Ethereum energy consumption had been on the rise through 2021. Most of it had been triggered by the bull market which had brought renewed interest to the market. However, with the market now finally headed into the dreaded bear trend, the interest in the blockchain has waned. As a result, activity on Ethereum is down and what this has translated to is a decrease in the amount of energy used on the network.
Energy Usage Nears Yearly Lows
Going into the year 2022, the Ethereum energy consumption had been on a steady rise. The network had seen an influx of new users during the course of last year due to the rise in the decentralized finance (DeFi)” and non-fungible tokens (NFTs). Estimated energy consumption for the year had grown about 50% in the span of six months. By the third week of May, the estimated energy consumption for Ethereum had peaked at 93.98 TWh.
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The decline from this point onwards would be swift though as June had come with the bear market. The decline in prices saw investors begin to pull out of the digital asset, which had initially resulted in a rise in network activity. However, the following weeks saw the energy consumption decline by about 50%.
ETH energy consumption declines | Source: Digiconomist
Presently, the estimated energy consumption for the Ethereum network is 51.82 TWh. The last time that it was this low was in September of 2021. It follows the same trend set by Bitcoin, the largest cryptocurrency in the space. Data shows that bitcoin’s estimated energy has dropped to 204.5 TWh, which is the lowest that it has been in a year. Additionally, the daily energy consumption for bitcoin is now sitting 30% lower than the previous month at around 10.57 GW on a daily basis.
Ethereum Mining Profitability Drops
The decline in the price of Ethereum has brought multiple implications with it. Not only has its energy consumption reduced, but it has also seen a drop in the mining profitability of miners. These miners who are rewarded with coins for helping to confirm transactions on the network are now recording less cash inflow dollar-wise due to the price crash.
ETH loses footing at $1,200 | Source: ETHUSD on TradingView.com
Given that miners have to continuously pay for their operations, the drop in price meant that while they were still paying the same dollar value, or more, to carry out their mining operations, the returns have now dropped.
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The decline in the energy consumption of the network shows that these miners are indeed scaling back their mining operations due to this drop in profitability. The same is been recorded across the leading network Bitcoin which has seen its price decline more than 60% from its all-time high.
Featured image from CryptoSlate, chart from TradingView.com
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Author: Best Owie