Crypto News– A year following its groundbreaking transition to a proof-of-stake (PoS) system, Ethereum has witnessed a substantial reduction in energy consumption and significant enhancements in network accessibility. Nonetheless, there remain various technical challenges on the path ahead.
Ethereum Merge Commemoration: A 99% Drop in Energy Consumption, Yet Ongoing Centralization Concerns
The Merge, executed on September 15, 2022, marked the Ethereum mainnet’s integration with a distinct proof-of-stake blockchain known as the Beacon Chain.
The most conspicuous transformation post-Merge was Ethereum’s shift from an energy-intensive proof-of-work (PoW) consensus mechanism to PoS, resulting in a dramatic reduction in the network’s overall energy consumption.
Data from The Cambridge Centre for Alternative Finance reveals that Ethereum’s energy consumption has plummeted by over 99.9%, compared to the roughly 21 terawatt hours of electricity it consumed during the PoW era.
In addition to its energy efficiency gains, The Merge also rendered the Ethereum network economically deflationary. This means that the issuance of new Ether (ETH), designed to secure the network, has been outpaced by the amount of ETH permanently removed from circulation.
Ultrasound.money data indicates that slightly over 300,000 ETH (equivalent to $488 million at current market prices) has been burned since the Merge. At the present burn rate, ETH’s total supply is decreasing by 0.25% annually. While many supporters anticipated a surge in Ethereum’s price due to this deflationary pressure, these hopes were dampened by various macroeconomic headwinds such as the banking crisis and surging inflation.
Notably, Ethereum’s growth lagged behind Bitcoin’s (BTC) price surge in the first quarter of the year. Bitcoin, the flagship cryptocurrency, appeared to benefit from the traditional financial instability caused by the banking crisis.
Setting price movements aside, the core theme of the proof-of-stake upgrade was the replacement of miners with stakes to secure the network.
The subsequent Shapella upgrade in April 2023 prompted a substantial influx of ETH into staking, with major beneficiaries including liquid staking providers like Lido and Rocket Pool.
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