,266 households in the US.
And finally, a single transaction on Ethereum could power 1.41 US households for a full day, while Bitcoin is even worse being able to power 22.47 households per transaction.
So, where is all this energy going to, and how does Ethereum use Proof of Stake to reduce the greenhouse gas output?
Casper Completely Changes Things
With the Proof of Work mechanism, solving the computational puzzle first is like winning the lottery. However, miners increase their chances by adding computing power, which then requires more energy.
Switching to a completely new consensus mechanism means that a blockchain no longer needs miners to offer their proof of work first in order to validate the transaction on the network.
The Ethereum 2.0 staking mechanism allows all those network participants who have deposited 32 ETH and meet the necessary technical requirements to become validators.
Then the algorithm chooses a validation node to verify the transaction by performing cryptographic work with a considerably lower level of complexity than with the Proof of Work.
Not only does this approach offer massive output gains for the entire network, making the native currency more performant and cost-effective, but it also reduces the amount of energy required to perform the validation cycle.
In that sense, the Ethereum 2.0 Proof of Stake mechanism offers massive benefits to blockchain participants on a global scale.
“The PoW part is the one that’s consuming these huge amounts of electricity. The blockchain transactions themselves are not super computationally intensive. It’s just verifying digital signatures. It’s not some kind of heavy 3D-matrix map or machine learning on gigabytes of data.”
Ethereum 2.0 would certainly decrease part of the backlash the blockchain space as a whole has received in the past due to its “contribution” to the pollution of the planet.
With less time needed to perform a validation operation and via a less power-consuming process, Ethereum will be one of the very few blockchains that will seriously be tackling the environmental issue instead of contributing.
EOS and several other small blockchains are already going in the same direction as Ethereum 2.0 by having less power-consuming validation processes in place with the Proof of Stake mechanism implemented.
As an environmentally friendly company in the blockchain industry, AIKON is focused on being part of the solution instead of the problem. This is partially the reason why their identity management solutions ORE ID, ORE Protocol, and ORE Vault are hosted on EOS — a Proof of Stake based blockchain.
Nevertheless, having more blockchains making an effort to solve this crucial issue is a step in the right direction, and we are looking forward to seeing a more sustainable blockchain ecosystem.