Ethereum Watch

• Ethereum’s annual carbon footprint was significantly cut since The Merge.
• Bitcoin’s estimated annual emissions contributed just 0.15% to the global tally. 

Ethereum’s [ETH] annual electricity consumption fell by more than 99.9% after switching from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism, according to a report by Ethereum.org.

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Ethereum goes green

ETH’s energy consumption across the global network was 0.0026 terawatt-hours (TWh) per year, even lower than payment company PayPal and online steaming giant Netflix.

Consequently, Ethereum’s annual carbon footprints have also been significantly cut down, falling by more than 99% to 870 tonnes of CO2e. The transition, also referred to as “The Merge,” played a critical role in bringing down the environmental costs for securing the network to a great extent.

The Merge was a pivotal event in the brief history of blockchain technologies. Under the new PoS model, staked ETH, rather than expensive hardware, secures the network and validates transactions.

By eliminating the power-guzzling computers from the scope, which competed with each other to solve complex cryptographic problems, Ethereum made a decisive shift to sustainability and scalability.

Bitcoin has a long way to go

Environmental concerns have been a thorn in the flesh for blockchain technology over the years. While Ethereum has addressed these concerns with The Merge, the issue of Bitcoin [BTC] mining has been the major sticking point between environmentalists and blockchain proponents.

As per data from Cambridge Bitcoin Electricity Consumption Index (CBECI), BTC’s greenhouse gas emissions have surged significantly over the past three years. The phase, encompassing the historic bull market of 2020-21, witnessed heavy demand on the BTC network, resulting in influx of more miners and consequently more power-hungry mining hardware.

While 2022’s crypto winter provided short-term relief, 2023’s market rally brought the miners back into the game. May saw an unprecedented jump in transactional activity on the blockchain, leading to monthly emissions of 6.03 MtCO₂e, the joint-highest in Bitcoin’s history and tied with March 2021 figures.

Bitcoin’s 2023 emissions already hit 34.69 MtCO2e at the time of publication. Assuming continuous emissions at the current rate, the network’s annual figures were estimated to jump to 72.48 MtCO₂e, 30% more than 2021.

For context, this was greater than the yearly greenhouse gas emissions of countries like New Zealand and Cambodia.

In terms of electricity consumption, Bitcoin reportedly sucks power at an annualized rate of roughly 143 terawatt-hours (TWh). If this figure is met this year, 2023 would be the most energy-intensive year on record for Bitcoin.

The larger picture

While concerns around Bitcoin’s carbon footprint sound legitimate, it’s essential to zoom out and analyze its contribution from a broader perspective. Using CPECI’s data, it was found that Bitcoin’s estimated annual emissions contributed just 0.15% to the global tally.

Bitcoin has been marketed as a store of value and an inflation hedge, pretty much like the status earned by the yellow metal. For two assets offering similar characteristics, it seemed reasonable to compare their carbon footprints. Here too, “Digital Gold” didn’t disappoint.

Annual emissions as a result of mining Bitcoins were 27% lower than that of mining gold.

The shift to renewables

Of late, the noticeable shift to cleaner and renewable sources of energy has put optimism among Bitcoin proponents.

China, along with other Asian countries like Kazakhstan, are regions where fossil fuels are heavily subsidized. This incentivized miners to exploit these resources, resulting in higher carbon footprints. During this time, China became the global leader in Bitcoin mining.

But as mining activity moved to the U.S. after China’s blanket ban on cryptos and mining, things have changed. The south-central state of Texas has dished out favorable policies and tax incentives to attract miners to its wind and solar power.

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The above examples show that blockchain technologies have adopted different measures to address the allegations of unsustainability. While Ethereum has effectively shut down its critics after The Merge,

Bitcoin’s footprint, though alarming, pales in comparison to some of the other power-guzzling industries.

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