• Annual energy used by YouTube, Gold mining, Bitcoin, Ethereum, Netflix, Gaming, PayPal - source: Ethereum
By A Chippendale Resident
[Editor’s note:
• Banks, credit cards use over 250TWh/yr of energy
This guest blog is by a Chippendale resident who wishes to remain anonymous. The resident has been investing in and learning about cryptocurrency since February this year.
My main reason for exploring crypto is explained by the graph above. It shows how much energy banks use to operate their financial system. See my notes below for more on this aspect.
If you’re like me, and know nothing of and barely understand crypto currency, Bitcoin, Ethereum and such then I’ve put some explanation of terms below this article. It may help to read them first, or as you go.
Because, as I understand it, crypto currency may empower many of us to set ourselves free of banks and their control over currency - and us - I’m investigating it.
Please comment on this blog with questions and your own explanations and experiences to help improve our understanding of cryptocurrency.
My main comment is, the language and terms used needs to be simpler, able to be understood and used by anyone, at least as simple as the words we use for cash. With time, however, we may understand cryptocurrency more easily in the same way we came to understand the internet
There is a handy, simply-written introduction here, too, by Ethereum.]
If ‘every billionaire is a policy failure’, can we free ourselves of banks?
Ethereum went green yesterday by shifting to proof-of-stake (PoS), from proof-of-work (PoW), positioning the blockchain as environmentally friendly and on the road to greater scalability and economic sustainability.
Previously the Ethereum PoW consensus mechanism, used between 0.1% and 0.3% of the world’s electricity production which as of September 15 at 06:42:42 UTC, went to near zero.
This shift known as the ‘The Merge’, has been described as changing a plane’s engine mid-flight, a technological feat with many climate advocates worldwide thrilled by the positive impact this will have on the environment and thus crypto’s reputation.
The upgrade went off smoothly after 2 years of testing by the Swiss based Ethereum Foundation and ushers in two major benefits for Ethereum – the network’s electricity usage is expected to drop by 99.9% or by 0.2% of global electricity consumption. New emissions of ETH (the cryptocurrency of the Ethereum blockchain) will drop by 87.5% and become deflationary in a potential boon for investors as the number of coins entering the supply drops.
The impact of Ethereum’s transition to PoS on power consumption is a massive change and a first step in improving the efficiency and transaction speeds of the Ethereum network.
Previously, each transaction had a carbon footprint of 147.86 kg but with PoS this has now been reduced to 0.07kg or the equivalent of 2-3 emails and 17,000 times more efficient that Bitcoin.
The Ethereum blockchain currently can process 13-15 transaction per second (VISA card does 1,700 per second) and on average, it takes anywhere from 15 seconds to 5 minutes to process transactions on an average day. Ethereum’s stated goal is up to 100,000 transaction per second.
The Ethereum PoW consensus mechanism, was similar to the original mechanism used by Bitcoin to verify new transactions, add them to the blockchain and create new coins. Under PoW, miners competed to be the first to solve complex cryptographic problems using specialised computers, draining massive amounts of electricity in the process. (Bitcoin uses the equivalent to New Zealand’s total electricity demand.)
Only the first miner to solve the problem was the “winner” who then got to update the blockchain with the latest transactions and be rewarded with a predetermined amount of crypto. All the other miners who lost this race, received nothing and essentially wasted the electricity and effort used – hence the massive energy consumption or waste of PoW networks.
PoS picks a "winner" in a different way. In the PoS consensus mechanism, instead of needing energy hungry computing power to validate transactions, validators - that’s users and other participants in Ethereum- must stake or invest the blockchain’s coins as collateral or security to participate. This fact drastically reduces the energy consumption needed by using a pseudo-random process to select a limited number of validators from computers known as nodes (home PCs can be competitive nodes) that support a cryptocurrency network through validating and relaying transactions. Full nodes store every block from the first to most recent and, when chosen to forge the next block of transactions, check if the transactions in the block are valid. It then signs the block and adds it to the blockchain. As a reward, the node receives transaction fees from the block. Only those nodes randomly selected participate in this process thereby creating no carbon footprint from “losers”.
[Editors note: yes, this language is, to me at least, counter-productive and off-putting but for the moment it’s how the cryptocurrency world talks.]
Ethereum’s transition yesterday to PoS has been described as the first stage of a 5 stage rocket launch, in the Ethereum network’s journey to scale to its first billion users and building the Web3 ecosystem over the coming years.
“Web3” will be decentralised blockchains with ownership distributed, built, operated and owned by users instead of large centrally controlled Web2 technological entities such as Google, Meta, Amazon and your Bank.
All of these own your - you, the bank and credit card user - data and sell it back to you whilst constantly changing the rules, algorithms and pricing to enrich their platforms and shareholders at your expense.
Hold on to your hats!
A Chippendale resident
Editorial explanation
• Comparing Ethereum’s energy use with YouTube, houses
These notes are copied from Ethereum’s site and others.
Energy used by banks, credit cards, crypto
“Bitcoin's annual electricity consumption is currently at around 113.89 TWh (terawatt-hours). To help put this number into perspective, the report pointed out that the annual global energy supply is at around 166,071 TWh.
"There is no denying that the Bitcoin network consumes a substantial amount of energy, but this energy consumption is what makes the Bitcoin network so robust and secure," the report noted.
In comparison, the annual total energy consumption of the gold industry is around 240.61 TWh. It was much harder to get to this number, Galaxy Digital Mining admitted.
"To compare this to Bitcoin's electricity consumption, we only considered direct GHG emissions (scope 1), indirect electricity emissions (scope 2), and any emissions associated with gold refining and recycling. The annual GHG emissions from these segments amounted to 100,408,508 tCO2. We then converted the GHG emissions number to kWh/yr using a global IEA carbon intensity multiplier of 0.92 lb CO2/kWh16. Using this multiplier, we estimate that these elements of the gold industry utilize roughly 240.61 TWh/yr," the report said.“
“WHAT IS A BLOCKCHAIN?
A blockchain is a public database that is updated and shared across many computers in a network.
"Block" refers to data and state being stored in consecutive groups known as "blocks". If you send ETH to someone else, the transaction data needs to be added to a block to be successful.
"Chain" refers to the fact that each block cryptographically references its parent. In other words, blocks get chained together. The data in a block cannot change without changing all subsequent blocks, which would require the consensus of the entire network.“
“WHAT IS ETHEREUM?
Ethereum is a blockchain with a computer embedded in it. It is the foundation for building apps and organizations in a decentralized, permissionless, censorship-resistant way.
In the Ethereum universe, there is a single, canonical computer (called the Ethereum Virtual Machine, or EVM) whose state everyone on the Ethereum network agrees on. Everyone who participates in the Ethereum network (every Ethereum node) keeps a copy of the state of this computer. Additionally, any participant can broadcast a request for this computer to perform arbitrary computation. Whenever such a request is broadcast, other participants on the network verify, validate, and carry out ("execute") the computation. This execution causes a state change in the EVM, which is committed and propagated throughout the entire network.
Requests for computation are called transaction requests; the record of all transactions and the EVM's present state gets stored on the blockchain, which in turn is stored and agreed upon by all nodes.
Cryptographic mechanisms ensure that once transactions are verified as valid and added to the blockchain, they can't be tampered with later. “