Changing Climates in Crypto

Expectations were high for the Merge, the Ethereum blockchain’s long-planned transition from Proof of Work (PoW) to Proof of Stake (PoS) in September 2022. A few weeks later, it seems it may have already exceeded those expectations in one regard: sustainability. The Ethereum Foundation had estimated that removing the need for processing-intensive mining operations would cut the Ethereum network’s energy consumption by 99.5%. By at least one estimate by the Crypto Carbon Ratings Institute, actual consumption has dropped from a peak rate of 22,900,320 kwH/Year to just 2,600, savings of over 99.9%. 

According to Matt Bernoff from HyperFund’s research team, Ethereum’s energy efficiency has been part of the conversation from the very beginning. “Back in 2015, there wasn’t really a Proof of Stake consensus mechanism that worked yet,” he says. “The plan was to use a proven consensus mechanism that has worked really well for Bitcoin while we figure out how to do it.”

While the transition carried tradeoffs in decentralization, among other risks, Bernoff explains that the choice was supported by the successful debuts of other PoS projects like Cardano, and Solana, as well as the scale of the energy savings. “You could run the equivalent of an entire Proof of Work mining farm, thousands of computers, on a single Raspberry Pi,” he says. And further improvements might be possible through innovation in areas such as light nodes.

It runs contrary to  typical narratives around  impact and sustainability in crypto, and it turns out that the Merge isn’t an anomaly in that regard. Blockchain sustainability is not an oxymoron. The ambitions of founders and other market participants align with broader market trends in environmental, social, and governance (ESG) investing to drive innovation (and maybe even do some good).