Ethereum plans to reduce its energy consumption absurd by 99%

Bitcoin is absorbed most of the clamor and obscurity accumulate on cryptocurrencies, leaving behind its smaller and smaller brother ether. But Ethereum is all but small. Its market capitalization was about 10 billion dollars at the time of printing and has an equally huge energy footprint.

The mining of Ethereum consumes a quarter or a half of what Bitcoin does, but this means that for most of 2018 it was using roughly the same amount of electricity as Iceland. In fact, the typical Ethereum transaction consumes more energy than a normal US domestic use in a day.

"This is just a huge waste of resources, even if you do not believe that pollution and carbon dioxide are a problem.There are real consumers, real people, whose need for electricity is removed from these things," he says. Vitalik Buterin, the 24-year-old Russian-Canadian computer scientist who invented Ethereum when he was only 18 years old.

Buterin plans to finally begin undoing its energy wastage in 2019. This year Buterin, the co-founded Ethereum Foundation, and the broader open source movement advancing the cryptocurrency have all intends to field test a review long promise of the Ethereum code. If these developers are right, by the end of 2019 the new Ethereum code could complete transactions using only 1 percent of the energy consumed today.

The attempted rebirth of Ethereum will be one of the "most fascinating technologies to watch" of the year, says Zaki Manian, who is advising Cosmos to the cryptocurrency. Manian says that the development process of Ethereum means that more programmers and organizations must collaborate in the open, converge on specifications, invent all the technology to implement them and make them work together without problems. "It is by far the most technically ambitious open community project that has ever been attempted," says Manian.

Like Bitcoin, Ethereum relies on a blockchain, which is a digital ledger of transactions managed by a community of users. (It is called blockchain because new transactions are grouped into "blocks" of data and written at the end of a "chain" of existing blocks that describe all previous transactions.) However, Buterin has designed Ethereum to do more than keep it safely a ledger without a central authority. His vision was that Ethereum would become a global, decentralized computer, accessible to all and substantially immune to downtime, censorship and fraud.

What gives Ethereum's blockchain this potential is its ability to store data, support decisions and automate the distribution of value. It manages these activities through intelligent contracts, programs written by users or developers in the custom encoding language of Ethereum. Smart contracts have obvious business applications, but the long-term hope is that apps created by them will ultimately make Ethereum the most advanced cloud computing platform.

That noble vision clashes with the current reality of Ethereum. While there are some million-dollar apps running, Buterin also says he suspects that Ethereum is consuming more resources than it returns to benefits for society.

The problem is all that mining. Like most cryptocurrencies, Ethereum relies on a computational competition called proof of work (PoW). In PoW, all participants run for cryptographically secure transactions and add them to the globally distributed blockchain ledger. It is a winning race, it takes everything, rewarded with new crypts coined. So the more computational firepower you have, the greater your chances of profit will be.

The extraction of PoW is difficult depending on the design. The idea is to prevent any entity from controlling the blockchain. For example, if the computer system of a bitcoin had more than half of the entire mining power of the network, that miner could perpetrate fraud, such as the revision of long-term transactions. Bitcoin users would do little to appeal because the miners are anonymous.

In theory, PoW continues to extract a distributed deal. In practice, however, the development of application-specific ICs (ASICs) that accelerate extraction, produced by a handful of chip makers in China, has focused power on many cryptocurrencies.

Ethereum has continued the struggle against concentrated power by selecting a memory-intensive PoW algorithm to extract "ether", since its token value is known. This ethereal extraction algorithm penalizes the use of ASICs.

However, what the EthEleum PoE algorithm has not prevented is an explosive growth of computing resources dedicated to the extraction of the ether. The direct computing power for this task has increased by more than 25 times in 2017, as the token value has risen from $ 8 to $ 862 and the mining companies have built dedicated data centers full of general purpose graphics processing units, which they adapt well to the extraction of the ether.

The resulting energy demand has created a reaction from environmentalists. Utilities and communities, meanwhile, see financial risks and opportunity costs when dealing with cryptocurrency miners who devour cheap electricity while creating few jobs. Serving miners may require public services to improve equipment, which could become redundant if cryptocurrency prices fall and mining operations are interrupted.

The recent market dynamics support utility concerns. The value of the ether peaked at $ 1.355 last January and then started to slide down. In November, it crashed below $ 120, low enough to wipe out the miners' profit margin and induce some to slow or disable the mining platforms. According to a screening of the Digiconomo, a site created by Alex de Vries, a senior specialist and blockchain specialist at PricewaterhouseCoopers, Ethereum miners will probably reduce total energy consumption by more than half in less than 20 days.

It is therefore not surprising that some public services, such as Montreal-based Hydro-Québec, set higher electricity tariffs for miners. This pushback from utilities and their regulators can further erode the security of PoW-based cryptocurrencies. Restricted access to power and increased energy costs will prevent new miners from joining the game, accelerating the concentration of mining power. While concentrating, the risk of collusion and fraud increases.

