Matthias Hafner, Beatrix Marosvölgyi - The Green Evolution of Ethereum

Transcript

okay so first of all um we are going to explain to you uh the method used to evaluate uh the life um the environmental impact of products and services and then we are going to tell you more about the sustainability aspect of proof of ferium proof of stake ethereum the merge and the Duncan upgrade and then we are going to close our presentation with some summarizing thoughts now let's try it again I pushed the button yeah it's not working okay now it work I don't know why

thanks so um the life cycle assessment is the standard method used uh to to compute the environmental impacts associated with product life cycle and as you can see the steps the steps of a product life product life cycle are the following uh it's it can be divided into the raw material extraction um that is followed by the manufacturing and and processing and then the the product is transported to the retailers where then it's sold for the for the consumers then they use it and then they can dispose of the product or they can bring it to a recycling center um there are many different

environmental impacts a product or service can cause during life cycle these can be connected to the material and energy input or to the emissions water or air soil and so on and a few important examples of environmental impacts are the energy consumption the associated greenhouse gas emissions the water usage and the waste generation okay let's try yeah great thank you and in connection with blockchains there have already been a few attempts to conduct a life cycle assessment especially on bitcoin and ethereum since blockchain is digital product its life cycle assessment is based on the Hardwares and softwares

used to operate them uh currently the most studied impacts are the energy consumption and the greenhouse gas emissions especially in the use phase of a blockchain a few researchers also try to estimate the energy consumption in the production phase which is essentially the production of the mining device or other Hardware uh used for operation due to the lack of public data on Specialized mining Hardware it is extremely difficult to estimate the environmental impact of the production of every single part of mining hardware and since usually there is no need uh for specialized hardware for validation and node operation the range of Hardware that can be used for a blockchain like ethereum is even wider so it's even more

uh difficult to estimate the the environmental impact and depending on the country in which the hardware used for the blockchain is produced us or operated the greenhouse gas potential of a blockchain will be different a challenge by this calculation is that it is that that it is difficult to find trustworthy data on the location of every minor or node operator and to tackle this many researchers use a global average average emission intensity or make different assumptions on the location of the nodes and on the location of the users so in most studies only the use phase of U of blockchains are estimated whereas the energy consumption and the greenhouse gas emission estimations of other life cycle

life cycle phases like the transportation the usage and Retail and the VTE disposal are are ignored cannot be calculated correctly and the least studied impact categories of blockchains are their water usage the associated emissions and the amount of waste generated and recycled so the main uh reasons for the lack of research in these impact areas as I said already is the lack of data on Hardware geographical Loc ation and on the blockchain users and operators and this lack of data is actually not only a potential issue with blockchains but also with other products and services but due to the decentralized nature of blockchain it is especially significant and difficult to solve

so so in this short introduction to life cycle assessment we mainly discussed one important aspect that con contributes to blockchain's material and energy consumption oh sorry this is this slide and as you can see on the table below uh there are other driving forces behind the energy consumption of a blockchain the energy and material consumption is driven by the hardware and software but also by the consensus mechanisms and the redundancy in the blockchains architecture and all of these aspects are intertwined with each other so let's start let's continue our journey with uh discussing the implications of the consensus mechanisms mechanism so etherium was originally launched as a

proof of consensus mechanism uh just as Bitcoin but how does this work and um how do this affect the environmental impacts of ethereum uh in a proof of frog system miners uh verify transactions and add news new blocks to the blockchain by solving a complex mathematical puzzle and the mathematical puzzle is in a sense the task of solving a hash function by a trial and error process of finding the right notes which is an arbitrary number and the hash function of hash algorithm is a cryptographic function function which in a sense translates an input into a unique and deterministic set of characters and the output of this cryptographic translation is the so-called hash it is highly unlikely to get back to the original set

of characters from this hash so when the generated hash of the block and the nons are combined they are hashed again together and if the result is less than the so-called difficulty the block has been mined and can be added to the Block Chain if it is more The Miner has to try again with a new new nons and the larger the Computing hash rate of miners in the network the more the difficulty increases to keep the block time constant and after a minor solves the puzzle correctly he communicates the block to the others and after it is validated by others as well it can be added to the blockchain and the network hash rate is measured in Terah has per second and it is essentially the number of calculations or hashes created per second on the

