What is Ethereum Merge?
Ethereum’s Merge is one of the largest and most complex upgrades to any cryptocurrency network in history. It took place on September 2022, meaning that March 2023 marks the first six months of its successful execution and that we can now have some insight into longer-term data on how the network’s energy usage has changed.
So, what exactly happened?
Namely, the Proof of Work consensus mechanism Ethash has been replaced by a Proof of Stake mechanism. So, after the Merge, instead of miners using computational power to solve puzzles and secure the network, Ethereum is now relying on validators who have locked their funds for a specific period of time and are verifying and proposing new blocks.
But the switch wasn’t as easy as it may sound.
On the contrary, it had different layers of complexity.
First, the Merge should not interrupt the operations of the network and is designed for a seamless switch between the consensus mechanisms. Second, the network is designed for resilience against individual node failure. Therefore, several teams work on different implementations of the respective clients. In case a single type of node fails due to any reason, the functionality of the network is not at stake, as the remainder of the nodes is able to establish and keep consensus. However, this increases the complexity of testing and verifying any correct functionality.
For those who are late to this discussion, here’s a reminder of the most important reasons for switching to PoS:
- Lower barriers of entry;
- Reduced issuance of new ether;
- Reduced electricity consumption and carbon footprint.
As a result of the Merge, the overall cost of securing the network has decreased.
But not only that.
Even the most skeptical towards PoS dropped their jaws over the recent data regarding its energy efficiency.
Environmental Sustainability of Ethereum
There’s a very simple explanation for why the Merge had such a positive effect on energy efficiency – the computational power was replaced by network participants’ stake.
So, six months after the Merge we finally have some relevant data to look back on.
Namely, the research conducted by a German-based Crypto Carbon Ratings Institute showed that the Merge reduced the electricity consumption and carbon footprint of the Ethereum network by over 99.988% and 99.992%, respectively.
Given the complexity of the Ethereum Proof of Stake network, multiple consensus and execution clients exist. CCRI’s measurements covered 95.54 % of all clients and provided an estimate for the number of nodes in the network.
Let’s compare the pre-Merge and post-Merge numbers.
|Electricity consumption [MWh/year]
|CO2e emissions [t/year]
Why is this such a big deal?
Because Ethereum is the largest platform that supports smart contracts in terms of market capitalization. Therefore, its sustainability performance has a huge impact on the overall energy consumption, whereas, if it proves to be efficient, this Merge could bring revolutionary changes in the crypto industry.
Either way, the numbers are impressive and are putting Ethereum in a similar range with other Proof of Stake networks.
One of the key variables that miners can influence is the price paid for the electricity for their operations; selecting locations with high availability of electricity as well as cheap rates can make or break a business and are therefore a well-kept secret. Miners have no interest in sharing their location or their electricity prices, as this only would attract competition.
Finally, we’ll mention another comparison from this research.
Namely, in September 2022, Bitcoin miners received around $19.1 million in the last 24 hours as a mining reward whereas Ethereum miners received about $22.2 million.
For those interested to find out more about the approach in this research, you can read the full paper “The Merge – Implications on the Environmental Sustainability of Ethereum” on the CCRI official website.