Here’s what you should know about the long-awaited upgrade that turns the crypto player green
Top line
Ethereum, the blockchain that powers much of the crypto ecosystem and underpins the world’s second-largest cryptocurrency, completed a transformative software upgrade Thursday, co-founder Vitalik Buterin announced on Twitter, a landmark in digital history that could help the sector shed its eco-friendly reputation and pave the way for wider mainstream adoption.
Ethereum has completed the long-awaited “Merge”.
Keywords
Ethereum completed an ambitious software upgrade on Thursday that connects it to another network and fundamentally changes how transactions are verified on the blockchain.
The overhaul, called “Merge,” moves Ethereum away from the energy-intensive proof-of-work mechanism that relies on crypto miners to maintain the network by solving complex mathematical problems.
Post-Merge Ethereum will use a proof-of-stake mechanism, which eliminates cryptomining and requires “validators” to stake their own cryptocurrency for a chance to confirm a transaction in exchange for a reward.
The more ether staked, the greater the chance of winning, although all staked ether will yield a return.
The switch could reduce Ethereum’s energy consumption by as much as 99.9%, according to the Ethereum Foundation, which would go a long way to helping the sector win over critics who argue that cryptocurrencies are environmentally unsustainable.
The merger was marked by parties all over the world and celebrated by Buterin, who called it’s a “big moment” for the ecosystem.
Key background
The Ethereum merger has been in the works for years, and its completion was highly anticipated in the crypto industry. It stands as a landmark in the field’s short history and could change its trajectory going forward by addressing one of the most pressing concerns preventing popular acceptance, environmental impact. As it stands, Ethereum has an electrical energy footprint on par with a small country, and its annual usage is comparable to Chile’s. Beyond energy, it is hoped that the change will also increase the security of the Ethereum blockchain and ultimately lay the groundwork for developing a faster and cheaper network, which are also big issues. The upgrade could also lead to greater institutional acceptance of ether by removing some of the barriers investors faced, Bank of America said.
What you should look for
Any errors. Ethereum is one of the most widely used blockchains in the crypto space, and any post-merger issues could have far-reaching consequences. In addition to underpinning the second largest cryptocurrency token, ether, Ethereum supports a number of other cryptocurrency tokens and other crypto products such as NFTs will be affected. The complexity and scale of the project delayed its completion several times.
Big number
193 billion dollars. That’s the market capitalization of Ether, making it the second largest cryptocurrency in the world. It accounts for almost 20% of the total cryptocurrency market. Bitcoin, which has a market capitalization of around $385 billion, still uses the proof-of-work system and is widely criticized for its environmental impact.
Further reading
Hedge funds race to bet on outcome of Ethereum ‘Merge’ (Financial Times)
First Phase of Ethereum Merger, Biggest Thing in Crypto Since Bitcoin, Goes Live (Forbes)
