Ethereum blockchain to undergo major upgrade to cut energy use

This week, the Ethereum blockchain is slated to get a long-awaited software update 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 update that will fundamentally alter how ether tokens are produced and transactions on the Ethereum blockchain take place, will take place. According to the Ethereum Foundation, a group that serves as the network's spokesman, the new system will use 99.95% less energy.

Although the precise 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 organizations act as validators and use ether as collateral in an effort to win new tokens.

According to statistics website CoinGecko, ether is the second-largest cryptocurrency behind bitcoin, with a market capitalization of almost $200 billion. According to statistics from CoinMetrics, there are around 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 hardly changed.

In terms of Ethereum's broader developmental plan, this is a very significant event, according to James Malcolm, head of FX strategy at UBS. However, he said, the Merge is already included into the price of ether, so it may not necessarily have an effect.

ENERGY-SAVING?

Some investors and environmentalists have criticized the excessive energy consumption of cryptocurrency and blockchain technology. According to researcher Digiconomist one Ethereum transaction presently consumes as much energy as a typical U.S. home 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 decentralized 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 can be traded in the form of digital tokens without the need for traditional financial service providers.

Others see 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 center stage.

Even yet, trading is by far the most common application of ether, which has only recently seen limited mainstream popularity as a form of payment.