Ethereum is huge. With a market cap of more than $ 378 billion, it is second only to Bitcoin, which has a market cap of $847 billion. It’s also the dominant blockchain in the NFT and decentralised finance (DeFi) space by far.
Proponents pitch crypto as a viable alternative to the traditional financial system, since it is highly transparent, secure, easily accessible and ensures anonymity.
However, both of these blockchain flagbearers – Bitcoin and Ethereum – use proof of work, which raises questions about the sustainability and scalability of cryptocurrency in the future.
Here are some staggering figures:
Currently, Ethereum is estimated to use about 112 terawatt-hours of electricity per year, which is comparable to that of Netherlands and more than what Philippines or Pakistan use.
A single transaction on Ethereum is quivalent to the power consumption of an average US household over 9 days.
A single Ethereum transaction also equals the energy consumption of more than 1,50,000 VISA card transactions.
The yearly carbon footprint of Ethereum is comparable to that of Switzerland and on a daily basis it is equivalent to the carbon footprint of 327,642 VISA transactions or 24,638 hours of watching Youtube.
Bitcoin is worse. It consumes about 137 terawatt-hours of electricity per year.
When China banned cryptocurrencies last year, it said it was especially concerned about crypto mining’s effect on the environment as well as its use for fraud and money laundering.
However, Ethereum’s shift to proof of stake will put an end to crypto mining on its blockchain and is expected to reduce energy consumption by as much as 99.95 percent.
The second biggest cryptocurrency and the biggest player in NFTs and DeFi cutting its energy consumption by 99 percent would certainly warrant a more optimistic re-evaluation of the environmental cost of crypto and its feasibility as a worldwide financial system.
End of profitable ETH mining will mean anyone currently mining ETH will either have to transition to a different PoW coin or sell their graphics cards and use the money to stake.
This could lead to a much needed reduction in GPU prices which have been soaring since last year due to the global chip shortage.
There’s another possibility on the horizon. Since August 2021, Ethereum has burned (destroyed) the equivalent of $5.8 billion in ETH according to data dashboard Watch the Burn, leading to an increase in the value.
After the upgrade, the amount of ETH issued is projected to drop drastically which could make it a deflationary asset, which restricts supply as time passes, leading to a rise in value, like bitcoin.
It could pave the way for Ethereum to steal Bitcoin’s crown and become the most valuable currency – an event referred to as “The Flippening”.