Ethereum moved to proof of stake. Why can’t Bitcoin?

Bitcoin mining, the computationally intensive process by which new currencies are created and calculated, has become a global concern. After China cracked down on the process in mid-2021, miners sought out other regions of the world where energy was cheap, but not always clean. In places like Kazakhstan, miners are putting pressure on the power grid, which relies heavily on carbon-intensive coal-fired power plants, causing local blackouts and contributing to civil unrest. In upstate New York, where miners have taken over shuttered factories and empty warehouses, locals have complained of soaring energy bills and the high-frequency hum from whirring data center fans — and they worry about the environmental toll from mining. The United States currently hosts 38% of all Bitcoin mining.

A single Bitcoin transaction uses the same amount of energy as a single American household over the course of about a month. But does it have to be? Historically, the Bitcoin community has been fiercely resistant to change, but pressure from regulators and environmentalists fed up with Bitcoin’s massive carbon footprint may force them to rethink this stance.

A variety of other countries, including Kazakhstan, Iran, and Singapore, have placed restrictions on cryptocurrency mining. In April 2023, the European Parliament is set to pass a landmark crypto bill called Markets in Crypto Assets (MiCA), which mandates environmental disclosures from crypto companies. The law is expected to go into effect sometime in 2024.

This may just be the beginning for the European Union: The European Central Bank has previously stated that it cannot imagine a world in which governments ban petrol-powered cars in favor of electric cars but would not act on Bitcoin’s insistence on pumping CO2. “Some MEPs are already wondering why Bitcoin is not following Ethereum,” Alex de Vries, the data scientist behind Digiconomist, a website that tracks cryptocurrency energy use, told MIT Technology Review.

Efforts to eliminate bitcoin waste are also gaining momentum in the United States. In November, New York became the first state to enact a temporary ban on new permits to mine cryptocurrencies in fossil fuel plants. The new law also requires New York to study the impact of cryptocurrency mining on the state’s efforts to reduce greenhouse gas emissions.

So what does it take to make the switch?

Proof of work vs proof of stake

Cryptocurrencies do not have a central custodian, such as a bank, to oversee the public ledgers – the shared digital record of every transaction on the blockchain. Instead, they rely on consensus mechanisms to agree on updates. To prove the work, the method on which Bitcoin is based, a global network of computers — known as “miners” — spend electricity trying to win a lottery of sorts. Whoever wins can catch the next block and collect new coins in the process. The chance of winning is directly proportional to the number of calculations performed by the miner. As a result, huge server farms have appeared around the world dedicated only to winning this lottery.

Proof of stake, the approach that Ethereum is now using, eliminates this huge power consumption. Instead of miners, Proof of Stake systems use large numbers of “validators”. In order to become a validator, you must deposit a specific amount of coins – 32 ether, in the case of Ethereum or a “stake”. Staking gives validators a chance to verify and add new blocks of transactions to the blockchain so that they can earn rewards on top of their accumulated coins. The more coins you earn, the better your odds of being picked to add the next block of transactions to the chain.


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