Ethereum’s move to Proof of Stake and its environmental impact

Ralph Giles and Hannah Jones explain why cryptocurrencies utilising the proof of stake mechanism will grow in popularity


Read the full editorial “Proof of Stake – The Environmental Impact” on the SCL website.

Ralph Giles and Hannah Jones explained in an article for Computer & Law, how despite their volatile nature, cryptocurrencies have gained momentum and become a favourite among investors. These systems verify currency exchanges by the use of a “consensus mechanism”, the most popular of which is “proof of work” which regulates the process in which transactions are verified and added to blockchain.

This mechanism is operated by virtual miners who are required to solve a complex mathematical problem in order to update the blockchain with the latest verified transactions.

Our two IT law experts highlight that this mechanism, although effective, requires a huge amount of computer power and therefore electricity, with a single Ethereum 1.0 transaction consuming as much energy as an average US household uses in a week. “Proof of work” is used by the two largest cryptocurrencies – Bitcoin and Ethereum 1.0. This creates a worrying environmental impact of cryptocurrency mining using the “proof of work” mechanism, exaggerated by the enormous amount of electronic waste generated from the specialised hardware and computer servers used for mining.

Ralph and Hannah report on how Ethereum is consequently making a switch, which is expected to be completed by the end of 2022, to an alternative consensus mechanism known as “proof of stake”. “Proof of stake”, a network of “validators” who contribute or “stake” their own cryptocurrency in exchange for the chance to validate the new transaction, update the blockchain and earn a reward.

“Proof of stake” uses 99% less energy than the “proof of work” and uses less specialised hardware which should reduce the electronic waste issue.

Read the full article on the SCL website.

Bristows IT law expert, Ralph Giles, has further contributed to the Computer & Law Spring 2022 issue, with an article on modern slavery statements. Experienced Commercial and Technology Disputes lawyer and Chair of the SCL Sustainability and ESG group, Sarah Hill, has also contributed to the Computer & Law Spring 2022 issue, with an article on why sustainability and ESG issues matter to SCL


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