Bitcoin under pressure after Ethereum merger
With the success of the merge, Ethereum could use 99.9% less energy.
With the success of the merge, Ethereum could use 99.9% less energy. Bitcoin has meanwhile become an easier target for critics because of Proof of Work.
Thursday the Ethereum Merge succeeded. A switch from the energy-intensive Proof of Work (PoW) to the Proof of Stake (POS) consensus mechanism would cut energy use by 99.9%. Now Bitcoin is under pressure. The critique: energy consumption is too high, the CO2 impact too harmful for the environment, and PoW technology too outdated.
Sideswipes from all sides
Bitcoiners have faced a lot of skeptical and attacking remarks lately. There have been numerous studies, papers, and debates about PoW vs PoS. One thing has changed: authorities, governments, and environmental groups are taking the lead as well.
Greenpeace USA launched the petition "Change the Code, not the Climate" in March. The shift to "Proof of Stake" was proposed in this context. Apparently, politicians in the EU Parliament took note: during the MiCA process, a consensus switch was also discussed.
ECB and White House have energy concerns
Scientists at the European Central Bank (ECB) published two Bitcoin reports this summer. The first report looks at the massive energy use of "some crypto assets, which are estimated to consume as much energy annually as individual countries like Spain, the Netherlands, or Austria". Everyone knows which "crypto assets" this refers to: Bitcoin.
The second document points to the "holy grail of cross-border payments". But again, it’s clear: Bitcoin isn’t that. One of the main criticisms is the high, energy use tied to proof of work.
Recently, the White House called for a drastic reduction in the crypto industry’s energy use in a report on climate impact. The report says climate goals take top priority: greenhouse gas emissions must be reduced by more than 50% by 2030. To do that, states, communities and the crypto industry must collaborate on designing, developing and using eco-friendly crypto tech. Failing to hit the targets could lead to a proof-of-work ban.
Bitcoin stays Proof of Work
At Berlin’s Socratic Lab, a monthly Bitcoin meetup, the proof-of-authority concept from the Bank of Italy’s science team was the topic in August. After a quick laugh, the next agenda item was discussed.
The same behavior is seen in the fiery Michael Saylor, who just responded to the White House’s demand. In a letter, he says he thinks the recurring energy talk is part of lobbying by competing Proof-of-Stake crypto projects.
But not all Bitcoin supporters are as harsh as MicroStrategy’s founder. Crypto expert Matthias Reder shares his view on the merger:
''I think Bitcoin belongs in every sane portfolio. Still, I’m watching the merger, and I’d be honest that I’ll be glad if it goes through. Because competition in the bitcoin, blockchain space matters a lot to me. Of course you could say Bitcoin and Ethereum aren’t direct competitors. But there is certainly competition in the crypto space. There’s competition for companies, venture capital, and the sharpest minds in the field. Competition is essential for innovation. So from that perspective I view the merger as positive''.
How the Merge will ultimately affect Bitcoin, its energy use, and Proof of Work remains to be seen. In the meantime, a look at the Flippening Index helps. While it had surged in recent months, Ethereum hasn’t managed to reach more than 54 percent of the market cap of the number one crypto this year. For Bitcoiners, changing the consensus mechanism is as hard to imagine as a flippening: because Bitcoin without Proof of Work isn’t Bitcoin.
