An army of computer programmers scattered around the world is set to test one of the biggest software upgrades we’ve seen this week to reduce the crypto sector’s environmentally unfriendly energy consumption.
Developers have spent time working on a more energy-efficient version of the ethereum blockchain, a digital ledger, multibillion-dollar cryptocurrencies, digital tokens (NFTs), games and apps.
Ethereum – the second most important blockchain after bitcoin – burns more energy than New Zealand every year.
Experts say the change, which is expected to take place between Tuesday and Thursday, will reduce energy consumption by more than 99 percent.
Enthusiasts hope that the green ethereum will spur widespread adoption, particularly to enable banks to automate transactions and other processes. But so far, the technology has mostly been used to create speculative financial products.
In a recent note from ING Bank, the switch could help Ethereum gain acceptance from policymakers and regulators. “This could also encourage the interest of traditional financial institutions to develop Ethereum-based services,” the bank said.
‘Level of Technology’
Dubbed “The Merger,” the switch changes the way transactions are entered.
Today, so-called crypto miners use computer-powered devices to solve puzzles that reward them with new coins – known as “proof of work”.
The new system will eliminate those miners and their computers overnight.
Instead, “verifiers” must contribute 32 ether (worth $55,000) – ethereum’s cryptocurrency – to participate in the new “proof of stake” system.
But the integration process will be dangerous.
Blockchain company Consensus called it a “major technological milestone” and the biggest update for ethereum since its launch in 2015.
Critics have questioned whether such reforms would go smoothly given the sector’s instability.
Ethereum went offline for three hours in May after a new NFT project overwhelmed the network, putting pressure on buyers.
Several exchanges and crypto companies have said they will suspend transactions during the merger.
“Decentralized and Complicated”
The amendment also faces a possible backlash from crypto mining companies, whose business would be hit hard.
You can try to hack the process or create a “fork”, basically a small block that continues in the old way.
And even if the “merger” is successful, ethereum still faces a big hurdle before it is widely accepted.
For example, it is expensive to use and the update does not reduce the fees.
And the broader crypto sector is beset by volatile price fluctuations, security flaws and numerous scams.
Crypto attorney Charles Kerrigan of CMS said Ethereum is “decentralized and complicated” and that governments and banks have yet to be convinced to get on board.
“Traditional software vendors have had questions about how to easily accommodate upgrades to customers,” he said.
“A successful merger answers these questions.”
