EXPLAINER: Ethereum is ditching its ‘miners.’ Why?

SAN FRANCISCO — A complex software change to the cryptocurrency ethereum holds the potential to dramatically reduce its energy consumption — and resulting climate-related pollution. But the transition known as “the merge” is not going to do the trick by itself.

With the change enacted late Wednesday, ethereum — the world’s second most valuable cryptocurrency after bitcoin — has effectively eliminated the energy-intensive task of “mining” new coins on its blockchain. Mining requires enormous computing power, which translates to huge energy consumption and, in many areas, greater greenhouse gas emissions at older power plants.

By itself, however, the ethereum change won’t eliminate crypto’s expected environmental impact, although it’s expected to help a great deal. The backers of bitcoin have so far shown little interest in doing away with mining.

BACK UP A SECOND. WHAT IS CRYPTOCURRENCY?

Cryptocurrency is a type of digital money secured via encryption in a publicly viewable and purportedly unalterable way. Using these currencies, people can make direct financial transactions without any need for a bank or other financial intermediaries.

They run on constructs called blockchains, which consist of digitally signed transaction records that document every time a crypto coin is transferred or spent. Blockchains are also known as distributed ledgers because synchronized copies are stored on computers around the world; these copies also make it extremely difficult to alter, insert or destroy blockchain records.

IS CRYPTO BAD FOR THE ENVIRONMENT?

Researchers who have studied cryptocurrency are alarmed by its enormous energy usage. A recent report by the White House Office of Science and Technology Policy cited research findings that as of August 2022, annual electricity consumption for cryptocurrency exceeded that of individual nations such as Argentina or Australia.

This problem, however, isn’t inherent to cryptocurrency. Most of that energy is used for mining, a computationally intensive process for verifying blockchain transactions that also distributes new coins as rewards for competing miners. Crypto mining favors well-resourced groups that can put together a lot of specialized computers and supply them with electricity as cheaply as possible.

That can have unexpected external effects. Prior to the plunge in cryptocurrency values earlier this year, demand for computer graphics cards soared, pushing up prices and emptying store…