After years of anticipation, the cryptocurrency ethereum finally implemented a major network upgrade that completely changes how the blockchain verifies transactions, mints new coins and secures its network. Called proof-of-stake, this system has reduced ethereum’s energy consumption by more than 99%.
Energy usage has been one of the cryptocurrency industry’s biggest targets for critique. But it’s not likely that bitcoin will follow suit.
Instead, the bitcoin network is sticking with a system called proof-of-work, in which highly specialized computers try to guess a winning number that serves to validate transactions and create new coins. This is what’s known as mining.
At the moment, guessing a winning number takes over one hundred sextillion tries. All of this work helps to secure the network by making it nearly impossible for bad actors to accrue enough computing power to take control. But recent research also shows that in 2020, mining Bitcoin consumed 75.4 terawatt hours of electricity, more than all of Austria or Portugal.
This is the system formerly used by ethereum. But now the network has swapped out miners for validators. Instead of playing a massive computational guessing game, validators are assigned to verify new transactions, and earn ether as a reward for doing so.
To ensure that these validators act honestly, they essentially have to make a security deposit by staking a certain amount of ether coins into the network. If a validator tries to attack the network, they’ll lose their stake. Ethereum proponents say this penalty will make the network more secure, while bitcoin enthusiasts see proof-of-work as the more secure, tried and true approach.
However, the optics of bitcoin’s energy use in the midst of the global climate crisis has become a problem for the network. In response, some major bitcoin miners are starting to seek out renewable energy to power their data centers and trying to change the narrative by touting bitcoin’s energy use as an asset, as it helps drive investment into the nation’s aging electrical grid.