Ethereum blockchain to undergo major software upgrade to cut energy use
A long-awaited software upgrade to the Ethereum blockchain aimed at cutting its massive energy consumption is expected this week, a move advocates say could expand the technology’s use and support the price of the ether token.
The upgrade, known as the “Merge”, will mark a radical change in how transactions on the Ethereum blockchain occur and ether tokens are created. The new system will consume 99.95% less energy, according to the Ethereum Foundation, a body that acts as a spokesperson for the network.
The exact timing of the merger is unknown, but Google and other websites that track the blockchain predicted on Monday that it would take place early Thursday. The Ethereum Foundation has said that it will take place on 10-20 September. The event has been delayed several times in the past.
If successful, Ethereum will move from a “proof of work” system – where energy-intensive computers validate transactions by solving complex mathematical problems – to a “proof of stake” protocol, where individuals and companies act as validators using their ether. as collateral, in an attempt to win new tokens.
Ether is the second largest cryptocurrency after bitcoin, with a market capitalization of around $200 billion, according to data website CoinGecko. There are about 1 million to 1.5 million transactions per day on the Ethereum blockchain, compared to Bitcoin’s 200,000 to 300,000, according to CoinMetrics data.
Crypto prices plunged earlier this year as a broader downturn in financial markets prompted investors to shed risky assets. Ether has risen around 65% since the end of June ahead of the merger, while bitcoin has seen little change.
“This is a very significant development in the overall development plan for Ethereum,” said James Malcolm, head of FX strategy at UBS. Still, he said, that may not necessarily affect the price of ether as the merger is already priced in.
ENERGY SAVING?
The high energy use of crypto and blockchain technology has drawn criticism from some investors and environmentalists. A single transaction on Ethereum currently requires as much electricity as the average American household uses in a week, according to researcher Digiconomist.
For advocates, the energy-saving upgrade represents a big step forward in the race to become the world’s best blockchain.
Ethereum has become the blockchain of choice for various functions in the world of decentralized finance, including smart contracts and projects involving tokens that represent traditional assets such as stocks and bonds.
Ethereum supporters say the technology will form the basis of a new financial system, where money and assets can be traded in the form of crypto-tokens without the need for traditional financial service providers.
Others see it as a cornerstone of so-called “Web3”, a hyped but still unrealized iteration of the internet where blockchain and crypto assets take center stage.
Still, ether has so far seen limited mainstream adoption as a means of payment, with trading being by far the most popular use.
(This story has not been edited by Business Standard staff and is automatically generated from a syndicated feed.)
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