Ethereum’s Green Leap to PoS from PoW: Will Bitcoin Ever Follow?
Ethereum made headlines in 2022 by transitioning to proof of stake, drastically reducing its energy consumption by ninety-nine percent. In the volatile ecosystem of cryptocurrencies, dubbed “the Merge,” this shift positioned Ethereum as a greener alternative to the energy-guzzling Bitcoin. While Ethereum’s move was celebrated, Bitcoin, the most popular cryptocurrency, continues to consume as much energy as the entire country of the Philippines. This disparity raises the crucial question: why can’t Bitcoin follow Ethereum’s path to proof of stake?
Bitcoin mining, the process through which new coins are created, demands immense computational power and electricity. After China’s crackdown on mining in mid-2021, miners scattered globally, often landing in regions with cheap but not necessarily clean energy. In Kazakhstan, mining operations have strained the power grid, leading to blackouts and civil unrest. In upstate New York, the influx of miners has driven up energy costs and caused environmental concerns. Today, thirty-eight percent of Bitcoin mining operations are based in the US, further complicating the environmental debate.
A single Bitcoin transaction uses as much energy as a US household over almost a month. Yet, there is no technical barrier to transitioning Bitcoin to a more energy-efficient proof-of-stake system — only a social one. The Bitcoin community, known for its resistance to change, faces increasing pressure from regulators and environmentalists. The European Union is set to implement the Markets in Crypto Assets (MiCA) bill, mandating environmental disclosures from crypto firms. This legislation, expected to take effect in 2024, could be a precursor to broader regulations.
Proof of work, Bitcoin’s current consensus mechanism, relies on a global network of miners who expend electricity in a competitive process to validate transactions. In contrast, proof of stake, now used by Ethereum, employs validators who lock up, or “stake,” coins to gain the right to validate transactions and earn rewards. This method drastically cuts energy consumption while maintaining decentralization. However, the Bitcoin community remains divided on making such a fundamental shift.
Ethereum’s transition to proof of stake was a monumental task, taking seven years to accomplish. Vitalik Buterin, Ethereum’s creator, always envisioned this move but faced significant technical challenges. Major projects on Ethereum, including crypto exchange Coinbase and NFT platforms like OpenSea, supported the transition due to its environmental benefits and potential for lower transaction fees. Despite concerns about a potential split in the Ethereum community, the transition succeeded without significant competition from proof-of-work chains.
Bitcoin’s decentralized nature, often seen as its strength, complicates any attempt to change its consensus mechanism. While the Bitcoin code is open source, and anyone can theoretically contribute, decisions are heavily influenced by a small core team of developers known as “maintainers.” These maintainers are funded by influential groups like Blockstream and the MIT Digital Currency Initiative, adding layers of complexity to any proposed changes.
The idea of transitioning Bitcoin to proof of stake has supporters and critics. Emin Gün Sirer, creator of the Avalanche cryptocurrency, argues that Bitcoin’s resistance to change stems from a fear of risk and a desire to maintain its foundational principles, such as the fixed supply of 21 million bitcoins. Jorge Stolfi, a computer science professor, asserts that while there are no technical obstacles to switching Bitcoin to proof of stake, the real challenge lies in convincing miners who currently profit from the existing system.
The last significant attempt to change Bitcoin was with Bitcoin Cash in two thousand seventeen, which aimed to increase transaction capacity by enlarging block sizes. This effort led to community schisms and ultimately resulted in Bitcoin Cash becoming a lesser-known spinoff, highlighting the challenges of consensus in the Bitcoin community.
Nicholas Weaver, a researcher and crypto critic, believes that Bitcoin will never switch to proof of stake as long as miners can profit from proof of work. He argues that only a drastic decrease in Bitcoin’s value would stop the energy-intensive mining process.
Bitcoin’s reluctance to change could lead to its downfall, as governments and communities grow increasingly intolerant of its environmental impact. Alex de Vries of Digiconomist suggests that the resistance to change is unsustainable. The sooner Bitcoin adapts, the better it will be for everyone involved.
In summary, while Ethereum’s transition to proof of stake represents a significant step towards sustainable blockchain technology, Bitcoin’s journey remains fraught with social and economic challenges. The debate continues, but one thing is clear: the world is watching, and change may be inevitable.
References
Buterin, V. (2022). Proof of stake: The making of Ethereum and the philosophy of blockchains. Seven Stories Press.
Castor, A. (2023, February 28). Ethereum moved to proof of stake. Why can’t Bitcoin? MIT Technology Review.
Lin, S. (2023). Proof of work vs. Proof of stake in cryptocurrency. Highlights in Science, Engineering and Technology, 39, 953–961.
Sarkodie, S. A., Amani, M. A., Ahmed, M. Y., & Owusu, P. A. (2023). Assessment of Bitcoin carbon footprint. Sustainable Horizons, 7, 100060.
Stoll, C., Klaaßen, L., & Gallersdörfer, U. (2019). The carbon footprint of bitcoin. Joule, 3(7), 1647–1661.
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