Ethereum Energy Consumption
On the 15th of September, Ethereum replaced its Proof-of-Work (PoW) protocol, with an alternative known as Proof-of-Stake (PoS), which is a more energy-efficient and sustainable alternative. As a result of this change, the energy consumption of the Ethereum blockchain has dramatically decreased compared to alternative schemes still using PoW, such as Bitcoin, as indicated by the Annual Total Energy Consumption index, estimating a total of 0.01 TWh in a year for Ethereum. In contrast, the Annual Energy consumption for Bitcoin soars to 240 TWh.
This vast difference can be understood by considering the mechanism behind the PoW protocol, which requires a network of energy-intensive mining devices competing with each other to create the next block for the underlying blockchain. In PoS, the block creation process is instead controlled by the stakers’ wealth; coins are locked as collateral in the staking process, from which a staker is then randomly selected for the creation of the next block, regardless of the power of the underlying device the staker uses. contrary, the PoW protocol, which made the computational power of the underlying device directly important to yielding greater rewards.?
Before the Ethereum Merge, when Ethereum blockchain operated on the PoW protocol, its annual energy consumption was of the same order of magnitude to that of Bitcoin, at 112 TWh. The nearly double size of Bitcoin’s energy consumption can be attributed to the volume of Bitcoin transactions compared to those of Ethereum rather on their underlying structures, since both are blockchain-based and, up to September, operating on the same protocol. In general, blockchain technology can consume more energy compared to centralized alternatives due to their very structure.
Blockchains are distributed ledgers where data and processes are replicated across many different nodes in the network, introducing data redundancy, which is how decentralization is achieved on a blockchain. Since each node in a blockchain network consumes energy, however, it becomes evident that it is not the most energy-efficient structure compared to centralized alternatives.
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However, even with the PoW protocol, blockchain platforms do not generally consume a lot more energy compared to other centralized platforms such as Youtube, which tops at 244 TWh per year, consuming almost as much energy as gold mining (240 TWh per year). By introducing PoS on Ethereum, it is important to note that its annual energy consumption drops an order of magnitude below that of centralized paying systems such as Paypal (0.26 TWh). Although this difference is significant, the decentralized structure does affect energy efficiency, as can be seen by comparing the energy per transaction of PoS Ethereum (1.38 Wh per transaction minimum and 25.91 Wh per transaction on average) to a centralized institution such as Mastercard (0.7 Wh per transaction).
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