Ethereum blockchain to undergo major upgrade to cut energy use

Taken on November 29, 2021, this illustration shows representations of Ethereum, including the native cryptocurrency Ether. REUTERS/Dado Ruvic/Illustration/File Photo

LONDON, Sept. 12 (Reuters) – A long-awaited software upgrade aimed at reducing the massive energy consumption of the Ethereum blockchain is due this week.

Known as a “merge,” this upgrade will fundamentally change how transactions occur on the Ethereum blockchain and how Ether tokens are created. According to the company, the new system consumes 99.95% less energy. Ethereum Foundationa body that acts as a spokesperson for the network. read more

The exact timing of the merge is unknown, but Google and other sites that track the blockchain predicted on Monday that the merge would take place in the early hours of Thursday. The Ethereum Foundation says it will take place September 10-20. The event has been postponed several times before.

If successful, Ethereum will move from a “proof of work” system, where energy-consuming computers solve complex mathematical problems to validate transactions, to a “proof of work,” where individuals and businesses use Ether to act as validators. of stake” protocol. As collateral to acquire new tokens.

According to data site CoinGecko, Ether is the second largest cryptocurrency after Bitcoin, with a market capitalization of around $200 billion. According to data from CoinMetrics, there are approximately 1-1.5 million transactions per day on the Ethereum blockchain compared to 200-300 thousand for Bitcoin.

Cryptocurrency prices plummeted earlier this year as investors dumped riskier assets due to a widespread recession in financial markets. Ether has risen about 65% since the end of June before the merger, while Bitcoin has changed little. read more

“This is a very significant development in Ethereum’s overall evolution plan,” said James Malcolm, Head of FX Strategy at UBS. Still, he said, the merge is already priced so it won’t necessarily affect the price of Ether.

Energy saving?

The high-energy use of cryptocurrencies and blockchain technology has been criticized by some investors and environmentalists. A single transaction on Ethereum now requires as much electricity as an average US household uses in her week, according to researchers. Digiconomist.

For backers, the energy-saving upgrade represents a major step forward in the race to become the world’s top blockchain.

Ethereum has become the blockchain of choice for a variety of functions in the world of decentralized finance, including smart contracts and projects involving tokens representing traditional assets such as stocks and bonds. read more

Ethereum backers say the technology will form the basis of a new financial system, allowing money and assets to be traded in the form of cryptographic tokens without the need for providers of traditional financial services.

Others see it as the foundation for the so-called “Web3,” an exaggerated but as-yet-unrealized iteration of the internet where blockchain and cryptoassets take center stage. read more

Still, Ethereum has so far seen limited mainstream adoption as a payment instrument, with trading being by far the most popular use.

Reported by Elizabeth Howcroft.Edited by Tom Wilson and Louise Havens

Our criteria: Thomson Reuters Trust Principles.