A radical update last week to the Ethereum cryptocurrency was supposed to reduce energy consumption by 99 per cent, but the savings have so far failed to materialise as miners evicted from the network flock to other currencies. Estimates suggest that at least 50 per cent of energy hungry mining hardware formerly running Ethereum has now been put to use mining other coins.
In a long-awaited and much-delayed update called the Merge, Ethereum shifted from a proof of work (PoW) model – where vast amounts of computer power were devoted to “mining” new coins and verifying transactions – to a proof of stake model. Under the new system, instead of using computer hardware to mine new currency to get a reward, validators lodge money with the network to gain the right to validate transactions and get rewarded.
The move was in part a reaction to a major criticism levelled at cryptocurrencies: their vast energy consumption. By some estimates Ethereum was drawing about 83 terrawatt-hours (TWh) per year before the Merge, about as much as all of Chile’s electricity use, while bitcoin uses about 96 TWh per year, a little less than Pakistan.
Advertisement
In theory, the vast majority of Ethereum’s energy consumption has now dropped away, and the largest mining group, Ethermine, announced that it would . But large numbers of disgruntled miners who are left with hugely expensive, specialised hardware and no source of income have decided to continue harvesting other coins.
The hashrate of the Ergo cryptocurrency – a measure of the computer power devoted to mining – was tracking below 30 terahashes per second at the start of the month, but rose to a on 16 September in the days after the Merge. The hashrate of Ethereum Classic – an offshoot of Ethereum dating back to 2015 that retains proof of work – rose from 46 terahashes per second at the start of the month to a peak of 309 terahashes per second on 15 September. For Ravencoin, the hashrate rose from less than 5 terahashes per second at the start of the month to 24 terahashes per second on 17 September.
These cryptocurrencies also saw a spike in price as new miners joined the networks, which in turn created an increased incentive for others to join. But a large group of miners also chose to create an entirely new project that . This “EthereumPoW” network saw its hashrate jump from zero to 80 terahashes per second on 15 September. The group behind the project didn’t respond to a request for comment.
Those jumps together make up a significant portion of the mining power that left the Ethereum network at the point of the Merge. Ethereum had been operating at prior to the update. There are likely to be many other coins that claimed smaller portions of that mining market share.
Tim Beiko at the Ethereum Foundation, which acts as an oversight organisation for the network and can to some extent steer its development, says the Merge could lead to a boost for other cryptocurrencies, but it wouldn’t last. “Unless these networks capitalise on the new attention to build something, it’s hard to see why the price, and hence value of the daily mining rewards, would stay high,” he says. “My gut feeling is very much that the extra hashrate migrating to other networks is a temporary phenomenon.”
, founder of blockchain company Aventus, says at least 50 per cent of mining hardware previously deployed on Ethereum has already moved on to other networks, but also thinks this is a temporary shift. “If at any point there’s significant divergence in what the miners believe to be the right course of action, one of these forks can happen. So it’s happened before and I think it’ll happen again,” he says. “The question is: are they going to be able to sustain the same hashrate as Ethereum was able to sustain, and I believe the answer to that question is no. I believe it’ll die down because there isn’t the economics to support it.”
There are already signs that smaller miners have been pushed out of the industry by the arrival of bigger players. One former Ethereum miner, Trane Francks, says he switched to mining other currencies prior to the Merge, but that the influx of larger mining outfits has already made them unprofitable targets. “The network difficulty has escalated dramatically with Ethereum Classic such that earning potential has plummeted,” he says. “Currently, based on my electricity costs in Tokyo, it is not profitable to mine.”
Another miner who goes by the name Spookey told 91av: “Given the current chaos in mining, I have decided to shut down my miners as it is not worth it any more.”
