Ethereum, the second largest cryptocurrency, has completed a plan to reduce its carbon emissions by more than 99%.
The software update, known as “the merger,” will change the way transactions are handled on the ethereum blockchain, a public, decentralized ledger that underpins the cryptocurrency and generates ether tokens, the world’s most popular cryptocurrency after of bitcoin.
Vitalik Buterin, the inventor of ethereum, announced the end of the plan on Twitter Thursday morning, tweeting “Happy merging everyone.”
And we’re done!
Happy to merge it all. This is a great time for the Ethereum ecosystem. Everyone who helped make the merger possible should feel very proud today.
— vitalik.eth (@VitalikButerin) September 15, 2022
The move means that ethereum will no longer be created through an energy-intensive process known as “mining”, where banks of computers generate random numbers that validate transactions on the blockchain and generate new ether tokens as part of the process. The process, known as “proof of work” in the cryptocurrency world, will now transition to a “proof of stake” system, where individuals and companies act as validators, pledging or “staking” their own ether as a form of guarantee, to win newly created tokens.
Ethereum mining used as much electricity as Austria, according to the Digiconomist website, at 72 terawatt-hours per year. Alex de Vries, the website’s economist, estimates that the merger will reduce carbon emissions linked to ethereum by more than 99%.
De Vries added that the measure could represent 0.2% of the world’s electricity consumption disappearing overnight. However, he said bitcoin remained the biggest contributor to the crypto world’s carbon footprint.
“All eyes will be on bitcoin. It remains the biggest polluter in the crypto space. Even today bitcoin is responsible for as much electricity consumption as Sweden. And we know that will not change,” De Vries said.
Ethereum rose 2% to $1,630 (£1,417) after the move, according to website coinmarketcap, valuing the coin at just under $200 billion. Bitcoin’s market capitalization is worth $387 billion, having fallen sharply from its peak of more than $1 billion last year.
Carol Alexander, professor of finance at the University of Sussex Business School, said the merger was an important event for the crypto industry
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“The merger is the most important event in the history of the blockchain,” he said. “In my opinion, today marks the beginning of the end of bitcoin’s dominance over crypto assets. Ethereum is achieving something that bitcoin never could because bitcoin is a purely speculative asset and its mining network would never agree to abandon this source of income”.
Alexander added that the ethereum blockchain is a key feature of the world web3, an umbrella term for the latest iteration of the Internet, including its role as the basis for non-fungible tokens. “It powers the smart contract transactions on Ethereum that underpin web3 and thus today’s digital economy.”