Ethereum, the world’s second most valuable cryptocurrency, has just undergone a revamp.
The cryptocurrency has recently had a massive software upgrade, with its backers claiming it will reduce its carbon footprint.
Named as “The Merge”, the long-awaited revamp will slash Ethereum’s energy consumption by almost 99.95%, according to Ethereum Foundation, a nonprofit organization committed to supporting the cryptocurrency and its related technologies.
“The Merge refers to the original Ethereum Mainnet merging with a separate … blockchain called the Beacon Chain,” it explained.
Up until now, both Bitcoin and Ethereum were running on “proof-of-work” mechanism, in which high-powered computers were needed to solve complex puzzles. The merger moves Ethereum to “proof-of-stake” mechanism, which is much more energy efficient as it no longer requires computers competing against each other. Instead, users deposit their ether to join in on the race for more currency.
Deutsche Bank research analyst Marion Laboure wrote in a note this week, “With this switch, ethereum hopes that it “will improve security, reduce energy consumption, increase the number of users on the network, and grow its market cap.”
Vitalik Buterin, the 28-year-old Russian-Canadian programmer who helped create Ethereum said on Twitter, “Happy merge all. This is a big moment for the Ethereum ecosystem. Everyone who helped make the merge happen should feel very proud today.”
The co-founder said the upgrade shall “reduce worldwide electricity consumption by 0.2%.”
Cryptocurrencies may have become a phenomenal trend in the last few years, but observers say they are terrible for the environment. A single Ethereum transaction equates to the weekly power consumption of an average American household, according to Digiconomist, a platform that tracks energy usage of crypto.
Digiconomist said earlier this month that the power saved as a result of the upgrade would “likely be equivalent to the electrical energy consumption of a country like Portugal.” Also, it could become the “final nail in the coffin” for Bitcoin’s transaction mechanism.
Ethereum went down 0.7% after the news, trading at $1,592.78, but analysts believe the upgrade may have a big impact on the crypto world in the long run.
Meanwhile, Coindesk reported that the world’s most valuable cryptocurrency Bitcoin was down nearly 1%, trading at $20,174.
Craig Erlam, a senior market analyst at OANDA wrote in a note Thursday, September 15, “It’s been a long time in the making and the question on traders’ lips right now is will it be the next bullish catalyst for cryptos or a ‘sell the fact’ event.”