Ethereum, the blockchain that powers large swathes of the crypto ecosystem and underpins the world’s second-largest cryptocurrency, completed a transformational software upgrade on Thursday, its co-founder Vitalik Buterin announced on Twitter, a landmark in digital history that could help the sector shed its environmentally unfriendly reputation and pave the way for wider mainstream adoption.
Ethereum completed an ambitious software upgrade on Thursday that links it to another network and fundamentally changes how transactions are verified on the blockchain.
The overhaul, dubbed the “Merge,” shifts Ethereum away from the energy intensive proof-of-work mechanism that relies on crypto miners maintaining the network by solving complex mathematical problems.
Post-Merge Ethereum will use a proof-of-stake mechanism, which eliminates crypto mining and requires “validators” to stake their own cryptocurrency for a chance to verify a transaction in exchange for a reward.
The more ether staked, the greater chances of winning, though all staked ether will generate a return.
The switch could slash Ethereum’s energy consumption by as much as 99.9%, according to the Ethereum Foundation, something that will go a long way to help the sector win over critics who argue cryptocurrencies are environmentally unsustainable.
The Ethereum Merge has been in the works for years and its completion was hotly anticipated within the crypto industry. It stands as a landmark in the field’s short history and could change its trajectory going forward by addressing one of the most pressing concerns hindering popular acceptance, environmental impact. As it stands, Ethereum has an electrical energy footprint on par with a small country and its annual usage is comparable to Chile’s. Beyond energy, it is hoped the change will also increase the security of the Ethereum blockchain and ultimately lay the foundations for developing a faster and cheaper network, which are also big issues. The upgrade could lead to greater institutional acceptance of ether as well by removing some of the barriers investors faced, the Bank of America said.
What To Watch For
Any glitches. Ethereum is one of the most widely used blockchains in the crypto space and any issues following the Merge could have wide reaching consequences. As well as underpinning the second-largest cryptocurrency token, ether, Ethereum supports numerous other cryptocurrency tokens and other crypto products like NFTs would be affected. The complexity and scale of the project delayed its completion numerous times.
$193 billion. That’s the market capitalization of ether, making it the second-largest cryptocurrency in the world. It makes up nearly 20% of the overall cryptocurrency market. Bitcoin, which has a market capitalization of around $385 billion, still uses the proof-of-work system and is widely criticized for its environmental impact.
Hedge funds race to bet on outcome of Ethereum ‘Merge’ (Financial Times)