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Why Crypto's Big 'Merge' is Causing Big Headaches

An advertisement of Bitcoin, one of the cryptocurrencies, is displayed on a building in Hong Kong, on Nov. 18, 2021. (AP)
An advertisement of Bitcoin, one of the cryptocurrencies, is displayed on a building in Hong Kong, on Nov. 18, 2021. (AP)
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Why Crypto's Big 'Merge' is Causing Big Headaches

An advertisement of Bitcoin, one of the cryptocurrencies, is displayed on a building in Hong Kong, on Nov. 18, 2021. (AP)
An advertisement of Bitcoin, one of the cryptocurrencies, is displayed on a building in Hong Kong, on Nov. 18, 2021. (AP)

The biggest software upgrade in the short history of crypto has fulfilled its promise to wipe out more than 99 percent of the electricity used by the second-biggest cryptocurrency, experts have told AFP.

That is no mean feat, given that the Ethereum blockchain was burning through about as much electricity as New Zealand.

Sceptics had expected glitches with the upgrade, known as "the merge", but it ended up being a "rather boring event", according to Alex de Vries of the Free University in Amsterdam.

De Vries, whose Digiconomist website models the energy use of Bitcoin and Ethereum, said consumption had indeed plummeted by more than 99 percent on Ethereum.

Moritz Platt, a researcher specializing in crypto at King's College London, said the 99 percent estimates were realistic and heralded a positive step towards "cryptocurrency sustainability".

So the Ethereum blockchain, which supports billions of dollars of trading in games, tokens, art and the ether currency, has cleaned up its act.

But there are complications.

Ethereum faces bitter opposition from those who lost out from the merge and it could also get greater scrutiny from regulators.

- 'Astronomical' growth -
The old system, known as "proof of work", relied on people and firms to "mine" new coins -- an industry worth $22 million daily before the merge, according to de Vries.

The miners used vast power-guzzling computer rigs to compete with each other to solve complex equations, and the winner was awarded the prize of adding entries to the blockchain and generating coins.

The merge wiped out their business model overnight.

"Those rigs do not magically turn back into invested capital," said a crypto-miner known only as "J" who operates between Singapore and Hong Kong.

He said it was costing him between $30,000 and $40,000 a month to keep his staff and equipment idling while he thinks about his next move.

Plenty of miners have sold off their kit, while others are putting their rigs to work on less profitable blockchains that still use the old system.

A miner who uses the name Leon Ravencoin, for example, has been tweeting non-stop about the "astronomical" growth of Ravencoin, one of the currencies to get a boost after the merge.

The combined computing power used by these coins is around one-fifth of the pre-merge Ethereum blockchain.

However, de Vries said they generated only about $500,000 in daily revenue so only the most energy-efficient machines with the lowest energy costs would be able to make a profit.

As a result, one-fifth of the computing power would work out far less than one-fifth of the electricity use.

- 'Designed to be centralized' -
Aside from the problem with miners, the new system, known as "proof of stake", has several issues baked in.

Anyone willing to stake a large amount of ether can now "validate" new entries on the blockchain.

The more you stake, the more chance you have of updating the chain and earning coins.

The system gives an advantage to the biggest players, and just three companies now account for more than half of "validators", according to research by Dune Analytics.

Cryptocurrencies were envisaged as a decentralized alternative to the banks, corporations and governments that failed so spectacularly during the global crash of 2008.

But crypto-miner J said the new Ethereum was "designed to be more centralized" and suggested it no longer had a real purpose.

Regulators have also begun to pay attention, with US Securities and Exchange Commission Chairman Gary Gensler suggesting proof-of-stake looked like a securities market that would fall under his remit.

The disaster scenario for Ethereum would be that enough disgruntled purists switch to one of the gas-guzzling proof-of-work alternatives, with Ethereum Classic being the main one.

"There is nothing capping Ethereum Classic prices," said de Vries, meaning that miners could potentially make good profits if the market shifted their way.

A rush from the greener blockchain was "theoretically definitely possible", he said.

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Technology

Video Game Actors Are Voting on a New Contract. Here’s What It Means for AI in Gaming

A picketer holds a sign for the SAG-AFTRA video game strike at Warner Bros. Games headquarters on Aug. 1, 2024, in Burbank, Calif. (AP)
A picketer holds a sign for the SAG-AFTRA video game strike at Warner Bros. Games headquarters on Aug. 1, 2024, in Burbank, Calif. (AP)
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Video Game Actors Are Voting on a New Contract. Here’s What It Means for AI in Gaming

A picketer holds a sign for the SAG-AFTRA video game strike at Warner Bros. Games headquarters on Aug. 1, 2024, in Burbank, Calif. (AP)
A picketer holds a sign for the SAG-AFTRA video game strike at Warner Bros. Games headquarters on Aug. 1, 2024, in Burbank, Calif. (AP)

An 11-month strike by video game performers could formally end this week if members ratify a deal that delivers pay raises, control over their likenesses and artificial intelligence protections.

