Last night the Ethereum blockchain severed its links to crypto mining.
Codenamed ‘Shanghai’, the hard fork capped off ‘The Merge’ – Ethereum’s move from proof-of-work to proof-of-stake, fundamentally changing the way transactions are verified and the network secured.
Rather than relying on carbon-intensive computing to validate new data blocks, as with Bitcoin, users now stake cryptocurrency as a guarantee to secure and confirm new blocks.
After Shanghai, validators can now withdraw their staked ether or redeem the rewards – leading to fears that the market would be flooded with withdrawal requests.
However Ethereum will only permit 1,350 validators to withdraw their stake each day over the next 18 months, and each of these has staked 32 ETH – so no more than 43,200 ETH can enter the market per day.
Although this shift to a proof-of-stake system removes a barrier to more mainstream adoption of crypto, Joe Baguley, vice president & CTO, EMEA at VMware, says Bitcoin’s continued reliance on proof-of-work is a huge problem.
“The debate around Bitcoin’s environmental impact is one we will be having for years to come. For naysayers to imply the environmental impact of crypto mining is negligible is a mistake,” he said.
“It is an oversight of the long-term impact proof-of-work blockchains will have on the planet, which will only rise, particularly as we’ve seen more mainstream adoption and legal tender of mining currencies such as Bitcoin from the likes of El Salvador and, more recently, St Kitts and Nevis in the Caribbean.
“The Ethereum Merge is a responsible step in the right direction, removing a fundamental environmental barrier to more mainstream adoption. But it won’t put a plaster on this carbon-intensive [overall crypto] network, particularly if Bitcoin won’t also overhaul its underlying infrastructure.”
Baguley, who sits on several advisory boards at the European Commission and ETSI, and is a founding committee member of the Data Centre Specialist Group at the British Computer Society, says Bitcoin’s “ruthless” energy consumption cannot be offset with renewable energy.
“Plugging renewable resources into powering these blockchains can’t even begin to counteract its environmental burden; we just have to consider what other legitimate uses could have been offset with that same power,” he said.
“Thankfully, not all cryptocurrencies have the same environmental impact as Bitcoin. The question now arises on what can be done with the hardware required for cryptomining.
“There are already reports of powerful GPUs being sold off. What we need to ensure is that they aren’t being repurposed to mine other cryptocurrencies, but recycled for a greener use unrelated to the proof-of-stake protocol.
“There’s no such thing as ‘green’ crypto mining. What we really need is a cryptocurrency that is green by design and to prioritise building a more sustainable blockchain ecosystem from the outset – one which is both environmentally and financially stable.”
The next major Ethereum update, ‘Cancun’, will focus on scalability by reducing gas fees and improving transaction times.
Cryptocurrency shorts
Stablecoins must be regulated in the same way as commercial bank money, says Bank of England governor Andrew Bailey. “We have concluded that the public should expect assured value in digital money, and confidence in this is needed to underpin financial stability,” he said in a speech at the Institute of International Finance.
Bankrupt FTX has recovered over $7.3 billion in cash and liquid crypto assets, it says, helped by an increase in crypto market prices this year. It is also negotiating with stakeholders over a potential restart of its crypto exchange, while a Swiss court has approved its request to explore the sale of its European arm.
Social marketplace HUG, founded by Facebook Live creator Randi Zuckerberg, has raised $5m in a funding round led by DIGITAL.
Paxos is the latest company to plot a withdrawal from Canada following new regulations that require crypto services to segregate Canadian customer funds and refrain from offering particular services. All Canadian account activity will halt on June 2nd.
Crypto prices
The overall market cap of the 23,300 coins is at $1.23 trillion at the time of writing (7am UK), a 1.1% increase in the last 24 hours.
For round-ups of recent cryptocurrency news developments, click here.
For valuations of the top 100 coins by market cap in US dollars, plus 24-hour price change, see below.