Since its inception, cryptocurrency has dealt with a major problem of energy efficiency, a problem that became apparent after mining became an extremely popular activity. This problem became even more important, initially registering large energy consumption figures. Mining farms grew in power and size to try to mine a token that was increasingly difficult to obtain, mainly due to the enormous size of the market.
However, the main cryptocurrencies today are mined from renewable energies in almost 60% of their entirety, and the most important mining activity today with the cryptocurrency Ether has recently completely replaced the Proof-of-Work, accused of being very energy inefficient, thus initiating the new era of green cryptocurrencies.
The Ethereum Merge Changes Everything
Ethereum used to have two versions of the blockchain, handling mining by two mechanisms: the aforementioned Proof-of-Work and the so-called Proof-of-Stake. This second use the hard drive, instead of the graphics card and the processor as the Proof-of-Stake did, the main pillar of mining and the operation of the entire cryptocurrency system.
By changing the mining model, Ethereum marked a turning point in the market, and the economic results remain to be seen, however, everything indicates that this will be the trend from now on, at least within the cryptocurrencies that use the network. of Ethereum. Currently, Ether is one of the most volatile cryptos of 2022, going from an expectation that its value rose in the market, to an almost sudden drop in value, also bringing itself to the entire cryptocurrency market. For its part, Bitcoin and its main defenders claim that cryptocurrency is nowhere near as polluting as other assets, comparing it to several airlines, demonstrating, at least with monetary data, the amount of energy spent by the entire cryptocurrency industry does not exceed airlines or the retail industry. However, now with proof-of-stake becoming more widespread, this figure will be even lower.
Economically proof-of-work is more demanding
For the technology sector industry, the pandemic meant enormous difficulty in delivering manufactured products, components that needed microchips became increasingly scarce until prices began to skyrocket. The worst part was taken by the components necessary to create cryptocurrency farms, which cost thousands of dollars at their worst, despite the efforts of companies to limit this phenomenon, so that their target audiences could benefit from the products. that they put on the market.
With the cryptocurrency boom led by Bitcoin reaching $60,000 per token in 2020, components came at exorbitant prices and the entire tech sector suffered. The question of whether the proof-of-work is more or less efficient than the proof-of-stake in the economic field is difficult to determine since the scenario of a similar bullish period has not yet been given and only one could speculate about the real impact of the Ethereum merge.
In any case, in a similar scenario, one might think that, in effect, there would be an increase in hardware prices, but especially in SSD-type hard drives, a component that uses proof-of-stake to perform mining. Regarding the reduction of technological waste, it might not be so significant, since the graphics cards used in proof-of-work mining farms are stressed to the point of reducing their useful life in an extreme way, and the same will happen with the SSDs so that the technological equipment discarded would be equivalent in both models.