For Buterin, the reduction in energy consumption was part of the vision of the beginning of Ethereum. Most of the other Ethereum supporters are on agreement. "It is widely accepted in the Ethereum community that PoW uses too much energy, which is the number one priority for me," says Ethereum contributor Paul Hauner, co-founder of Australian computer security company Sigma Prime.

The Ethereum plan is to replace PoW with the proof of interest (PoS), an alternative mechanism for distributed consent applied for the first time to a cryptocurrency with the launch of Peercoin in 2012. Instead of millions of processors that simultaneously process the same transactions, PoS randomly selects one to do the job

In PoS, participants are called validators instead of miners and the key keeps them honest. PoS does this by requiring each validator to stake a stake – a stack of ether in the case of Ethereum – as a guarantee. A bigger bet gains a validator proportionally more chances in a turn, but it also means that a validator surprised to cheat has a lot to lose.

Switching to PoS will reduce the energy consumed per transaction Ethereum more than a hundred times, according to Buterin: "The PoW part is the one that consumes these huge amounts of electricity.The same blockchain transactions are not very computationally intensive. It's just checking for digital signatures. "It's not some sort of heavy 3D mapping or machine learning on gigabytes of data," he says.

Reducing computational power and energy consumption is not just an ecological move. It also has a financial advantage, because it should reduce the emission rate of fresh ether to encourage the validators – extra money that dilutes the value of a currency. "Because PoS validators are not spending all this energy, we do not have to reward them so much," says Darren Langley, a senior blockchain developer with Rocket Pool, in Brisbane, Australia, who is developing an app that will assemble stake-out pools, which they pay interest to ether owners who join the pool.

Switching to PoS could also increase security. Under PoS, the position of the account of each validator is known and can be destroyed if that validator breaks the rules. Vlad ZamfirThe main PoS developer of the Ethereum Foundation compares this to the Bitcoin community by acquiring the power to incinerate the data centers of a miner who abuses his power.

By 2015, the benefits of PoS had already convinced the Ethereum community to make the change, and leaders like Buterin expected to do so in just a year or two. To clarify their intentions, the core developers of Ethereum reprogrammed their PoW code to create an exponential increase in mining difficulties. Known as the "Difficulty Bomb", it began to slow down the creation of new transaction blocks at the end of 2016 and was expected to bring the extraction of the oil to a grinding arrest a few years later.

This time bomb, however, worked more like an alarm clock with a snooze button. In October 2017, when the time of the mines was almost doubled to 30 seconds, the Ethereum team zeroed the time, delaying the day of the PoW judgment of about 12 months. And they'll probably hit the nap again.

It's not like the Ethereum Team is sleeping. In fact, says Buterin, the developers of Ethereum have already killed most of the theoretical dragons associated with PoS. But the process of turning these theoretical solutions into efficient software has moved slower than expected.

What provides hope for 2019 it is a new radical plan adopted by the leaders of Ethereum in June 2018. Before that, they had anticipated the construction of PoS in the existing Ethereum blockchain. In June, they decided to take a clean break and build a completely new blockchain, which operates exclusively through PoS.

The two-wire solution, called Ethereum 2.0, makes a world of difference for the Ethereum programmers because continuing on the original chain would have meant writing the PoS mechanism as a sophisticated set of smart contracts. Hauner, who is conducting an effort called Lighthouse to build an Ethereum 2.0 client software, states that Ethereum's smart-contract language is a difficult medium to write complex code. "Writing smart contracts is a very limited computing environment. You can not do complicated things about it," he says.

Only a few months after the decision to move to Ethereum 2.0, its PoS specifications had been outlined and over half a dozen teams were already working on software implementations using a variety of programming languages. The Hauner group of Sigma Prime is developing its Ethereum 2.0 client using Rust, for example. It is expected that this app and others are running PoS on beta networks, or "testnet", at the beginning of 2019.

Buterin states that public testnets could manage other Ethereum 2.0 innovation chains with multiple branches to increase transaction throughput by the end of 2019. But he warns that there may still be "unknown unknowns" lurking that could bring their timeline back.

Being a multi-billion dollar network, Ethereum obviously has a lot to lose if it launches glitchy or unsafe technology. To play on the Ethereum PoE chain, ether owners will have to file an intelligent contract on the original Ethereum chain that irreversibly transfers the ether to the new chain. Any misstep could jeopardize the whole ecosystem of developers and projects that use Ethereum's smart contracts.

But Ethereum also has a lot to lose if it is delayed much longer. A series of well-capitalized projects – Cardano, Dfinity, Eosio and Manian 's Cosmos, to name just a few – are opening up their own PoS-based blockchains. Like Ethereum, they try to show that high security and high efficiency do not disagree.

The first to unlock the potential for blockchain applications could become the IT platform of the future. Others will probably fall into ruin. "This environment is naturally quite a predator," says Manian. "There will be a single platform that survives."

This article appears in the January 2019 press issue as "Ethereum will cut its absurd energy consumption".