On September 15th at exactly 4:43PM AEST, block height 15537394, Ethereum transitioned from the Proof of Work (PoW) consensus algorithm to Proof of Stake (PoS), much to the delight of the tens of thousands of people watching live across various viewing parties. This momentous occasion is known as “The Merge”, and has resulted in Ethereum’s security mechanism shifting from using energy to secure and maintain the network, to a mechanism that requires staking ETH as collateral instead.
This event marks a major milestone in the history of blockchain technology, second only to the Bitcoin and Ethereum networks going live. The merge has also been a crucial factor in MIT listing Ethereum as the sixth most innovative technology in 2022.
From an Ethereum end-user point of view, there is no noticeable change to the platform, as everything changes in the backend, or “under the hood”. The upgrade can be thought of as the equivalent of a vehicle having its petrol engine swapped out for an electric one, with the swap occuring instantly once a certain mileage has been reached on the odometer, all while the car is still moving! But the driver doesn’t notice the engine change, they simply continue to drive the vehicle as they did before.
One of the biggest benefits of this change in consensus mechanism is that Ethereum now becomes a much more environmentally sustainable network. Before the merge, Ethereum was consuming approximately 0.2% of the world’s energy, a figure that according to the analysis published by the Crypto Carbon Ratings Institute (CCRI), is now reduced by 99.98% with the transition to Proof of Stake. This dramatic reduction has reduced Ethereum’s total carbon dioxide emissions by 99.99%, and the network’s climate pollution drops from roughly 11 millions tons of CO2 emissions a year to approximately 870 tonnes, which CCRI says is slightly less than the amount of energy 100 homes in the US would use in a year.
This is important, because energy usage is constantly brought up as one of the biggest impediments for the adoption of blockchain and Web3 technology by companies and end-users. With the most widely used blockchain-based application platform reducing its energy consumption by almost 100%, it allows many of these conversations to be revisited, with businesses and users now able to re-evaluate the unique benefits Web3 technology brings without the negative drawback of energy consumption. The successful launch of the merge also acts as a catalyst for other Proof of Work based blockchains to see the success of the transition, and evaluate if they can look to implement a similar, more environmentally sustainable path for the future.
In addition to the dramatic reduction in energy usage, perhaps one of the greatest achievements of this upgrade is that something so complex and ambitious was able to be implemented globally to all users in an instant, with zero downtime, completely outside the bounds of centralizing forces such as governments or corporations, and without a single person or CEO in charge of the process. This is something that has never been done before at a scale such as this, and just goes to show what a global decentralized community of builders, researchers and users are capable of achieving when they all work together.
The transition to Proof of Stake is the first of many steps in Ethereum’s journey towards becoming a decentralized application platform scalable to billions of users around the world. The next steps for the network include “sharding”, a method for increasing the throughput of the network while reducing transaction fees, without sacrificing on the important properties that blockchain technology offers, such as network security or censorship resistance.
Author: Harry Papacharissiou, Chainlink Labs and Blockchain Australia Board Member.