Cryptocurrency experts say the changeover, which is expected between Tuesday and Thursday, will reduce energy consumption by more than 99 percent.
An army of computer programmers scattered around the world is set to attempt one of the crypto sector’s biggest software upgrades this week to reduce its use of environmentally friendly energy.
Developers have spent years working on a more energy-efficient version of the Ethereum blockchain, a digital ledger that powers a multibillion-dollar ecosystem of cryptocurrencies, digital tokens (NFTs), games and apps.
Ethereum, the second most important blockchain after Bitcoin, burns through more power than New Zealand every year.
Experts say the change, which is expected between Tuesday and Thursday, will reduce energy consumption by more than 99 percent.
Enthusiasts hope that green Ethereum will encourage wider adoption, particularly as a way to enable banks to automate transactions and other processes.
But so far the technology has largely been 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 boost the willingness of traditional financial institutions to develop Ethereum-based services,” the bank said. –
The switchover, dubbed “The Merge,” will change the way transactions are logged.
At the moment, so-called crypto-miners use energy-filled rigs of computers 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 piles of computers overnight.
Instead “validators” are paid 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 integration process will be risky.
Blockchain company Consensys called it a “landmark technical milestone” and the biggest update since Ethereum launched in 2015.
Ethereum went offline for three hours in May when a new NFT project caused a surge in buyers that overwhelmed the network. Several exchanges and crypto companies said they would suspend transactions during the integration process.
‘Decentralized and Complex’
The upgrade also faces a potential revolt from crypto-mining companies whose business will suffer.
They can try to hijack the process or create a “fork,” essentially a smaller blockchain that will continue with the old method.
And even if the “merger” is successful, Ethereum will still face major hurdles before it can be adopted more widely. For example, it is expensive to use and an update will not reduce the fee.
The broader crypto sector is plagued by wildly volatile prices, security flaws, and an array of scams.
Charles Kerrigan, a crypto lawyer from the firm CMS, said Ethereum was “decentralized and complex” and hadn’t been tested enough for governments and banks to get on board.
“There are questions about how easily it can handle the kind of upgrades that traditional software vendors provide to customers,” he said. “A successful merger will answer these questions.”
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