Cryptocurrency experts say the change, which is expected to take place between Tuesday and Thursday, will reduce power consumption by more than 99%.
An army of computer programmers scattered across the globe are set to attempt one of the biggest software upgrades the crypto industry has ever seen this week to reduce its environmentally harmful energy consumption. .
Developers have spent years working on a more energy-efficient version of the Ethereum blockchain, a digital ledger that underpins a multi-billion dollar ecosystem of cryptocurrencies, digital tokens (NFTs), games, and hardware. ‘apps.
Ethereum, the second largest blockchain after Bitcoin, burns more energy annually than New Zealand.
Experts say the change, which is expected to take place between Tuesday and Thursday, would reduce energy consumption by more than 99%.
Enthusiasts hope a greener Ethereum will spur wider adoption, particularly to allow banks to automate transactions and other processes.
But so far the technology has been widely used to create speculative financial products.
ING Bank said in a recent note that the switch could help Ethereum gain acceptance among policymakers and regulators. “This in turn could stimulate the desire of traditional financial institutions to develop Ethereum-based services,” the bank said. –
The switchover, dubbed “the merger”, will change the way transactions are recorded.
Currently, so-called crypto miners use power-hungry computing rigs to solve puzzles that reward them with new coins, a system known as “proof of work.”
The new system will get rid of these miners and their computer stacks overnight.
Instead, “validators” will need to stake 32 Ether (worth $55,000), Ethereum’s cryptocurrency, to participate in the new “proof-of-stake” system where they earn rewards for their work.
But the merger process will be risky.
Blockchain firm Consensys called it a “monumental technology milestone” and Ethereum’s biggest upgrade since its launch in 2015. Critics wondered if such an upgrade would pass without incident, given of the sector’s history of instability.
Ethereum went offline in May for three hours when a new NFT project sparked a wave of buyers that overwhelmed the network. Several exchanges and crypto companies have said they will stop trading during the merger process.
“Decentralized and complicated”
The upgrade also faces a possible rebellion from crypto mining companies whose business will be severely damaged.
They may try to hijack the process or create a “fork”, essentially a smaller blockchain that would continue with the old mechanism.
And even if the “merger” succeeds, Ethereum will still face major hurdles before it can be more widely adopted. For example, it is expensive to use and updating will not reduce the cost.
The wider crypto industry is beset by wildly fluctuating prices, security breaches, and an array of scams.
Cryptography lawyer Charles Kerrigan of CMS said Ethereum was “decentralized and complicated” and hadn’t been tested enough for governments and banks to get on board.
“There have been questions about how easily it could handle upgrades of the kind that traditional software vendors provide to customers,” he said. “A successful merger will answer these questions.”