Bitcoin since its arrival has experienced extreme debates and criticisms and an important one is its environmental footprint of Bitcoin. In 2019, the Cambridge Centre for Alternative Finance (CCAF) launched the Cambridge Bitcoin Electricity Consumption Index (CBECI) to investigate the environmental implications of Bitcoin. These research efforts aimed to bring clarity to the space and provide relevant information and data points.
CCAF, best known for its Bitcoin energy consumption dashboards and research at the Cambridge Judge Business School, unveiled its Cambridge Blockchain Network Sustainability Index (CBNSI) on Wednesday. CBNSI is the first move of CCAF to increase the number of blockchain networks included in the index.
CBNSI provides information on Ethereum’s electricity consumption before and after the merge. The methodology applied for estimating Ethereum’s electricity is based on a techno-economic model similar in logic to what is used for Bitcoin, modified specifically for Ethereum. It is important to note here that for post-merge the methodology to be used is different.
In the published document, the centre decoded Ethereum’s evolution and its environmental implications and mentioned that Ethereum used a PoW-based consensus mechanism (proof-of-work) but later transitioned to proof-of-stake (PoS). This transition often called the merge, is part of a series of major technical upgrades to enable decentralized scaling and tackle environmental concerns.
The document further explained that during the proof-of-work mechanism, Ethereum was predominantly mined using graphics processing units (GPUs) and, to some extent, application-specific integrated circuits (ASICs). While technically capable, it did not consider CPUs (central processing units) in research, as their mining performance is inferior to that of GPUs and ASICs. It further examined pre-merge electricity consumption.
Following that, the document highlighted Ethereum’s shift to a PoS-based consensus mechanism, which started in 2014. In PoW network participants who propose blocks must demonstrate unforgeable proof (a valid block hash) that they have spent computational resources. Conversely, PoS does not require such proof but instead requires participants to put financial resources at stake. It further explained its environmental impact.
The debate around electricity consumption and sustainability has gained momentum, thus, it is extremely important to perform active and thorough research to understand the actual impact of the currencies on the environment. It is evident that as the industry continues to evolve, policymakers and regulators are aiming to strike a balance between supporting its growth and minimizing its environmental impact.