whole network cumulatively this this measure gives us a clue about the electricity invested into mining so the results of proof of work ethum a common issue with proof of work blockchains is that as Hardware become more and more efficient in terms of hashes created per second the difficulty of solving the puzzle has to increase constantly to keep the block time and as it can be seen on the figure on the right uh this is also the case for proof of workum the network difficulty on the upper figure goes hand in hand with the annualized electricity consumption of ethereum and another source of electricity consumption in proof of work ethereum besides the mining uh are are

the execution of smart contracts but relative to mining this is only a negligible amount um the table on the left compares the results from the studies from the University of Cambridge and from the crypto carbur ratings Institute with the estimates about Bitcoin the analyzed electricity consumption shows the total yearly electricity consumption of the whole ethum network and assumes continuous power at the rate measured on the 14th of September which is right before the merch the analyzed carbon footprint corresponds to the total greenhouse gas emissions in the period of one year assuming a constant emission rate the estimations are from the University of Cambridge and from the crypto carbur ratings Institute so compared to bitcoin

both the analyzed elect electricity consumption and the carbon footprint of ethereum were around four times smaller but the number of transactions of on ethereum were 23 times larger and due to the constant increase of energy consumption ethereum had to find a way to to become more sustainable and this way was the change from proof of work to proof of stake so the main motivations behind the merge uh next to the sustainability aspects were were the where the need to increase scalability and to increase transaction speed and it started in December 20 20 and lasted until the 15th of SE September 2022 yes and the merge is called such

because the ethum mayet was merged with the bent chain where the proof of stake uh consensus mechanisms had already been tested previously uh as the figure on the right shows the merge had a huge impact um on the on the environmental impact of ethum according to the crypto carburs in Institute and the University of Cambridge uh it led to a 99 .9% decrease in energy consumption and carbon food footprint and all this was due to the change of consensus mechanism which defines the hardware and software used uh on the network so through the change of consensus mechanism from proof of work to proof of stake

essentially um the way of providing Security on the network changed from providing it through work uh electricity consuming work with uh instead of that it is provided with Stakes Financial Stak stakes and this led to The Disappearance of the work related electricity consumption obviously specialized Hardware is also not necessary anymore to secure the network and the remaining electricity consumption is essentially caused by the execution of the of the smart contracts the simple Hardware uh by the electricity consumption is of the much simpler Hardware that has to be used and by the softwares so the client electricity consumption and the result is a drastic

drastic decrease of environmental impact as I've already mentioned and uh sorry and on the table on the left you can see the environmental impact results estimated by the University of Cambridge and The cryptocarbon etics Institute and the numbers of PayPal as a comparison from 2022 uh so let's first first focus on the comparison of pre and post merge the numbers pre merge um are those are those estimated day before the merge whereas the numbers post merge are those estimated day after the merge and depending on the study the analyzed electricity consumption was reduced by a factor of 8 to 10,000 whereas the carbon

footprint was reduced by a factor of 12 to 13,000 after the merge and when we compare these results to PayPal's climate report from 2022 we can see something even more interesting at first s before the the merge eum's analized electricity consumption was around 80 times larger than papals and after the merge ethereum's electricity consumption became more than 100 times smaller than that of Pap so if you compare the carbon footprint of the two uh we see an even greater difference according to papers reported carbon fruit pin from from scope one and scope two emissions um they emitted 517,000 600 tons of SE CO2 CO2

equivalent and it is 69 around 690 times larger than that of eum's emission post merge so it is also important to compare them in the dimension of transactions so what is the utility essentially and if you calculate the year number of ethereum and esc20 token transactions uh with the help of gas fees we get 1.7 billion transactions ethereum transactions and 5 80 million erc20 uh transactions and compared to this PayPal achieved 22 billions of transactions if you break these numbers down with the yearly electricity consumption and carbon

footprint uh we see that the paper transaction needs around 10 times more electricity than an ethum transfer and also in terms of carbon emissions we see that uh with the paper transaction 23.2 gram of CO2 equivalents are emitted which is equivalent to around 116 Google Google searches that's a fun fact and it is more than 40 times larger than the half grams em ited through an ethereum transaction um so these know these numbers show clearly that the merge actually be so that after the merge eum actually became a Greener Greener transaction Network than PayPal and now I would like to give it to Mattias hner

who is going to tell you more about the Denon upgrade and the summarizing thoughts thank you very much for this uh very nice overview of the current state so I'm going to talk a little bit um about um the next steps so we have seen like that the merge already reduced a lot of the environmental impact and now the question is what other factors um do drive basically the environmental impact of etherium um if we go to the next slide um want to talk a little bit about the denune upgrade so what was the denune upgrade um it consists of nine um eips uh most importantly was Proto tank

