The 15th of September was a big day for the crypto industry, which saw arguably the biggest change to this blockchain-based world. Called ‘The Merge’, it was a significant change in, well, the business model, for Ethereum, which is still stable and hasn’t collapsed.
Ethereum is one of the biggest cryptocurrencies, second in size to Bitcoin, and it has fundamentally changed how it uses the blockchain to register changes and create value.
Instead of using the very energy-intensive process known as proof-of-work, Ethereum has shifted to what is called proof-of-stake. It claims to be 99% more energy efficient. Among the many problems with cryptocurrency, this unforgivable use of energy – often calculated in terms of an entire country’s electricity usage – is arguably the worst, especially from an environmental perspective.
This is the principal reason I have been such a sceptic about crypto – apart from its dangerous lack of regulation and how many, many people have lost their life savings.
This shift – known as ‘the merge’ – has been years in the making and testing. It finally happened last week, and a week later, nothing has broken. Yet.
The proof is in the staking
It marks an important growing up for the crypto and blockchain industry – which has been defined for the last few years by increasingly powerful computers that fight it out to solve advanced mathematical problems. Such rigs have themselves become hugely expensive and companies (especially in China and Russia) have created big server farms in the ongoing scrabble to mine Bitcoin.
So much so, that mining for Bitcoin has become institutionalised, as it were.
In the beginning, it seemed impressive that Bitcoin mining consumed as much energy as a country – in the same deluded way we all thought similar comparisons for Facebook users was quaint, as opposed to dangerous.
But as time progressed, we all realised how much energy was being, literally, wasted in this mindless pursuit of a harder-and-harder to achieve goal. All at the expense of the planet, as that country-sized block of energy was mostly produced from fossil fuels. The world has enough challenges, it doesn’t need an artificially created land grab that uses as much electricity as Portugal without feeding tens of millions of living, breathing people or keeping them warm.
Crypto mining is indefensible in this climate-conscious age, where record temperatures were reached in Europe. I was in London for its hottest-ever day of 41 degrees Celsius in July and spent some time in those heatwaves in Greece and the UK. Climate change is for real, no sceptic can disavow the impact of rising global temperatures and their impact on our lives.
That is why the merge’s move to the less-ecosystem-damaging proof-of-stake methodology is much better for the planet and for the crypto ecosystem in general.
This merge will not be the last time we speak about this shift, but that it has happened is itself significant. It took eight years, much debate, and many tests to pull off what someone described as changing the engine of a spacecraft while it was flying. That is perhaps the second most remarkable aspect of the merge, even if it was the most technically difficult thing to happen to crypto since the blockchain itself was invented.
The most significant, and the most heartening aspect, is that Ethereum’s co-founder Vitalik Buterin and its distributed leadership realised they had to change to stop the insane energy use. Making that decision and following through with it shows that the crypto ecosystem can evolve beyond Satoshi Nakamoto 1.0 to something more useful, and less damaging to the environment.
This article first appeared in the Financial Mail.
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