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The world’s second-largest cryptocurrency has undergone a major transformation, altering its technology to reduce carbon emissions by more than 99.9%, according to platform Ethereum.
Ethereum founder Vitalik Buterin confirmed Thursday that the transition, known as the “merge,” has been completed.
And we have made the final decision!… Merge everything.This is a big moment for the Ethereum ecosystem, he said in a tweet.
This means that its blockchain technology has been upgraded from the energy-hungry model used by rival Bitcoin.
Expectations for this move have seen the price of Ethereum’s token, Ether (ETH), double in the last two months, but not everyone is looking forward to the change.
Euronews Next examines what is changing and how the transformation will affect the crypto market.
The first part of the Merge upgrade kicked off on September 6th with the Bellatrix upgrade marking the so-called hard fork that transforms Ethereum from Proof of Work (PoW) to Proof of Stake (PoS). base.
With this switch, Ethereum will move from an energy-hungry PoW model to a PoS model. Both mechanisms are used to confirm transactions and add new blocks to the chain, but they work differently.
The PoW system works like a competitive numbers game, rewarding the first person to solve the puzzle with a set amount of cryptocurrency.
It takes a lot of energy because it requires a global network of computers to execute transactions as soon as they occur.
A PoS system does not require any energy-consuming hardware when acquiring coins. Coins are presented as collateral in the staking process and randomly selected through software.
No matter how powerful your machine is, it doesn’t increase your odds of creating the next block on the blockchain and winning. The only way to increase your chances of winning is to earn more coins.
Since the merge was completed on Thursday, Ethereum’s price has not changed significantly.
“This has taken a long time, but so far it’s been on track. Short-term price action has been subdued and with interest in the huge amount of options recently opened, this will continue I think,” said Richard. Usher is head of over-the-counter trading at London-based cryptocurrency company BCB Group.
I feel today is a very important step forward in the usability of cryptocurrencies going forward. , he said in a comment to Euronews Next.
The volatile cryptocurrency market has been under pressure over the past few months, dubbed Crypto Winter, as the value of cryptocurrencies such as Bitcoin took a hit.
Usher firmly believes that today’s merge “will give beleaguered investors confidence that broader crypto assets are in their portfolios” once the broader risk market begins to recover. .
The switch to PoS is “a step in the right direction when it comes to sustainability,” economist Alex de Vries, who runs the website Digiconomist, told Euronews Next.
He estimates that the energy consumption of Ethereum mining is around 72 terawatt hours per year, which is equivalent to the carbon footprint of Switzerland.
De Vries says he’s researching how much energy the switch can save. At this point, he estimates it’s at least 99%.
“This is like a country like Portugal (a quarter of all data centers in the world combined) running out of electricity overnight,” he said.
But he added that PoS will not completely solve the energy problem of cryptocurrencies.
Blockchain by design will never be a super-efficient technology, he said.
The choice of the name Merge is a bit deceptive, as Ethereum employs the Beacon Chain PoS system, but there will likely be more splits creating PoS and PoW chains.
This fork is not the first in the history of cryptocurrencies. Bitcoin was also split after the upgrade to create Bitcoin Gold and Bitcoin Cash.
According to tokennomics expert Eloisa Marchesoni, Merge will not have much of an impact for investors and the cryptocurrency startup scene.
The worst impact will be on miners, she told Euronews Next, explaining that older versions are likely to depreciate in value and the equipment used for mining will not work in the new PoS model. .
In the case of Ethereum, if the PoS version takes off and is priced higher, the PoW version may be priced lower, forcing the majority of miners to shut down.
Marchesoni, who mines Ether himself, said the expensive equipment isn’t a complete waste because he can find alternative coins to mine with a compatible PoS. This may take a month, but it shouldn’t cause any major problems.
According to her, the main complaints miners have is the centralization aspect and the feeling that Ethereum is acting like Wall Street and banks.
While it may be cleaner than Bitcoin for the environment, the upgraded Ethereum is unlikely to reach the top spot in the crypto market.
Bitcoin has always been like electronic digital gold, and Ethereum is like fiat currency, two very different things, said Marchesoni.
And nobody holds more capital in Ethereum. People hold more capital in Bitcoin. The original is not so speculative in Bitcoin.
Marchesoni expects the price of Ethereum to rise slightly, but perhaps only for a few days or weeks.
Longer term, she believes Ethereum is laying the foundation for PoS. Unlike PoW, PoW cannot be used for metaverses or NFTs, but other cryptocurrencies will develop blockchains for new protocols and new governance models.
De Vries also doesn’t believe Merge will trigger the latest cryptocurrency bull market. Although it is a “step in the right direction” towards cleaner cryptocurrency mining, it does not solve PoS issues, mainly scalability, he said.
But Merge could possibly prompt policymakers to ban PoW in the years to come.
If Ethereum can move from Proof of Work to Proof of Stake, why not say, Bitcoin, you either do the same or we dont allow Bitcoin anymore, said Dave. said Mr. freeze.
“If it (the merge) really succeeds, I think it’s a very real risk. I fully expect this to be back on the table again. Maybe not soon, but definitely soon. to”.
According to Conor Svensson, CEO and founder of Web3 Labs, Merge Web3 in a few days.
The Ethereum community has had a merge event in mind for years, and with the various teams building on top of Ethereum technology, we believe there is an inevitability, he told Euronews Next. .
According to Svensson, the current challenge for Ethereum is the need to keep updating things like security and speed to stay ahead of the competition. But he believes that Ethereum’s position in Web3 is the building block for most of Web3’s technologies, such as NFTs.
All these decentralized autonomous organizations first appeared on Ethereum, and that brought all these projects to Ethereum, he said, adding, Where are the main innovations in Web3 happening? It’s still happening.”
