After eight years of proof-of-work mining, Ethereum finally became green on 15th September 2022. It did so by swapping out proof-of-work mining for a new proof-of-stake based consensus mechanism, using ETH instead of energy to secure the network. Ethereum's proof-of-stake mechanism now uses just ~0.0026 TWh/yr across the entire global network.
The energy consumption estimate for Ethereum comes from a CCRI (Crypto Carbon Ratings Institute)(opens in a new tab)↗ study. They generated bottom-up estimates of the electricity consumption and the carbon footprint of the Ethereum network (see the report(opens in a new tab)↗). They measured the electricity consumption of different nodes with various hardware and client software configurations. The estimated 2,601 MWh (0.0026 TWh) for the network’s annual electricity consumption corresponds to yearly carbon emissions of 870 tonnes CO2e applying regional-specific carbon intensity factors. This value changes as nodes enter and leave the network - you can keep track using a rolling 7-day average estimate by the Cambridge Blockchain network Sustainability Index(opens in a new tab)↗ (note that they use a slightly different method for their estimates - details available on their site).
To contextualize Ethereum's energy consumption, we can compare annualized estimates for some other industries. This helps us better understand whether the estimate for Ethereum is high or low.
The chart above displays the estimated yearly energy consumption in TWh/yr for Ethereum, compared to several other industries.
It is complicated to get accurate estimates for energy consumption, especially when what is being measured has a complex supply chain or deployment details that influence its efficiency. Consider Netflix or Youtube as examples. Estimates of their energy consumption vary depending upon whether they only include the energy used to maintain their systems and deliver content to users (direct expenditure) or whether they include the expenditure required to produce content, run corporate offices, advertise, etc (indirect expenditure). Indirect usage could also include the energy required to consume content on end-user devices such as TVs, computers and mobiles, which in turn depends on which devices are used.
There is some discussion of this issue on Carbon Brief(opens in a new tab)↗. In the table above, the value reported for Netflix includes their self-reported direct and indirect usage. Youtube only provides an estimate of their own direct energy expenditure, which is around 12 TWh/yr(opens in a new tab)↗.
The table and chart above also include comparisons to Bitcoin and proof-of-work Ethereum. It is important to note that the energy consumption of proof-of-work networks is not static - it changes day-to-day. The value used for proof-of-work Ethereum was from just before The Merge to proof-of-stake, as predicted by Digiconomist(opens in a new tab)↗. Other sources, such as the Cambridge Blockchain Network Sustainability Index(opens in a new tab)↗ estimate the energy consumption to have been much lower (closer to 20 TWh/yr). Estimates for Bitcoin's energy consumption also vary widely between sources and it is a topic that attracts a lot of nuanced debate(opens in a new tab)↗ about not only the amount of energy consumed but the sources of that energy and the related ethics.
The point of this paragraph isn’t to cast any kind of judgement, but to put the reduction in energy achieved by The Merge into context.
Energy debates
Energy consumption does not necessarily map precisely to environmental footprint because different projects might use different energy sources, for example a lesser or greater proportion of renewables.
For example, Cambridge Bitcoin Electricity Consumption Index(opens in a new tab)↗ indicate that the Bitcoin network demand could theoretically be powered by gas flaring or electricity that would otherwise be lost in transmission and distribution.
Ethereum's route to sustainability was to replace the energy-hungry part of the network with a green alternative. It is also frequently argued that all industries (with exceptions) generally plug into the same grid, and rather than moralizing about which specific uses are acceptable and which aren’t (which will always be divisive), it would be better to focus on migrating to a more sustainable and efficient grid infrastructure.
Within the blockchain world there are divergent opinions about the value of PoW. Supporters of PoW argue that the large energy expenditure is what gives the network security and is therefore necessary. Proof-of-work is more Lindy than proof-of-stake today. However, many believe that at least equal security can be derived from proof-of-stake based consensus, implying that high energy consumption is a choice, not a necessity for securing a chain.
It has also been argued that access to energy is more decentralized than access to capital to stake. The counter-argument is the centralizing power of hardware escalation - most mining is done by industrial players that can afford to benefit from economies of scale and frequent hardware upgrades that individuals can’t access.
In the end, the issue always reduces down to an individual choice about whether the energy expenditure is worth it. One person might suggest that proof-of-work mining is justified because the energy is being spent creating a form of money which increases individual freedom, and anyway only individuals and markets should be able to determine whether a particular use of energy is justified. Others would argue that proof-of-stake doesn’t require large amounts of energy to be consumed in the first place and is therefore ethically superior.