sharding uh I think you have already heard of it basically it introduced blops um so these blops is basically a more um efficient way to start data in particular um transactions of layer twos um so so um of this uh second uh layer of of transactions that makes it more efficient basically to conduct transactions and why are these blops more efficient to hold transaction well one main reason is because they are stored only for a temporary time and not forever which makes it cheaper to conduct transaction on layer

twos so um this basically reduces L2 fees and overall what we see um it before the merge was highly um concerned about the consensus mechanism um protos sharding yeah den sharding and l2s as as a whole basically the evolvement of of conducting transactions not only on the layer one but also on the layer two and tackles basically the redundancy problem so with redundancy we mean that um in in layer one um every transaction is basically recalculated on every note so in a centralized system like PayPal we only have a few redund redundant

calculations to ensure the system basically the trust of the central entity ensures that it's correct in blockchains we have this redundency by default uh because many many different notes basically um all notes basically calculate or ensure um that um the the uh the transactions are correct more or less so this of uh obviously this requires more computation however um Layer Two um is is possibility to reduce this redundancy in a way that not all transactions are calculated by all nodes we have like a um a second system where some um uh some

transactions are aggregated and stored in aggregated way um and if we look now at the implication um we as I said it allows L2 and Proto Dan shorting allows basically for a more efficient allocation um of the resources so to say and and reduces I call it unnecessary rany um so because these effects um if we look particularly at optimistic rollups um which are quite um centralized in the sense of that the aggregation of the transactions is quite centralized it there are mechanisms to check for it afterwards but the

aggregation is quite centralized so it's highly efficient so the costs uh the computation costs they come basically for optimistic rollups for storing this data on the layer one and and therefore we can use the fees um as an approximation for the consumation um computational consummation and if we look at the prices um of l2s um then we see that they are now roughly um for optimistic rollups they're roughly uh for L1 at that point in time when you take it the these are linearly scaled they were $2 um for optimistic rollers at the same time that we captured this

there were two cents and and this ratio is in line over time so maybe it can fluctuate both um but because they're highly dependent on each other is mainly about 100 times for other types of of rollups so for septics set key rollups and this ratio is is lower um but so to say when we look at L1 and L2 with optimistic rollups or L2 in general we can say that basically these L2 make ethereum 10 to 100 times more efficient for today um and if you look at the tenun upgrade specifically um it reduced the um the the L2 fees by 80 to 90% so

basically 80 90% of this reduction is is um is due to the tenun upgrade and obviously tenun upgrade was integrated 30 days ago so that might change a little bit these numbers so basically coming to that um to the discussion um um let's look at etherium strategy so um the tenun upgrade basically is the start of the search area of etherium and etherium the goal of this this of etherum is basically to increase the scalability um of to 100,000 100,000 transactions per second so etherium strategies to increase this cability and if we look now at the main sources

identified over our journey and these are two so once we have the consensus mechanism that was tackled with the switch from energy to assets as a security which reduced um the environmental impact immensely by 99.9% so making it already Greener um or if we have at least at par with today's um uh uh today's transaction Systems payment systems so the next step is red andany as we identified and here that we see that um these temporary data storage so the proton shorting and aggregated verification so layer twos um reduced

the impact again to roughly 90 to 90 90% so making it even Greener um so basically if these transactions are conducted on layer twos so this technology is greener than today's um uh uh Payment Systems so if we now compare so this is good good what we basically see if you compare now etherum strategy which goes beyond so this we haven't reached this 100,000 transactions per second but if we compare that basically with the direction then we see that it's aligned so basically the etherum wants to make um uh the more transactions per seconds so more efficient so this helps also the environment because that means

and that less computation are needed to store this transaction so eum strategy um is aligned with the environmental goals what holds the future I think um there we we as I said there is more going on um with tank Shoring so more evolvement um of of etherium so to make it more efficient um then we have uh what else can be done is basically more separation of tasks that also helps the the efficiency so one is basically this proposal and Builder separation which is discussed now um and obviously what we need to do our um estimation for L2 and and um for for D Shing was very roughly using the fees

estimates uh especially with set key rollups and there are also additional computations that's come with it so um obviously we need to better understand the impact of various um L2 types to have a clear view basically how green etherum will be in the future yes so that's about it thank you very much for your attention [Applause]