Blockchain technology is the future, and every indication suggests that it has the potential to revolutionize and positively impact the world by improving various aspects of human endeavors. Because of its negative environmental impact, blockchain adoption and integration have slowed significantly. Blockchain networks, such as Bitcoin and, previously, Ethereum, required a significant amount of energy to function properly. A previous article discussed the environmental impacts of blockchain networks.
In this article, we look back at the challenges Ethereum faced as a proof-of-work blockchain. How the Ethereum Merge successfully transitioned the Ethereum network into a green blockchain, effectively addressing a relevant problem and paving the way for future global adoption of blockchain technology, smart contracts, and NFTs.
An overview of Ethereum and the challenges associated with proof-of-work.
With a current valuation of $170 billion, Ethereum is the world’s second-largest blockchain network by market capitalization. The Ethereum blockchain network is flexible, programmable, and decentralized and was designed to be “the world’s computer.” Since its inception in 2014 and subsequent launch in 2015, the Ethereum blockchain network has been at the forefront of several blockchain innovations. The Ethereum network enabled notable innovations, such as smart contracts, which gave rise to decentralized applications and finance. Non-fungible tokens (NFTs) were first introduced on the Ethereum blockchain in 2017 and have since grown into a multibillion-dollar innovation. The Ethereum blockchain has paved the way for various other innovations, including decentralized autonomous organizations (DAO). Ethereum very much pioneered the concept of Web 3.
Despite the Ethereum network’s series of blockchain innovations and use cases, meaningful adoption of blockchain technology has been somewhat stalled, as several organizations and industries, understandably, point to its negative impact on the environment. The Ethereum network, like its forerunner, the world’s first blockchain network, Bitcoin, used proof-of-work to reach consensus, mine new blocks, and secure the network. This required complex mathematical computations and a lot of energy to complete. For the longest time, the environmental impact of blockchain networks has been a barrier to widespread adoption.
As previously stated, the Ethereum network was designed to be far more scalable and adaptable than Bitcoin, and the Ethereum Merge is proof of the network’s adaptability and flexibility. It is important to note that the energy consumed by proof-of-work to reach consensus is a predefined feature designed to discourage malicious individuals from attempting to break into the blockchain network and seed malicious blocks. The massive amount of energy required acts as a deterrent, much to the detriment of the environment.
Simply put, the Ethereum Merge converts the Ethereum network from a proof-of-work to a proof-of-stake chain. The Ethereum network relied solely on the proof-of-work mechanism to achieve network consensus and mine Ethereum tokens up until September 15th, 2022. The Merge refers to the Merge of the Ethereum mainnet, referred to as the “execution layer,” with a separate proof-of-stake blockchain known as the Beacon chain, referred to as the “consensus layer,” which was launched in December 2020. Combining both chains eliminates the need for complex computations and, by extension, energy-intensive mining. The blockchain is now secured by ETH staked. Network validators would now need a minimum of 32 Ethereum tokens to participate in network security, with no need for advanced computing systems.
The Merge, as simple as it sounds, was not an easy task to complete. It has been described as changing the engine of a moving vehicle. The Merge’s success attests to the scalability of the Ethereum network and blockchain in general. The entire transaction history, as well as important data such as smart contracts, accounts, and so on, are all present on the new and improved Ethereum blockchain.
In Time Magazine, Justin Drake, one of Ethereum’s key researchers leading the migration, explained it as follows: “The Merge dramatically increases the security of Ethereum. An attacker needs 51% of the blockchain’s value to [take control]. With Proof of Work, you need on the order of $5 billion, which allows you to buy enough computers and transformers, connect all of them to the grid, and then carry out an attack. With proof-of-stake, we will have about $20 billion in economic security today – and this is a number I expect will grow dramatically.”
The Merge not only converted Ethereum to an environmentally friendly blockchain, but also made it much safer and easier for interested individuals to participate in network activities and earn incentives for doing so. Overall, this is a win for blockchain users and the environment.
Significance of Ethereum’s transition to proof-of-stake in global blockchain adoption.
As previously mentioned, the energy consumption of proof-of-work blockchain networks has been a major factor in their adoption. The completion of the Merge signals the end of proof-of-work for Ethereum and the start of a more environmentally sustainable blockchain network. Ethereum’s energy consumption has been estimated to be 99.95% lower, effectively making it a green blockchain. The annualised total energy consumption fell from 92 TW/h per year to 0.01 TW/h per year as a result of the significant drop in energy consumption.
The blockchain’s eco-friendliness opens the door for it to be adopted as the “world’s computer.” Organizations and nations that were concerned about the environmental impact or security of blockchain now have several concerns addressed by the Merge’s singular effect. The Ethereum network can now be used without fear of causing environmental damage.
Because they may be harmful to the environment, NFTs have been underutilized. All NFTs, on the other hand, have been migrated to the new and improved Ethereum blockchain and have a lower environmental impact than a Visa transaction. This can easily translate to the adoption of blockchain technology in industries in need of an upgrade, such as the certification industry. NFTs can now play a larger role in ownership, authentication, and other areas.
The Ethereum Merge is a massive and astounding success for blockchain adoption, cryptocurrency, and the world at large. A technological breakthrough with implications for the next 10–20 years in the digital and blockchain space. The move to a more environmentally friendly network demonstrates the Ethereum blockchain network’s adaptability, scalability, and viability. Blockchain advocates, especially Ethereum enthusiasts, can now freely champion their course for its adoption.
NFTs, in particular, stand to benefit greatly from the Merge. While skeptics may have raised several concerns about the adoption of NFTs, their impact on the environment will no longer be a source of concern. NFTs designed to have a positive environmental impact, such as wildlife or rainforest conservation, can operate on the Ethereum network without fear of negating their positive impact.