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HomeCryptoCryptoverse: Electric ether leaps on verge of Merge

Cryptoverse: Electric ether leaps on verge of Merge

Taken on May 23, 2022, this illustration shows the cryptocurrencies Bitcoin, Ethereum and Dash jumping into the water. REUTERS/Dado Ruvic/Illustration

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Aug 16 (Reuters) – Ethereum appears to be undergoing a mega upgrade. finally.

After years of delays, the “merge” is almost certain to occur as the underlying cryptography of the blockchain undergoes a radical shift to a system where the creation of new Ether tokens is much less energy intensive. It seems to take place on the moon.

Omar Syed, co-founder of smart contract platform Shardeum, said: “I think there will be some drama surrounding the merge, but I don’t think there will be any technical issues.”

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Investors seem to agree that Ethereum is outperforming its big brother Bitcoin.

Ether has risen for six weeks in a row, well away from its November 2021 peak of $4,868.79, but has climbed from a 18-month low of $880 in mid-June to nearly $2,000.

Bitcoin paled in comparison, rising 37% from its June low to $24,116.

According to CoinMarketCap, Ether eats into the huge Bitcoin market share. It accounts for nearly a fifth (19.7%) of the total crypto market capitalization of $1.14 trillion, up from less than 14.9% two months ago, according to CoinMarketCap. Bitcoin’s share fell to 40.2% from 44.9% over the same period.

Alex Miller, CEO of Hilo, which builds developer tools to create applications for Bitcoin, said:

If the creators of Ethereum succeed, as many expected, it would be a game changer for blockchain, making mining cheaper and easier to adopt for fintech and other cryptocurrency apps.

Of course, the elusive transition is largely unwarranted, has been postponed several times, and most recently feared the developers would abandon plans to push the button in June and never see the light of day. It makes investors who are just starting out feel uneasy.

The merge is also fraught with risk, with about 122 million Ether worth about $232 billion in circulation, which could be jeopardized if it fails.

If the upgrade doesn’t work, “the whole crypto world will be set back five or ten years,” Hiro’s Miller said.

“Difficulty Bomb”

The Ethereum blockchain currently uses an energy-intensive Proof of Work (PoW) method for block verification. Miners use large amounts of electricity to quickly solve complex computational problems and earn newly minted coins.

On a parallel chain, Ethereum is testing a Proof of Stake (PoS) system where miners only need to “stake” their coins to validate transactions and create new blocks. He promises to reduce blockchain energy consumption by 99.95%, ready for faster transactions.

Not everyone is happy about the impending merger of the two systems. In particular, Ether miners are attracting attention as expensive mining equipment becomes obsolete and can no longer be used for Bitcoin mining.

Ether mining has historically been more profitable than Bitcoin mining. According to Arcane Research, Ether miners will earn $18 billion in 2021, while Bitcoin miners will earn $17 billion.

Some miners have decided to move to mining next-best alternatives, such as tokens Ethereum Classic and Ravencoin.

At least one miner has declared plans to resist and continue mining Ethereum, and will likely continue to run PoW chains in their current form after the merger, competing with upgraded blockchains. causing concern.

However, there are dangers with that option.

To discourage post-merge PoW parallel chains, the creators of Ethereum designed a “difficulty bomb” that dramatically increases the difficulty of mining.

Additionally, both Tether and USDC (the largest stablecoin) are pushing for Merge, reducing the likelihood of widespread adoption of parallel PoW chains.

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“A post-merger Ethereum chain split is still unlikely to persist for long,” said Alex Thorne, head of enterprise research at Galaxy Digital.

Nonetheless, at least some investors are preparing for hard forks or parallel PoW chains, as indicated by their positioning in the derivatives market.

Ether futures are also trading on the CME exchange at a premium of $1,905, “reflecting expectations around the Proof of Work fork,” said Matthew Sigel, head of digital asset research at fund manager VanEck. increase.

“But the gap isn’t big enough to be considered extreme foam,” he added.

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Reporting by Medha Singh and Lisa Pauline Mattackal of Bengaluru Editing by Vidya Ranganathan and Pravin Char

Our criteria: Thomson Reuters Trust Principles.


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