This week, the Ethereum blockchain is slated to receive a long-awaited software upgrade aimed at reducing its enormous energy usage, a move that supporters think may increase the technology’s use and bolster the price of the ether token. The “Merge,” an upgrade that will fundamentally alter how ether tokens are created and transactions on the Ethereum blockchain take place, will take place. According to the Ethereum Foundation, a group that serves as the network’s spokesperson, the new system will use 99.95% less energy.
Although the exact time of the Merge is uncertain, it was predicted on Monday by Google and other websites monitoring the blockchain that it will occur in the early hours of Thursday. According to the Ethereum Foundation, it will happen from September 10 to 20. The event has already been postponed multiple times. If it is successful, Ethereum will switch from its current “proof of work” system, which relies on energy-guzzling computers to validate transactions by solving difficult mathematical puzzles, to a “proof of stake” protocol, in which users and organisations act as validators and use ether as collateral in an effort to win new tokens.
According to data website CoinGecko, ether is the second-largest cryptocurrency behind bitcoin, with a market valuation of almost $200 billion. According to data from CoinMetrics, there are roughly 1 million to 1.5 million transactions per day on the Ethereum blockchain as opposed to 200,000 to 300,000 for Bitcoin. Early this year, the price of cryptocurrencies fell precipitously as investors fled riskier investments due to a general decline in the financial markets. Ahead of the Merge, Ether has increased by almost 65% since the end of June, whereas bitcoin has barely changed.
In terms of Ethereum’s broader developmental plan, this is a highly significant move, according to James Malcolm, head of FX strategy at U.S. However, he added, the Merge is already factored into the price of ether, so it may not necessarily have an impact.
Some investors and environmentalists have criticised the excessive energy consumption of cryptocurrency and blockchain technology. According to researcher Digiconomist, a single Ethereum transaction presently consumes as much energy as a typical American household does in a week. According to supporters, the energy-saving improvement marks a significant advancement in the competition to become the best blockchain in the world.
In the area of decentralised finance, Ethereum has emerged as the preferred blockchain for a variety of tasks, including smart contracts and initiatives using tokens that represent conventional assets like stocks and bonds. Supporters of Ethereum claim that the technology will serve as the foundation for a new financial system in which assets and money may be traded in the form of digital tokens without the need for traditional financial service providers.
Others view it as the foundation of the so-called “Web3,” a much-hyped but as-yet-unrealized version of the internet where blockchain technology and digital assets take centre stage. Even so, trading is by far the most common application of ether, which has only recently experienced limited mainstream popularity as a form of payment.