Cryptocurrencies like Ethereum and Bitcoin are often put side to side with each other. Since they are both considered trailblazers of cryptocurrency, people never get tired of their comparisons. This has led to a big question: “Ethereum vs Bitcoin: which one is greener?” This is a valid question considering the number of environmental problems that activities in cryptocurrencies cause. We can acknowledge the spectacular features of a network, but how safe is it for the environment? Which network is less harmful? In this article, we will be answering these questions and many more.
Proof of Work
We cannot discuss the environmental effects of Bitcoin or Ethereum without mentioning their mechanisms. The consensus mechanisms of either cryptocurrency account for the maintenance of the network, validation of transactions, and the amount of energy expended in performing these functions. The two primary consensus mechanisms include the Proof of Work (PoW) and the Proof of Stake (PoS).
Bitcoin is currently operating on the PoW consensus mechanism, while Ethereum is running on the PoS consensus mechanism. However, Ethereum recently made a switch from the PoW to the PoS consensus mechanism. Don’t worry, we will discuss that soon.
Now let’s get into Proof of Work and how it works. Proof of Work involves two parties: Party A and Party B. Party A has to prove to Party B that they have performed a considerable amount of work. Party A, of course, performs a great deal of work which they have to prove. Party B, on the other hand, performs very little work. Party A represents the nodes that perform the required work. While Party B represents the network that will examine the work. What do nodes and networks have anything to do with the security or validation of transactions? Firstly, you need to understand that Bitcoin is built on the blockchain. The blockchain is a decentralized network, meaning that it lacks a single authority. It is maintained by users on the network making it very difficult to hack. The users on the network who are responsible for Proof of Work are represented by nodes.
Now let’s get into the work that these nodes are proving. In PoW, a process known as Bitcoin mining is performed. Bitcoin mining is simply generating new Bitcoin. When the coins are generated, miners get rewards as well. However, there is a catch. To receive rewards, a node has to guess the solution to a puzzle. The name of this puzzle is called the hash puzzle. Different nodes compete to get the solution to this mathematical puzzle. The miner responsible for the node that first solves the puzzle gets rewarded with Bitcoin. Hashing in this context helps to validate transactions and put new Bitcoin into circulation.
A good note to take from this is that Proof of Work is highly energy intensive. It is not so eco-friendly as the by-products of the operation include harmful gas emissions into the environment.
Is Ethereum mining going away?
The short answer is yes. The reason for this is that Ethereum now uses a far less energy-intensive consensus mechanism known as Proof of Stake. However, it has not always been like that. Not until September 15, 2022, Ethereum used the PoW consensus mechanism. The merge entails the shift from the PoW to the PoS consensus mechanism. This is only just a step ahead in preparation for the launch of Ethereum 2.0. Ethereum mining has now been replaced by a process called staking, where users on the platform validate transactions. But instead of doing so with high-powered computers, they are doing this by storing their coins on the network.
Proof of Stake
Proof of Stake is a consensus mechanism on the blockchain that validates transactions through the random selection of validators. Just like PoW, PoS also involves two parties: Validators and the network. Users on the platform involved in validation transactions perform an act called staking. Staking is the process of locking your coins to validate transactions and ensure the network’s security. In return, validators will earn rewards through interest from their initial staked coins. When users stake their coins, a validator will be chosen at random. This validator’s contribution will then be used to validate transactions on the network.
The rule of thumb governing staking is that the higher the amount you stake, the higher your rewards. This is so because staking rewards are measured on a percentage basis. Your staking amount is the amount of effort used to validate transactions. Hence, the rewards are given accordingly. Proof of stake also improves the network in terms of speed and scalability. Since there is not much equipment needed, transactions are quickly processed. This is another reason why Proof of stake is greener and environmentally friendly.
From this analysis, we can point out the major differences between Proof of Work and Proof of Stake. For one, it is obvious that PoS uses a lot less energy than PoW. We can say that PoS is greener than the PoW consensus mechanism. Other differences are seen in the forms in which rewards are received by miners and validators. Also, the requirements for being a miner and for being a validator are completely different. Miners need energy and equipment to perform operations, while validators only need to stake their coins.
How much energy does ETH use?
According to the Crypto Carbon Ratings Institute (CCRI), Ethereum burns a whopping twenty-three (23) million Megawatt-hours of energy and emits about eleven (11) million Tons of carbon yearly. Due to The Merge, it is estimated that Ethereum would be using just 2,600 Megawatt-hours yearly, which is a massive drop of 99.988% and will reduce Ethereum’s total carbon emissions to about 870 Tons which is a 99.992% reduction.
To visualize just how massive this change is, imagine the Burj Khalifa shrinking to the size of a traffic cone. In the history of tech, this is regarded as the biggest decarbonization, and regulatory bodies have highly applauded it. However, there are certain uncertainties, as some former Ethereum miners have reportedly moved to other networks to continue mining. Also, before The Merge, EthereumPoW (ETHW) was forked from the Mainnet, and former Ethereum Mainnet miners have expressed their desire to continue earning from there.
While it is still unsure how this will play out, one thing is sure; the Ethereum mainnet network has successfully shed the load of heavy energy consumption.
How much energy does Bitcoin use?
It is estimated that Bitcoin consumes about 200 Terawatt-hours of energy yearly— roughly the total energy consumption of Argentina. In addition, it emits about 100 Megatons of carbon and generates about 32,000 Tons of electrical waste from outdated hardware annually. These figures make Bitcoin the highest energy-consuming cryptocurrency due to its bulky and operations-heavy Proof-of-Work (PoW) system.
Aside from Bitcoin, other cryptocurrencies that still use the Proof-of-Work system bear the burden of high energy consumption and carbon emissions, which have been frowned upon and created the notion of cryptocurrency being the climate’s enemy.
Is Ethereum 2.0 more energy efficient?
With all the points mentioned, there’s no doubt that Ethereum 2.0 is more energy efficient, in the sense that carbon emissions will be reduced by 99.992%. This means that the entire Ethereum network’s carbon emission can be equated to the emission of 100 American households.
With the switch from Proof-of-Work to Proof-of-Stake, there will be significant changes in performance, as it will be less power-intensive.
Also, there will be no need for miners, as validators will take over, and nodes will be able to generate cryptographic hashes to authorize transactions. Mining hardware will also not be needed, further reducing carbon footprints. With all these modifications, there is less need for hardware and computation power, which reduces the carbon footprint and energy consumption, thus making the environment cleaner.
Ethereum vs Bitcoin: which one is greener??
Yes, when comparing Ethereum vs Bitcoin, ETH is greener than BTC. From the analysis throughout the article, you can see that Ethereum uses less energy than Bitcoin, making it more environmentally friendly. This is also a result of the Proof of Stake consensus mechanism used by Ethereum. Even before the merge, Bitcoin used more energy than Ethereum. So in all timelines, Ethereum has always been more green than Bitcoin.
The Ethereum network has made positive efforts to reduce its energy consumption and the notion of cryptocurrency being the climate’s enemy. While there are still some debates about the carbon reduction not being impactful as the former Ethereum miners have moved to other networks, it cannot be disputed that the Ethereum network has successfully shed the load of high energy consumption and carbon emission.
Ebiere Watchman is a prolific writer specialized in web 3.0 and finance. Ebiere’s experience includes research projects, sales copywriting, and storytelling. She prides herself in crafting impeccable content to drive mass adoption in cryptocurrency.