Ethereum ‘merge’ has happened, marking a new era for greener cryptos and blockchain – Euronews | Jewelry Dukan

The world’s second-largest cryptocurrency has undergone a significant transformation, according to its Ethereum platform, which will change its technology to reduce carbon emissions by more than 99.9 percent.

The transition known as “The Merge” is complete, Ethereum founder Vitalik Buterin confirmed on Thursday.

“And we did it! … Happy merging. This is a big moment for the Ethereum ecosystem,” he said in a tweet.

This means that its blockchain technology has been upgraded from the intensive energy consumption model used by its rival Bitcoin.

While anticipation of the move has doubled the price of Ethereum’s token, Ether (ETH), over the past two months, not everyone is excited about the change.

Euronews Next examines what is changing and how the transformation may impact the crypto market.

What is Ethereum’s “Merge” and Proof of Stake?

The first part of the merge upgrade began on September 6th with the Bellatrix upgrade, which marked a so-called “hard fork” converting Ethereum from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS). becomes. Base.

The shift will take Ethereum from the intensive energy-consuming PoW model to the PoS model. Both mechanisms are used to confirm transactions and add new blocks to the chain, but they work differently.

The PoW system works like a competitive numerical guessing game and the first person to solve the puzzle gets a fixed amount of cryptocurrency.

It requires a global network of computers to be running at the same time when a transaction takes place, and therefore a lot of energy.

With the PoS system, there is no energy-consuming hardware when purchasing coins, which are deposited as a deposit when staking and then randomly selected via the software.

How powerful your machine is does not increase your chance of winning and being able to create the next block for the blockchain. The only thing that increases your chance of winning is simply getting more coins.

How did the markets react?

Ethereum’s price has not changed massively since the merger closed on Thursday.

“This has been a long time coming and has so far gone smoothly. Price action has been subdued in the short term and I think this will continue in the short term due to the immense amount of option interest that has opened recently,” said Richard Usher, head of over-the-counter trading at London-based crypto firm BCB Group.

“My feeling is that today is a tremendously significant advance in the usability of cryptocurrency into the future. Even if it doesn’t directly affect BTC (Bitcoin) etc., it will underpin the future of all crypto assets in the future,” he said in comments to Euronews next.

The volatile crypto market has been under pressure for the past few months in the so-called crypto winter, which has seen the value of cryptos like bitcoin take a hit.

Usher said he strongly believes that when broader risk markets start to recover, he strongly believes today’s merger “will give struggling investors confidence that the broader crypto assets have a place in their portfolios.” .

Can the Ethereum Merge Make Crypto Greener?

The move to PoS is “a step in the right direction in terms of sustainability,” Alex de Vries, an economist who runs the Digiconomist website, told Euronews Next.

He estimates the energy consumption of Ethereum mining at around 72 terawatt hours per year, which corresponds to Switzerland’s carbon footprint.

De Vries says he’s working to find out how much the switch will save energy. At the moment he estimates it to be at least 99 percent.

“That means that the power consumption of a country like Portugal (a quarter of all data centers in the world combined) disappears overnight,” he said.

But he added that PoS will not completely solve crypto’s energy problem.

“Blockchain by design is just never going to be a super-efficient technology,” he said.

Merge or Split?

The choice of merge name is due to Ethereum adopting the Beacon Chain PoS system, but it’s a little deceptive as it’s more likely to be a fork that creates the PoS chain and a PoW chain.

This fork is not the first time in crypto history. Bitcoin has also seen splits after upgrades, creating Bitcoin Gold and Bitcoin Cash.

For investors and the crypto startup scene, according to Eloisa Marchesoni, a tokenomics expert, the merger will not have such a big impact.

“The worst impact will be on the miners,” she told Euronews Next, explaining that the value of the old version is likely to go down and the equipment used for mining will not work for the new PoS model.

For Ethereum, if PoS version launches and price is high, then PoW version may have low price, which will force majority of miners to shut down.

Marchesoni, who mines ether herself, said the expensive equipment is not a total waste as one can find alternative coins to mine at PoS that are compatible. Although this can take a month, it doesn’t cause massive problems.

The main point miners are upset about is the centralization aspect and the feeling that Ethereum is “acting like Wall Street and the banks.”

As big as bitcoin?

While it may be cleaner for the environment than Bitcoin, the upgraded Ethereum is unlikely to take the top spot in the crypto market.

“Bitcoin will always be like electronic digital gold. And Ethereum is like fiat money, it’s just two completely different things,” Marchesoni said.

“And no one holds their bigger capital in Ethereum, people will hold big capital in Bitcoin. None of the OGs, as we call them, none of the originals in crypto actually speculate that much on bitcoin.”

Marchesoni expects Ethereum to see a slight price increase, but only for maybe a few days or weeks.

In the longer term, she believes that Ethereum will lay the groundwork for PoS, which unlike PoW cannot be used for the Metaverse or NFTs, but that other cryptos will develop the blockchain for new protocols and new governance models.

De Vries also doesn’t think Merge will trigger the recent crypto bull run. Although “it’s a step in the right direction” for cleaner crypto mining, he said it doesn’t solve PoS’ problems, mainly scalability.

However, Merge could potentially prompt policymakers to ban PoW in the years to come as they seek to regulate cryptos and have highlighted concerns about environmental impact.

“If Ethereum can go from Proof of Work to Proof of Stake, then why not just say, ‘Bitcoin, you’re either going to do the same, or we’re going to disallow Bitcoin,'” de Vries said.

“I think it’s a very real risk if it (the merger) is really successful. I would fully expect that to come back to the table, maybe not immediately but definitely soon.”

How will it affect Web3?

According to Conor Svensson, CEO and founder of Web3 Labs, not much will change as a result of the merger Web3 in the near future.

“The merge event has been on the mind of the Ethereum community for several years and there is confidence in the inevitability as the various teams build on top of the Ethereum technology,” he told Euronews Next.

Svensson said the challenge for Ethereum now is that it needs to continue its updates, such as security or speed, to stay ahead of its competitors. But he is confident that Ethereum’s place in Web3 is the building block for most Web3 technologies like NFTs.

“These decentralized autonomous organizations, they all appear on Ethereum first, and that’s what fueled all these projects,” he said, adding, “Where is the main innovation happening in Web3? Still mostly on Ethereum.”

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