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The Ethereum network's previous consensus mechanism relied on miners with energy-hungry graphic processing units, seen above. Its latest transformation relies on validators with basic laptops and stable internet connections.Source: South_agency/Getty Creative via Getty Images
Ethereum, the world's second-largest cryptocurrency protocol by market capitalization, virtually eliminated its energy consumption overnight on Sept. 15 by successfully transitioning to a new consensus mechanism known as proof of stake.
Although the long-awaited change did not result in a sudden price action for ether, the protocol's native crypto-asset, industry experts expect the shift to gradually alleviate concerns about how the use of blockchain technology is impacting the environment and demand for energy.
The so-called "Merge" was executed as the energy intensity of cryptocurrency protocols such as Bitcoin and Ethereum has become a hot issue in Washington, D.C. On Sept. 8, the White House released a report required under an executive order signed by U.S. President Joe Biden that detailed the energy impacts of crypto mining operations.
Bitcoin miners, who use a more energy-intensive consensus mechanism called proof of work, accounted for an estimated 0.9% to 1.4% of all U.S. electricity usage in 2021, according to the report. That estimate rose to 0.9% to 1.7% when proof of work Ethereum mining was included.
The White House report called for further federal action to ensure the U.S. crypto industry develops in a sustainable way.
'All applications will benefit'
Electricity consumption is inherent in proof of work's design. Bitcoin miners secure the network by expending significant amounts of capital to purchase and run high-powered computers that solve complex math puzzles, competing for the opportunity to produce new blocks in a distributed ledger of transactions. In return, they receive transaction fees and new bitcoins from a diminishing supply that will eventually be capped at 21 million. Once the bitcoin supply reaches its hard cap, proof-of-work miners will only get paid through transaction fees.
Until Sept. 15, Ethereum miners also used high-powered graphics processing units, or GPUs, in running a proof-of-work consensus mechanism that consumed roughly the same amount of energy as Finland. A consensus mechanism uses a decentralized network of users to propose,...