Ethereum's successful switch from the the energy-intensive Proof-of-Work to Proof-of-Stake mechanism to ensure blockchain integrity will reduce Ethereum's energy consumption by 99.95%. This is great news for carbon reduction and addresses the common criticism that crypto is hurting the planet by contributing to global warming.
Ethereum changed platforms, will bitcoin do the same?
No, it's not feasible, according to many bitcoin maximalists. Also, in responding to accusations that bitcoin is bad for the environment, it's important to understand the type of electricity that's being harnessed and how bitcoin compares to other industries.
Michael Saylor, Executive Chairman of MicroStrategy, a publicly-traded business intelligence firm, recently wrote an article explaining bitcoin's energy consumption – Bitcoin Mining and the Environment. Here is a summary of his main points along with some of my thoughts.
1. Bitcoin's Energy Use
If a company's manufacturing process requires using a large amount of electricity, the cost of electricity will be a major factor in determining site location. However, it's only one of many factors. The executives will look at labor costs, workforce availability, real estate costs, tax laws, tax incentives, utility costs, and other factors. Electricity is the major operating expense for bitcoin miners and the lower the cost of electricity, the more attractive it is to bitcoin miners. Saylor said that miners tend to locate "at the edge of the grid, in places where there is no other demand, at times when no one else needs the electricity." Bitcoin miners usually pay 2 to 3 cents per kWH compared to retail and commercial consumers in major metropolitan areas who pay 10 to 20 cents per kWH. 2. Bitcoin Mining Can Benefit The Environment One-third of the world's energy power is wasted.
Bitcoin mining can use "stranded natural gas" or methane gas to power its computers. For example, bitcoin miners in Texas set up operations on oil fields where excess natural gas is released into the environment. With bitcoin mining, instead of the methane being released into the atmosphere, it is captured and used. Miners can also set up operations at landfills and capture that methane.
Saylor pointed out that "No other industrial energy consumer is so well suited to monetize excess power as well as curtail flexibly during periods of energy shortfall and production volatility." Bitcoin miners can also locate where there is excess power due to low demand of near clean energy sources such as solar, wind, hydro, and geothermal. 3. Bitcoin Compared to Other Industries
Almost sixty percent of bitcoin mining uses sustainable sources. Also, computers that power bitcoin miners became 46% more energy efficient over the past year. Saylor states that bitcoin is far less energy intensive than tech firms Google, Netflix, or Meta and one to two times less energy intensive than airlines, logistics, retail, hospitality, and agriculture.
4. Bitcoin Cannot Use Proof-of-Stake Saylor argues that if bitcoin mining moved to proof-of-stake, the security and control of the network would would be concentrated in a small group of software developers. This would be not be suited to an open, fair money or global settlement network. Supporting his argument, consider that since Ethereum has migrated to Proof-of-Stake, 52% of ETH is staked by only three entities, Lido, Coinbase, and Kraken.