Crypto

The foundation of “Web3” could use 99.95% less energy in 2022

Ethereum's move to proof-of-stake was supposed to happen this year, but got pushed back to next year.
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4 min read

If you’ve spent any time online in 2021, chances are you’ve heard the term “Web3” tossed around with increasing frequency.

That’s because there’s a fast-growing movement to build the next iteration of the internet—hence “Web3”—based (mostly) on the Ethereum blockchain. Enthusiasts say Web3 will usher in a new internet era where individual people can have more control over their data and experience and corporations could have less power. And while skepticism of Web3, and crypto more broadly, comes in many forms, one of the biggest criticisms is around its environmental footprint.

But, at least for Ethereum–based projects, that could soon change.

Currently, the annual carbon footprint of Ethereum transactions is comparable to the entire country of Norway, but a planned update could result in about 99.95% less energy consumption, according to the Ethereum Foundation. The change—which is tied to a fundamental part of the blockchain’s security–was supposed to take place this year, but in early December it was pushed to 2022.

How it works: Ethereum is decentralized, meaning that unlike a bank or other financial institution there is no one entity overseeing transactions. Instead, every computer within the network must agree on the record of transactions in order to keep the system secure. To achieve this, blockchains use a consensus mechanism.

Like bitcoin before it, Ethereum 1.0 was founded on a consensus mechanism called proof-of-work (PoW).

PoW requires that individual computers within the network solve extremely complex math problems to create a new “block” and validate the transactions within it. The owner of the computer is rewarded in crypto for participating. This process is called “mining,” and it is energy-intensive by design—the need to use a large and costly amount of computing power deters individuals from tampering with the blockchain.

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Proof-of-stake (PoS) is a different method to maintain consensus and the integrity of Ethereum.

With PoS, rather than contributing their computing power to performing complicated calculations, validators put up a portion of their own cryptocurrency tokens, creating an individual “stake” in keeping the ledger accurate. The penalty of losing those tokens if they try to mess with Ethereum’s security replaces the massive energy use as a deterrent, and thereby protects the system without generating as much greenhouse gas emissions.

What’s next: The transition to Ethereum 2.0 has been in the works for years. Ethereum inventor Vitalik Buterin has been pushing for the switch since 2015.

Buterin initially expected it would take about one year to implement PoS, but it’s more complex than a PoW model and transitioning the world’s largest smart-contract network to a new consensus mechanism while maintaining its stability is incredibly difficult.

This upgrade will change the Ethereum infrastructure and make the energy-intensive mining process obsolete.

The ability to stake ETH is already live and so far more than 270,000 users have staked at least the minimum 32 ETH (about $123,000 as of Dec. 20) each to become validators in the chain.

Ethereum’s protocol developers launched an update to the network earlier this month, but the “difficulty bomb”—an exponential increase in the difficulty of PoW calculations meant to slow or freeze mining and incentives the transition to PoS—was pushed back to June 2022.

The change will make Ethereum a more eco-friendly option than bitcoin and help address one of the biggest critiques leveled at crypto optimists.

“I’m definitely very happy that one of the biggest problems of blockchain will go away when proof of stake is complete,” Buterin told Fortune in May.

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