Ethereum blockchain completes ‘monumental’ software upgrade

Leading cryptocurrency figures have hailed the completion of one of the biggest software upgrades the sector has ever attempted, an overhaul of the Ethereum blockchain aimed at reducing its massive energy consumption.

“And we finished!” Ethereum co-creator Vitalik Buterin tweeted Thursday, calling it a “big moment for the Ethereum ecosystem.”

Buterin cited research that claimed the “merger,” as the developers have called the software upgrade, would reduce global power consumption by 0.2 percent.

Enthusiasts hope a more energy-efficient Ethereum will spur wider adoption of blockchain technology, especially for banks and financial firms to automate backend processes.

But so far the technology has largely been used to create speculative financial products.

And critics remain skeptical of the claims of energy savings, pointing out that it is unclear how much energy the new system will need.

Blockchain company Consensys called it a “monumental technological milestone,” but the scale of the work and the potential for error led several companies and major exchanges to halt trading during the merger process.

The largest exchange, Binance, said on Thursday it had resumed trading in ether, the native currency of Ethereum, tweeting: “The Ethereum merger is complete.”

Ether fell slightly in early trading and has lost more than half of its value since the start of the year, suffering a chastisement along with the rest of the crypto world as investors shied away from riskier assets.

Ether accounts for nearly 20 percent of a cryptocurrency market valued at around $1 trillion, according to website CoinGecko.

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“Proof of Effort”

The upgrade changes the way transactions are logged on the Ethereum blockchain.

From the inception of Ethereum in 2015, so-called crypto miners competed for the price of adding entries to the blockchain.

They used enormous computing power to solve complex equations with only the winners receiving the reward, a mechanism known as “proof of work”.

Developers had spent years working on an energy-efficient version of Ethereum, a digital ledger that underpins cryptocurrencies, digital tokens (NFTs), games and apps worth tens of billions of dollars.

Ethereum is the second most important blockchain after bitcoin, but it has faced criticism for burning through more power each year than New Zealand.

The new system scraps the competitive element and eliminates the miners and their energy-sapping computer stacks.

Instead, potential “validators” must put up 32 ether (worth $55,000) with the winner chosen in a lottery-like system to update the chain and receive the reward, a system known as “proof of stake.”

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Source: AFP