As various renowned tech-heads such as Elon Musk and Bill Gates express concerns regarding the power-hungry cryptocurrency, and countries such as China, Iran, and Thailand ban and restrict Bitcoin mining, there is a dire need to convert to greener mining cryptocurrencies. Continue reading →
Bitcoin mining has often been accused of exploiting the world’s energy resources for an unfair advantage. As various renowned tech-heads such as Elon Musk and Bill Gates express concerns regarding the power-hungry cryptocurrency, and countries such as China, Iran, and Thailand ban and restrict Bitcoin mining, there is a dire need to convert to greener mining cryptocurrencies.
After Bitcoin, Ethereum (which is the blockchain) and its cryptocurrency Ether is the largest and most popular cryptocurrency to dominate the market. With Bitcoin’s notoriety increasing due to its horrific energy consumption, Ethereum had no choice but to think quickly and adopt a more sustainable approach to sustain itself. Thus, in this blog, we will be analyzing whether Ethereum mining is greener than Bitcoin or not.
To put things into perspective, if Bitcoin were a country, it would rank in the top 30 most power-consuming countries of the world. At 87.3 TWh annually, Bitcoin consumes more energy than many leading countries of the world such as Finland (which consumes 84.2 TWh annually) and Belgium (which consumes 82.05 TWh annually).
To validate one Bitcoin transaction, 1702.85 kWh of electricity is required, which would be sufficient in powering the average US house for about 58.37 days.
Thus, Bitcoin has had a devastating effect on the environment by devouring a hefty chunk of the world’s nonrenewable resources in its short existence. The carbon footprint a single Bitcoin transaction leaves behind is approximately 549.74 kg of CO2. Therefore if the trajectory prevails, Bitcoin alone has the potential to increase the earth’s core temperature by 2 degrees due to global warming.
The first aspect to be taken into consideration is that while Bitcoin is assumed to be running on an average of $0.05 kWh, Ethereum miners are paying an average of $0.10 kWh. The difference is due to Ethereum being run on Ethash. Ethash is an algorithm, which is resistant to application-specific integrated circuit (ASIC) chips, a technology that is prevalent in the Bitcoin network.
Compared to Bitcoin, if Ethereum was a country, it would be ranked as the 46th most power-consuming country in the world, devouring 63.39 TW/h per year. Thus, making Ethereum more power-hungry than Switzerland (which consumes 63.3 TWh annually) and Israel (which consumes 60.5 TWh annually).
Moreover, a single Ethereum transaction requires 144.7 kWh of electricity, which is equivalent to how much power is consumed by the average US household in 4.89 days. Additionally, the carbon footprint of a single transaction of Ethereum is 68.73 kg of CO2, which is equivalent to 152,329 VISA transactions.
Hence, it can be deduced by the statistics provided above that Ethereum mining is much greener than Bitcoin. However, we should further analyze the working of Ethereum to comprehend what it is doing differently than Bitcoin.
Observing the fate of Bitcoin, Ethereum had to think fast to find a greener solution to cryptocurrency. Otherwise, the crackdowns we are witnessing for Bitcoin mining will soon be conducted against Ethereum mining. Therefore, Ethereum founders are working on shifting Ethereum mining to a more energy-efficient solution.
By overhauling the Ethereum blockchain code, the newer version will be far more efficient than Bitcoin in regards to data storage, value distribution automation, and decision support. Officially named Ethereum 2.0, this upgraded version of Ethereum is not only efficient in terms of transactions but is cost-efficient as well, aiming to reduce the energy requirement by 99.95%.
While Bitcoin uses the Proof-of-Work (PoW) model, Ethereum will shift to the Proof-of-Stake (PoS) model, which will replace power-consuming mining with staking. The PoS model has been divided into 3 stages:
Out of these three, the first stage, The Beacon Chain, is already in full effect, which has allowed a conservative statistical analysis to take place.
Contrary to PoW, PoS does not require power-hungry computers to process transactions to earn newly mined cryptocurrency. The validators, who were formerly known as miners under PoW, will have to offer a stake as collateral. For solving the algorithm and processing the transaction, the stakers are rewarded with Ether, which is treated as a passive income.
According to an estimated statistical analysis performed by the Digiconomist, while Bitcoin consumed almost 14 Gigawatt of power at the beginning of 2021, Ethereum under PoW consumed almost 5.13 Gigawatt of power in the same timeline. Whereas, it is estimated that Ethereum under PoS would consume 0.00262 Gigawatt of Power.
Thus, it can be observed from the conservative estimations above that PoS is approximately 2000 times more energy and resource-efficient than PoW. Hence, Ethereum under this upgraded model will be able to decrease total energy consumption by 99.95%.
According to the Ethereum Foundation, if we translate this data into per transaction figures, we will receive 35 Wh under Ethereum 2.0’s PoS model, which is equivalent to 20 minutes of TV. On the other hand, Ethereum under PoW consumes energy that can be used to run an average US household for 2.8 days per transaction. PoS’s efficiency against Bitcoin is prominent and shows the game-changing potential.
From the above literature, it can be confidently said that Ethereum mining is far greener than Bitcoin mining. If the minds behind Ethereum manage to reduce power consumption by 99.95% with the emergence of the PoS model, then it will revolutionize the face of cryptocurrency and the finance industry for a more sustainable, greener, and eco-friendly future.
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