The agreement feels "like diamond amounts of pressure suddenly lifted," said Sarah Elmaleh, a voice actor and chair of the Screen Actors Guild-American Federation of Television and Radio Artists' interactive branch negotiating committee.

Union members have until Wednesday at 5 p.m. Pacific to vote on ratifying the tentative agreement.

Voice and body performers for video games raised concerns that unregulated use of AI could displace them and threaten their artistic autonomy.

"It’s obviously far from resolved," Elmaleh said. "But the idea that that we’re in a zone where we might have concluded this feels like a lightening and a relief."

AI concerns are especially dire in the video game industry, where human performers infuse characters with distinctive movements, shrieks, falls and plot-twisting dialogue.

"I hope and I believe that our members, when they look back on this, will say all of the sacrifices and difficulty we put ourselves through to achieve this agreement will ultimately be worth it because we do have the key elements that we need to feel confident and moving forward in this business," said Duncan Crabtree-Ireland, the SAG-AFTRA national executive director and chief negotiator.

Here’s a look at the contract currently up for vote, and what it means for the future of the video game industry.

How did the current strike play out? Video game performers went on strike last July following nearly two years of failed negotiations with major game studios, as both sides remained split over generative AI regulations.

More than 160 games signed interim agreements accepting AI provisions SAG-AFTRA was seeking, the union said, which allowed some work to continue.

The video game industry is a massive global industry, generating an estimated $187 billion in 2024, according to game market forecaster Newzoo.

"OD," and "Physint" were two games delayed due to the strike during the filming and casting stage, video game developer Hideo Kojima wrote in December. Riot Games, a video game developer, announced that same month that some new skins in "League of Legends" would have to use existing voice-overs, since new content couldn't be recorded by striking actors. Skins are cosmetic items that can change the visual appearance of a player and is sometimes equipped with new voice-overs and unique recorded lines.

The proposed contract "builds on three decades of successful partnership between the interactive entertainment industry and the union" to deliver "historic wage increases" and "industry-leading AI provisions," wrote Audrey Cooling, a spokesperson for the video game producers involved in the deal.

"We look forward to continuing to work with performers to create new and engaging entertainment experiences for billions of players throughout the world," Cooling wrote.

Video game performers had previously gone on strike in October 2016, with a tentative deal reached 11 months later. That strike helped secure a bonus compensation structure for voice actors and performance capture artists. The agreement was ratified with 90% support, with 10% of members voting.

The proposed contract secures an increase in performer compensation of just over 15% upon ratification and an additional 3% increase each year of the three-year contract.

How would AI use change in video games? AI concerns have taken center stage as industries across various sectors attempt to keep up with the fast-evolving technology. It’s a fight that Hollywood writers and actors undertook during the historic film and TV strikes that forced the industry to a stop in 2023.

"In the last few years, it’s become obvious that we are at an inflection point where rules of the road have to be set for AI, and if they aren’t, the consequences are potentially very serious," Crabtree-Ireland said. "I think that really made this negotiation extra important for all of us."

SAG-AFTRA leaders have billed the issues behind the labor dispute — and AI in particular — as an existential crisis for performers. Game voice actors and motion capture artists’ likenesses, they say, could be replicated by AI and used without their consent and without fair compensation.

The proposed contract delineates clear restrictions on when and how video game companies can create digital replicas, which use AI to generate new performances that weren't recorded by an actor.

Employers must obtain written permission from a performer to create a digital replica — consent which must be granted during the performer’s lifetime and is valid after death unless otherwise limited, the contract states. The time spent creating a digital replica will be compensated as the same amount of work time it would have required for a new performance.

The agreement also requires the employer to provide the performer with a usage report that details how the replica was used and calculates the expected compensation.

Elmaleh, who has been voice acting since 2010 and had to turn down projects throughout the strike, said securing these gains required voice actors bring vulnerability and openness to the bargaining table.

"We talked a lot about the personal, the way it affects our displacement as workers and just the sustainability of our careers," Elmaleh said. "Our work involves your inner child. It’s being very vulnerable, it’s being playful."

What’s next for the video game industry? The tentative agreement centers on consent, compensation and transparency, which union leaders say are key elements needed for the industry to keep progressing.

As the contract is considered by union members, Elmaleh and Crabtree-Ireland said further work needs to be done to ensure the provisions are as broad as necessary.

"Even though there’s a deal that’s been made now, and we’ve locked in a lot of really crucial protections and guardrails, the things that we haven’t been able to achieve yet, we’re going to be continuing to fight for them," Crabtree-Ireland said. "Every time these contracts expire is our chance to improve upon them."

Elmaleh said she hopes both the video game companies and performers can soon work collaboratively to develop guidelines on AI as the technology evolves — a process she said should start well the proposed contract would expire in October 2028.

Leading negotiations has felt like a full-time job for Elmaleh, who took on the role in a volunteer capacity. As the efforts die down, she said she anxiously anticipates returning to video game acting in a landscape that is safer for performers.

Voice acting "is core to who I am. It’s why I fought so hard for this. I wouldn’t do this if I didn’t love what I do so much. I think it’s so special and worthy of protection," she said.