It is also relevant that part of the reason ether has value, liquidity and relatively wide distribution is because a real-world commodity (energy) was expended in the past, when Ethereum ran on proof-of-work. That value is now baked into the token making it a viable asset for securing the network. In a way, Ethereum’s higher carbon past has enabled its low carbon future.
At the end of the day, at any level of expenditure, some people believe it to be worth it, others don’t.
You can browse energy consumption and carbon emission estimates for many industries on the Cambridge Blockchain Network Sustainability Index site(opens in a new tab)↗.
Ethereum’s carbon debt
Ethereum originally used proof-of-work which had a much greater environmental cost than the current proof-of-stake mechanism. It switched over in September 2022, after 8 years on proof-of-work.
From the very beginning, Ethereum planned to implement a proof-of-stake based consensus mechanism, but doing so without sacrificing security and decentralization took years of focused research and development. Therefore, a proof-of-work mechanism was used to get the network started. Proof-of-work requires miners to use their computing hardware to calculate a value, expending energy in the process. Just before the switch to proof-of-stake, the energy consumption was closer to 78 TWh/yr, comparable to that of Uzbekistan, with a carbon emission equivalent to that of Azerbaijan (33 MT/yr).
CCRI examined the impact of Ethereum’s transition from proof-of-work to proof-of-stake. The annualized electricity consumption was reduced by more than 99.988 %. Likewise, Ethereum’s carbon footprint was decreased by approximately 99.992 % (from 11,016,000 to 870 tonnes CO2e). Therefore, the environmental cost of securing the network is drastically reduced.
Why is proof-of-stake low-energy?
Under proof-of-stake, PoW puzzle-solving is not necessary. Miners are replaced by validators who perform the same function except that instead of expending their assets in the form of computational work, they stake ether as collateral against dishonest behavior. If the validator is lazy (offline when they are supposed to fulfill some validator duty) their staked ether can slowly leak away, while provably dishonest behavior results in the staked assets being "slashed". This strongly incentivizes active and honest participation in securing the network. This disincentive structure allows for network security with proof-of-stake while eliminating the need to expend energy on brute-force computations. Detailed explanations of the network security under proof-of-stake can be found here and here.
The hardware arms race that incentivizes PoW miners to consistently upgrade their hardware to more and more energy-hungry systems is removed under PoS. Validators can participate with normal home computers or even low power devices such as Raspberry Pi. This removes a significant barrier to entry and widens participation in securing the network. However, there is still a substantial cost to becoming an Ethereum validator - the minimum stake is 32 ether.
A green application layer
While Ethereum's energy consumption is very low, there is also a substantial, growing, and highly active regenerative finance (ReFi) community building on Ethereum. ReFi applications use DeFi components to build financial applications that have positive externalities benefiting the environment. ReFi is part of a wider "solarpunk" movement that is closely aligned with Ethereum and aims to couple technological advancement and environmental stewardship. The decentralized, permissionless, and composable nature of Ethereum makes it the ideal base layer for the ReFi and solarpunk communities.
Web3 native public goods funding platforms such as Gitcoin run climate rounds to stimulate environmentally conscious building on Ethereum's application layer. Through the development of these initiatives (and others, e.g. DeSci), Ethereum (not exclusively, there are also similar apps on other chains) is becoming the base layer for a range of potentially environmentally and socially net-positive applications.
There have also been several suggestions that blockchain backends can enable, circular, less wasteful economies using, for example NFTs and global markets to connect buyers and sellers, or preventing double-spending of carbon offsets.
It remains to be seen whether these nascent applications can generate real-world positive externalities in the way they intend.
Why did the merge take so long?
Ethereum was an aspirant PoS chain since its inception. However, it turned out to be a major technical challenge. This is because the Ethereum developer community wantd to ship proof-of-stake without compromising on security, scaleability and decentralization.
Initially, the development roadmap was divided into phases, with scaling by sharding the blockchain happening before the merge to PoS. However, the rapid development of layer 2 “rollups” allowed Ethereum to scale sufficiently that the merge was brought forwards in time, before sharding.
New software clients had to be developed from the ground up to deal with the new security and consensus mechanisms. The community had to buy in to the idea by staking their ether in a deposit contract, even without a fixed date for withdrawals being enabled (i.e. staked ETH was locked until some unknown point in the future). Then, the new client implementations had to be extremely rigorously tested. This process took several years.
Summary
While Ethereum's energy consumption has historically been substantial, it transitioned from energy-hungry to energy-efficient block validation in September 2022. To quote Bankless, the best way to reduce the energy consumed by proof-of-work is simply to "turn it off". Ethereum did that in September 2022, reducing its energy consumption by >99.98%.