This article is part of our On the Radar 2022 series.
By all accounts, Ethereum had a great year.
The price of Ether rose 400% in 2021, assets locked in DeFi soared 12x to $250B, and network users paid nearly $10B in fees.
However, the increased network activity in 2021 saw Ethereum’s annual energy consumption skyrocket past 100TWh, putting it on par with Kazakhstan.
Crypto, and specifically Proof-of-Work (PoW) blockchains like Bitcoin and Ethereum, have been criticised for their impact on the environment, and perhaps with good reason.
Taken together, the top two cryptocurrencies by market capitalization constitute the 12th-largest consumer of electricity in the world, just behind the United Kingdom.
Ethereum developers recognized early on that Proof-of-Work would not be sustainable as the network grew beyond a certain size, and so a multi-year plan to transition Ethereum to a more efficient Proof-of-Stake consensus mechanism was set in motion with the launch of the Beacon chain in December 2020.
Currently, 276K validators have staked over 8.8M ETH ($33B) and are earning ETH2.0 staking rewards.
The final step in Ethereum’s transition to Proof-of-Stake has been dubbed ‘the merge’, in which the current Ethereum mainnet will merge with the Beacon chain PoS system, which has so far been running in parallel with the existing PoW mechanism.
This will mark an end to energy-intensive mining and the Ethereum Foundation expects energy use to drop by 99% once the transition is complete.
The merge is expected to occur in the first half of 2022.