Home Energy company Ethereum blockchain drastically reduces power consumption with ‘Merge’ software upgrade

Ethereum blockchain drastically reduces power consumption with ‘Merge’ software upgrade

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Representation of Ethereum, with its native cryptocurrency Ether, is seen in this illustration taken November 29, 2021. REUTERS/Dado Ruvic/Illustration/File Photo

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LONDON, Sept 15 (Reuters) – The Ethereum blockchain has undergone a major software update, drastically reducing its power consumption, its inventor and co-founder tweeted on Thursday.

The new system will use 99.95% less energy, according to the Ethereum Foundation. The upgrade, which changes how transactions occur and how ether tokens are created, could give Ethereum a major advantage as it seeks to outperform rival blockchain bitcoin. Read more

“We believe this is an important moment that will lead to ETH outperforming the broader crypto market for some time to come,” said Richard Usher, head of over-the-counter trading. at BCB Group, a London-based crypto company.

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Most blockchains consume large amounts of energy and have been criticized by environmentalists and some investors. Prior to the software upgrade, known as Merge, a single Ethereum transaction used as much energy as an average US household in a week, according to researcher Digiconomist.

With the software update, Ethereum has moved from a “proof of work” system, where power-hungry computers validate transactions by solving complex mathematical problems, to a “proof of stake” system, where individuals and businesses act as validators, using their ether as collateral, to earn newly minted tokens. Read more

“Happy merging everyone,” inventor Vitalik Buterin said in a tweet. “This is a great moment for the Ethereum ecosystem.”

Ethereum was born in 2013. Proponents say it will form the backbone of much of the widely hyped but still unrealized “Web3” vision of an internet where crypto technology takes center stage in apps and commerce.

It powers platforms involving crypto offshoots such as decentralized finance and non-fungible tokens, and is used in so-called “smart contracts” – blockchain-based conventions believed to have use in traditional finance and other industries.

Cryptocurrency Ether was little changed at $1,608 at 0857 GMT.

Investors bet before Merge that the upgrade would increase the price of the ether token. Ether has gained around 85% from its June lows, outperforming larger rival bitcoin’s 15% gain. Overall, however, cryptocurrencies have suffered this year, with bitcoin and ether both down around 55%.

Ether took market share from bitcoin before the merger and now accounts for around a fifth of the $1 trillion crypto market. Bitcoin’s share fell to 39.1% from this year’s peak of 47.5% in mid-June.

Besides power consumption, high costs and slow transaction times are the main issues facing the Ethereum network. Merge will not immediately address these issues, although some analysts say it lays the groundwork for Ethereum expansion.

Strengthening Ethereum’s environmental, social, and corporate governance (ESG) credentials “would be good for regulatory-focused institutions that want to start exploring the Ethereum ecosystem,” said Marc Arjoon, Ethereum Research Analyst at Digital Asset Manager CoinShares.

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Reporting by Maria Ponnezhath in Bengaluru and Elizabeth Howcroft in London; edited by Tom Wilson and Edwina Gibbs

Our standards: The Thomson Reuters Trust Principles.

Elizabeth Howcroft

Thomson Reuters

Reports on the intersection of finance and technology, including cryptocurrencies, NFTs, virtual worlds and money that generates “Web3”.