These coins consume one-fifth of the computing power of Ethereum before the merge.
According to experts, the second-biggest cryptocurrency has been able to eliminate over 99 percent of its electricity consumption with the most recent software upgrade.
With Ethereum blockchain burning through electricity at a rate about equal to New Zealand’s, that’s no mean feat.
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Despite expectations of glitches with “the merge”, Alex de Vries of the Free University of Amsterdam called it “rather boring”.
On his Digiconomist website, De Vries, who models the energy consumption of Bitcoin and Ethereum, confirmed that Ethereum’s consumption had plummeted by more than 99 percent in the past year.
In order to make cryptocurrency sustainable, Moritz Platt, a researcher specialising in cryptography at King’s College London, said that the 99 percent estimate was realistic, and that it was a major step in the right direction.
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Ethereum, a blockchain network operated by Ethereum, which is responsible for the trading of billions of dollars of games, tokens, art and ether currency every day, has cleaned up its act recently.
The situation is complicated, however.
Those who suffered as a result of the merger are likely to be bitterly opposed, while regulators may also be inclined to scrutinize Ethereum more closely than before.
Astronomical growth
According to de Vries, the old system, known as a “proof of work”, was based on private individuals and businesses mining new coins on a daily basis, which propelled this industry to be worth more than $22 million before the merger.
A mining challenge was held between the miners who used huge, power-guzzling computers to compete with each other by solving complex equations, in order to add entries to the blockchain and generate coins for the winner.
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Overnight, their business model was wiped out by the merger.
“These mining rigs do not magically turn back into invested capital once they are turned off,” said a crypto-miner with the name of “J” who is based between Singapore and Hong Kong and is running such a business.
According to him, keeping his staff and equipment idle has been costing him between $35,000 and $45,000 a month, while he thinks about what his next step will be as he tries to figure out what to do.
There has been a lot of buzz about the “astronomical” growth of Ravencoin, an asset that has risen in value after the merger and has been tweeted non-stop by a miner who uses the name Leon Ravencoin.
It was predicted that these coins would have around one-fifth as much computing power as the pre-merge Ethereum blockchain was at the time.
The company, however, reports that it generates only about $500,000 in daily revenue, which means only the most efficient machines with the lowest energy costs will be able to make a profit, according to De Vries.
Therefore, one-fifth of the computing power would produce far less electricity consumption than one-fifth of the electricity needed to operate the computer.
The Centralized design
Besides the problem with miners, the new system is also prone to several other issues, namely the implementation of the so-called proof of stake.
It is now possible for anyone with a large amount of ether to stake on the blockchain to “validate” new entries on it.
It is important to remember that the more you stake, the greater your chances of being able to update the chain and earning coins are.
Research by Dune Analytics has found that because of the way the system is designed, it gives an advantage to the largest players, and only three companies constitute more than half of the “validators”.
In the wake of the global financial crisis of 2008, cryptocurrencies were envisioned as a way to replace the bank, corporation, and government institutions that failed so spectacularly during the global economic meltdown.
However, crypto-miner J believes the new Ethereum blockchain is more centralized than the old one, and that it is no longer being used for any real purpose.
In the meantime, the US Securities and Exchange Commission chairman Gary Gensler has indicated proof-of-stake appeared to be a securities market that might fall under his jurisdiction as it looks similar to the securities markets that he oversees.
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If Ethereum Classic is the main proof-of-work replacement, Ethereum Classic could end up being the biggest disaster for Ethereum, with enough disgruntled purists switching to some of the gas-guzzling proof-of-work alternatives.
“ Ethereum Classic prices have not been capped,” said de Vries, implying that the price of the cryptocurrency could conceivably rise over time if the market shifts in the right direction.
He said he considered it “definitely possible” that blockchain-based transactions would produce a rush in the future.
