LONDON
The Ethereum blockchain will receive a long-awaited software update this week that will reduce its massive energy consumption.Supporters say this could increase the number of people using the technology and boost the price of the ether token.
The “Merge” upgrade will change a lot about how transactions happen on the Ethereum blockchain and how ether tokens are made. The Ethereum Foundation, https://ethereum.org/en/upgrades/merge/, a group that speaks for the network, says that the new system will use 99.95% less energy.
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No one knows exactly when the Merge will happen, but Google (NASDAQ:GOOGL) and other sites that track the blockchain said on Monday that it would happen in the early hours of Thursday. The Ethereum Foundation says it will happen from September 10th to the 20th. The event has been put off more than once before.
If successful, Ethereum will switch from a “proof of work” system, in which energy-hungry computers validate transactions by solving complex math problems, to a “proof of stake” protocol, in which people and companies act as validators by using their ether as collateral to try to win new tokens.
According to the data site CoinGecko, Ether is the second-biggest cryptocurrency after Bitcoin, with a market capitalization of about $200 billion. According to data from CoinMetrics, there are between 1 million and 1.5 million transactions on the Ethereum blockchain every day. Bitcoin has between 200,000 and 300,000 transactions per day.
Early this year, the price of crypto fell because investors were fleeing risky assets because the financial markets as a whole were going down. Since the end of June, the price of Ether has gone up about 65% ahead of the merge, but bitcoin hasn’t changed much.
James Malcolm, head of FX strategy at UBS, said, “This is a very important step in the long-term plan for Ethereum.” Still, he said, it might not change the price of ether because the Merge is already built into the price.
ENERGY-SAVING?
Some investors and environmentalists have criticised the high energy use of crypto and blockchain technology. A researcher at Digiconomist (https://digiconomist.net/ethereum-energy-consumption) says that right now, a single transaction on Ethereum uses as much energy as an average U.S. household does in a week.
Supporters say that the upgrade to save energy is a big step forward in the race to be the best blockchain in the world.
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Ethereum has become the blockchain of choice for many decentralised finance tasks, such as smart contracts and projects that use tokens to represent traditional assets like stocks and bonds.
Backers of Ethereum say that the technology will be the foundation of a new financial system in which money and assets can be traded in the form of crypto tokens without the need for traditional financial services.
Others see it as a key part of the so-called “Web3,” a version of the internet that has been talked about a lot but hasn’t been built yet, where blockchain and crypto assets take centre stage.
Still, most people don’t use ether as a payment method yet, and trading is by far its most popular use.