Last September, the long-awaited Ethereum “Merge” finally occurred and the Ethereum network successfully transitioned from proof-of-work (PoW) to proof-of-stake (PoS). Prior to the Merge the security of the Ethereum (ETH) network had been guaranteed by proof-of-work, i.e., the same mechanism that still powers Bitcoin (BTC). Since the Merge the security of the Ethereum network is now guaranteed by the collective stake of hundreds of thousands of validators who are punished, or “slashed,” if they go offline, double sign transactions or otherwise misbehave.
This story is part of CoinDesk’s 2023 Mining Week, sponsored by Foundry. Lane Rettig is a core developer at Spacemesh, and a former Ethereum core developer. He’s an advocate for open source software, open protocols, and open systems.
On the face of it this may seem like a massive accomplishment for Ethereum because it allowed the network to completely retire proof-of-work mining and, thus, to significantly reduce its energy consumption. Indeed, amidst ongoing mainstream FUD (fear, uncertainty and doubt) around the energy intensity of proof-of-work mining, the Ethereum Foundation marketing machine spun the upgrade as the “greenification” of Ethereum and institutional investors who won’t touch bitcoin are now holding ether as a result.
As a former Ethereum core developer who briefly worked on the technologies behind the Merge I have mixed feelings about the upgrade. I feel that it’s a major technical accomplishment and has certain advantages for Ethereum, but I strongly disagree with the economic arguments used to justify it: among them that staking is less wasteful, more secure and increases profitability. Let’s pick apart these claims one by one.
Claim #1: Proof-of-stake is less wasteful
This is the main and most important claim made about the Ethereum Merge: that it reduced Ethereum energy consumption by around 99.5%. This figure is shortsighted and misleading for several reasons. Strictly speaking it is true that Ethereum’s energy consumption fell after the Merge, but what matters to humanity is total energy consumption.
All of those GPUs, or graphics processing units, that were previously used to mine Ethereum didn’t disappear overnight. Many found uses in other applications, most obviously mining other PoW…
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