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Ethereum’s new upgrade is supposed to decrease its energy usage: Here’s how it works

Here we explain how Ethereum's new upgrade is going to lower the cryptocurrency's consumption so rapidly.

By: Tech Desk | Pune |
Updated: March 28, 2022 6:28:57 pm
Cryptocurrency ethereum, ethereum price, ethereum price rises, ethereum price rises, dogecoin, cryptocurrencyA representation of virtual currency Ethereum are seen in front of a stock graph in this illustration taken February 19, 2021. (Reuters)

Ethereum, the blockchain behind the cryptocurrency Ether, is announcing a major update, which aims to decrease the enormous energy consumed in Ether mining by 99.95 per cent.  The company has announced a move to Proof-of-Stake (PoS) mechanism away from the existing Proof-of-work (PoW).

With the new update, “the energy expenditure of Ethereum will be roughly equal to the cost of running a home computer for each node on the network,”the Ethereum website claims in a blog post. But what does this mean? We take a look at how Ethereum’s new upgrade is going to lower the energy consumption  so rapidly.

Different blockchains, different energy consumptions

For the uninitiated, Blockchain is a digital distributed database, which records every transaction, making every transaction transparent and immutable, meaning that it cannot be changed or modified. And there are different kinds of Blockchains available depending on usage.

The two major blockchains used for transaction is Bitcoin and Ethereum. Bitcoin Blockchain is fast, secure and robust but is extremely expensive. On the other hand, Ether is cost-effective, but is slower as compared to Bitcoin. There is one thing here in common —both of the blockchains consume a lot of energy.

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According to Digiconomist, Ethereum consumes about 112 terawatt-hours of electricity per year, which is comparable to that of Netherlands and more than what Philippines or Pakistan use. A single transaction on Ethereum is equivalent to the power consumption of an average US household over 9 days.

A single Ethereum transaction also equals the energy consumption of more than 1,50,000 VISA card transactions. Bitcoin is worse. It consumes about 137 terawatt-hours of electricity per year.

What is POS? How is it better than PoW?

Both PoS and PoW are methods of mining cryptocurrencies. A chain of private computers — a network — is constantly working towards authenticating the transactions by solving complex cryptographic puzzles. This is called cryptocurrency mining. Most legacy cryptocurrencies, such as Bitcoin, rely on a proof-of-work mechanism. PoW mechanism is a traditional form of crypto mining where thousands of computers are required in a mining facility, consuming high electric power.


But in the case of PoS, anyone who owns any amount of cryptocurrency can put up their tokens as collateral towards the development of blockchain. In return, the user is rewarded a fixed percentage of the pledged assets as rewards when a new block is added to the blockchain. This process is called the ‘staking’ of crypto assets. A block reward refers to the number of cryptocurrencies you get if you successfully mine a block of the currency. For every new block created, miners get additional ownership in the token over time via network fees, newly minted tokens or other such reward mechanisms.

Earlier, proof-of-work was an appealing concept because people just needed an ordinary computer to mine coins. PoS is better than PoW because you don’t really need a mining equipment, which is posed to reduce energy consumption by 99.95 per cent and increase transaction speeds.

Much of mining is now done by large, well-financed pools, without owning any actual device. With the PoS mechanism any crypto holder can now easily contribute to mining and earn specialised rewards.


However, there is still no consensus in the crypto community about the PoS model being better than PoW. Some users and well-known names in the market, such as Jack Dorsey, in a tweet earlier pointed out that this new method does not offer as much security to the network as proof of work offers.

Meanwhile, Alyse Killeen, founder of Bitcoin-focused venture firm Stillmark, said on Twitter: “Ethereum is in so much trouble…ensuring security is becoming harder and harder.” She argues that proof-of-stake is less secure and that it makes Ethereum more vulnerable to attacks.

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First published on: 28-03-2022 at 06:20:40 pm

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