$ETH Ethereum production has fundamentally changed with the Merge in September 2022. Before this, Ethereum, like Bitcoin, used a Proof-of-Work (PoW) consensus mechanism, meaning new Ether (ETH) was created through a process called mining.
Past Method: Mining (Proof-of-Work)
* How it worked: Miners used powerful computers to solve complex mathematical problems. The first miner to solve the problem added a new block of transactions to the Ethereum blockchain and was rewarded with newly minted Ether and transaction fees.
* Hardware: This process required significant computational power, typically utilizing GPUs (Graphics Processing Units) or specialized ASIC (Application-Specific Integrated Circuit) hardware.
* Energy Consumption: PoW mining was energy-intensive, leading to environmental concerns.
* Reward: Initially, the block reward was 5 ETH, which later decreased to 2 ETH per block. Blocks were mined approximately every 12 seconds.
Current Method: Staking (Proof-of-Stake)
* The Merge: In September 2022, Ethereum transitioned to a Proof-of-Stake (PoS) consensus mechanism. This significant upgrade, known as the Merge, eliminated the need for mining.
* How it works: Instead of miners, the network now relies on validators. Validators are individuals or entities that "stake" (lock up) a certain amount of their Ether (currently 32 ETH) to activate validator software.
* Validator Roles: Validators are randomly chosen to propose new blocks and attest (verify) to the blocks proposed by others. If they perform these duties honestly and according to the network rules, they are rewarded with a portion of the transaction fees and new ETH issuance.
* Energy Efficiency: PoS is significantly more energy-efficient, as it doesn't require intensive computational power. Ethereum's energy consumption decreased by over 99.84% after the Merge.
* Rewards: Staking rewards vary based on the total amount of ETH staked and network activity. The current estimated reward rate is around 2-7% APY (Annual Percentage Yield).
Key Differences
| Feature | Proof-of-Work (Mining) | Proof-of-Stake (Staking) |
|---|---|---|
| Block Creation | Solving complex computational puzzles | Validators chosen based on staked ETH |
| Energy Use | High | Significantly lower |
| Hardware | Powerful GPUs or ASICs | Requires staking a specific amount of ETH |
| Participants | Miners | Validators |
| Reward | New ETH and transaction fees for block creation | New ETH and transaction fees for validating blocks |
Ethereum Supply
* Unlike Bitcoin, Ethereum does not have a hard cap on its total supply.
* However, with the implementation of EIP-1559 in August 2021, a portion of the transaction fees is burned (permanently removed from circulation). This mechanism, combined with the shift to PoS (which requires less new ETH issuance compared to PoW), has made Ethereum more deflationary at times.
* As of April 17, 2025, the total supply of Ethereum is approximately 120.70 million ETH. This number has increased slightly over the past year.
* The rate of new ETH creation under PoS is significantly lower than under PoW.
In summary, Ethereum production no longer involves traditional mining. Instead, the network relies on staking, where participants lock up their Ether to secure the network and earn rewards in return. This transition has made Ethereum significantly more energy-efficient and has altered the dynamics of its supply.