Ethereum, the second most important “blockchain” in the world of cryptocurrencies after that for bitcoins, has managed to transform itself to drastically reduce its environmental impact, but according to specialists, this change could have serious consequences.
Launched in 2015, Ethereum now houses billions of dollars in transactions, thanks in particular to the Ether cryptocurrency, and also serves as a support for many assets such as NFTs, tamper-resistant digital certificates of authenticity.
After months of preparation, this “block chain” – a term that refers to a huge computer registry – successfully completed one of the largest software updates in the history of the industry on September 15.
This dangerous operation, called “The Merge”, consisted of changing one of the pillars of Ethereum’s operation – the mode of validation of operations – to move to a less energy-consuming system.
Since it works without a central authority, it is up to some users of Ethereum to validate the operations taking place on this massive ledger.
To belong to this circle of “validators” until mid-September, it was necessary to solve a very complex calculation that requires a lot of computing power. The exercise, called “Proof of Work” in English, consumes a lot of electricity.
From now on, the “validators” must place an Ether bet to be entitled to validate. A method called “Proof of Stake” that allows you to remove heavy infrastructure and only need software.
Indeed, almost a month later, this change has wiped out more than 99% of the blockchain’s electricity consumption, which until then was more or less equivalent to the consumption of a country like New Zealand, according to Alex de Vries. an economist at the Free University of Amsterdam.
The 99% estimate is realistic and represents a positive step towards “cryptocurrency sustainability,” said Moritz Platt, crypto researcher at King’s College London.
The long-awaited transition, on the other hand, caused a veritable earthquake for the “miners”, those individuals responsible for validating the operations who had invested in powerful computer equipment.
Before “The Merge”, this sector could bring in about $22 million a day through Ethereum alone, according to Alex de Vries. However, the new transaction validation method has rendered them obsolete.
“You can’t magically resell all that infrastructure and get back your invested capital,” lamented a cryptominer known only as “J” that operates between Singapore and Hong Kong.
– Centralization –
Another undesirable consequence of the operation “The Merge”, the stronger centralization of Ethereum.
Anyone who can pledge a certain amount of Ether can now validate. The higher the amount pledged, the greater the opportunity to validate it and thus make a profit.
The system thus gives an advantage to the largest players and three companies currently represent more than half of the “validators”, according to a study by the firm Dune Analytics.
A disgrace to cryptocurrencies, originally created as a decentralized alternative to banks and governments after the 2008 crisis.
In the United States, SEC Chair Gary Gensler has previously suggested that the “proof of stake” system could equate cryptos to a securities market, effectively leading to stronger regulatory scrutiny.
The disaster scenario for Ethereum then would be that enough disgruntled users prefer alternatives that still use “proof of work”, especially the main one called Ethereum Classic.
According to Alex de Vries, miners could potentially make significant profits if the market turned in their direction.
A scramble from the greenest blockchain to the most energy-intensive would then be “completely imaginable,” he added.