On the morning of September 14, 2022, the largest upgrade in Ethereum’s nine-year history went into effect. The upgrade, known as The Merge, changed Ethereum from a Proof of Work system to a Proof of Stake system. That removed cryptocurrency miners and, as a result, may reduce network electricity consumption by 99.95%.
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Will The Merge change Web3 forever?
An upgrade just made Ethereum run on 99.95% less energy than before. What will that mean for the future?
That’s a lot to take in, so let’s break it down. Cryptocurrency mining might be familiar. Miners, known as validators, secure the blockchain by solving puzzles, thus earning a reward in the form of cryptocurrency. But here’s the problem: The computers used to do the mining take an incredible amount of power to operate.
Thirteen years ago, when cryptocurrency was in its infancy, you could mine crypto (at the time, basically worthless) from a home computer with a few seconds’ worth of energy. Today, cryptocurrency mining is its own industry. Companies build extremely powerful computers, which, on average, can use nine years worth of electricity to mine one coin.
On the miner side of things, only the validator who solved the cryptographic puzzle first got the reward. The energy of all other miners was wasted. Not very efficient. Here’s how that played out for Ethereum: Before the upgrade took place, the total network consumed at least $11 billion worth of electricity annually.
But the new system, Proof of Stake, doesn’t use miners. The network is still secured by validators, but instead of multiple validators burning energy by racing to solve a puzzle, trusted validators who stake cryptocurrency as collateral are chosen via a sort of lottery system. Whoever is chosen in that lottery is the one who gets to add a block of transactions to the blockchain, and then earns the reward. No other energy is used — running the energy bill way, way down.
To put the energy savings in perspective: If we imagine that Ethereum used as much power as the state of Texas, then The Merge would make it so the state could be powered with the same amount of energy as the 45,000-person city of Rockwall.
By the Ethereum network shifting from a Proof of Work system to a Proof of Stake system, and saving a ton of energy in the process, the conversation about Ethereum’s network has shifted to how this will make Web3 more sustainable, secure, and scalable. More specifically, the lower energy buy-in means the network can accommodate more users and more applications. Plus, the more users on the network staking Ether to add a block of transactions to the blockchain, the harder it is for a bad actor to overwhelm and attack the network.
That sounds like a massive overhaul — and it is — but what makes it so exciting is that the change happened without ever halting Ethereum operations. The Merge revealed a redesigned network that sustainably supports new apps, more users, and more Web3 possibilities than we’ve seen before, made possible by companies like ConsenSys. And it’s just getting started.