The second-most valued cryptocurrency in the world, Ethereum, has finished a significant software upgrade that, according to its proponents, will reduce its carbon impact.
According to the Ethereum Foundation, a nonprofit devoted to promoting the cryptocurrency and related technologies, the long-awaited update, dubbed “The Merge,” will lower ethereum’s energy use by approximately 99.95%.
It went on to say that “The Merge” saw the original Ethereum Mainnet joining forces with a different blockchain known as the Beacon Chain.
Up until this point, both Ethereum and Bitcoin operated on a “proof-of-work” system that required powerful computers to solve challenging puzzles. Due to the elimination of the requirement for computer competition, the merger switches Ethereum to the “proof-of-stake” process, which is significantly more energy efficient. Users instead deposit ether to take part in the competition for more money.
According to a note published this week by Deutsche Bank research analyst Marion Laboure, ethereum anticipates that this change “will improve security, reduce energy usage, increase the number of users on the network, and raise its market cap.”
The 28-year-old Russian-Canadian coder who worked on Ethereum wished everyone a “happy merging.” “The Ethereum ecosystem is at a pivotal point at this time. Everyone who contributed to the merger should be quite proud of themselves today, he continued.
The improvement will “lower worldwide electricity use by 0.2%,” according to the co-founder.
Despite the amazing growth of cryptocurrencies in recent years, environmentalists claim that they are bad for the environment. An typical US household uses around the same amount of electricity each week as one Ethereum transaction, according to Digiconomist, a company that monitors cryptocurrency energy usage.
The electricity saved as a result of the improvement would “likely be similar to the electrical energy consumption of a country like Portugal,” according to a report from Digiconomist earlier this month. It might also be the “last straw” for the transaction system of bitcoin.
Ethereum fell 0.7% in value following the news, trading at $1,592.78, although analysts believe the update will have a significant long-term influence on the cryptocurrency market. According to CoinDesk, the price of bitcoin, the cryptocurrency with the highest market capitalization, dropped by roughly 1% to $20,174.
Craig Erlam, a senior market analyst at Oanda, wrote in a note on Thursday that the event has been “years in the making and the question on traders’ lips right now is will it be the next bullish trigger for cryptocurrencies or a “sell the fact” event.