On 15 September, the ethereum blockchain is planning to switch off its mining rigs. If it happens, it should reduce the carbon emissions of the entire ethereum ecosystem by orders of magnitude overnight, leaving bitcoin as the only major cryptocurrency to be built on the destructive proof-of-work concept. But the switchover could also throw some of the largest institutions in the sector into chaos, and seems likely to evolve into a cold war between the new version of ethereum and the diehard followers of the old. And that’s if it happens at all.
A brief refresher on cryptocurrencies. The two biggest in the world, ethereum and bitcoin, are based on an idea called proof of work. This – and I’m simplifying – involves the networks outsourcing their security to a decentralised network of miners, who compete to burn ludicrous amounts of electrical energy to generate lottery tickets. Each time a winning lottery ticket is generated, the miner who did so gets a reward (for bitcoin, that is currently 6.25BTC – about £110,000), and gets to verify all the transactions that have happened since the last winner, packaging them up into a neat block, and adding them on to the chain made up of all previous blocks. They stamp the block with their lottery number and the process begins again.
