At 19:27 Eastern time on April 12, the Ethereum blockchain, home to the world’s second-most-popular cryptocurrency, ether, will finally sever its links to crypto mining. Within the Ethereum bubble, a sense of anticipation is building; some are planning “viewing parties” for the occasion. Codenamed “Shanghai,” the update to Ethereum caps off a process, after “The Merge,” which fundamentally changes the way transactions are verified and the network secured.
Under the old system, proof-of-work (PoW) mining, the right to process a batch of transactions and earn a crypto reward is determined by a race to solve a mathematical puzzle. The greater the computing power miners throw at the problem, the greater their chance of winning the race. Under Ethereum’s new proof-of-stake (PoS) system, there is no race and there are no miners; instead, the winner is determined by raffle. The greater the amount of ether somebody locks up on the network—or stakes—the greater the chance they hold a prize-winning ticket.
By demonstrating that a large-scale blockchain can shift from one system to another, Shanghai will reignite a debate over whether the practice of mining that still supports bitcoin, the most widely traded cryptocurrency, is viable and sustainable. Figures from the University of Cambridge suggest the Bitcoin network consumed 107 terawatt-hours of energy in 2022—equivalent to that of the Netherlands—of which only just over a quarter came from renewable sources. Prior to The Merge, Ethereum consumed roughly two-thirds as much energy as the Bitcoin network. But the move away from mining has cut that consumption, according to analysis by Alex de Vries, data scientist at De Nederlandsche Bank and creator of Digiconomist, a source of crypto emissions data, by at least 99.84 percent.
“The energy consumption problem is Bitcoin’s achilles heel,” says de Vries. “It’s a simple fact that as the price of bitcoin gets higher, the energy consumption problem gets worse. The more money miners make, the more they will typically spend on resources: hardware and electricity.
But many bitcoiners dispute the characterization of the network as energy-guzzling and carbon intensive, saying that mining is increasingly powered by renewable energy. And, they say, PoS is inferior to PoW—prone to centralization (crypto’s great nemesis), concentrating influence and wealth in the hands of the wealthy, without any mitigating forces, like energy costs, pulling in the opposite direction. All of this makes Shanghai a proxy battle over the future of crypto.
In bitcoin’s infancy, the cryptocurrency could be mined effectively with just a personal computer and simple software. But as the level of appetite for bitcoin increased, the industry professionalized. Today, the mining scene is dominated by large companies—some publicly traded, like Marathon Digital and Riot Blockchain—that operate gargantuan facilities with rack upon rack of hardware. The largest of these mines, many of which are located in Texas, can draw upwards of 700 MW of power.
But bitcoin proponents claim that looking at the absolute amount of energy that the industry consumes misses important context. Far from triggering investment in new fossil-fuel plants, miners say they are incentivizing renewable energy development, by plugging the gaps when demand is low.
