scorecardresearchEthereum merge: How will it help the second largest blockchain?

Ethereum merge: How will it help the second largest blockchain?

Updated: 17 Sep 2022, 12:00 PM IST

By swapping proof-of-work for proof-of-stake, Ethereum will now consume 99.9 percent less energy. Read further to know more on the much-awaited Ethereum Merge.

Ethereum network is the second largest blockchain after bitcoin in terms of market cap

Ethereum network is the second largest blockchain after bitcoin in terms of market cap

The massive overhaul of Ethereum, referred to as Merge, has finally occurred. With this, Ethereum’s digital machinery has become significantly more energy-efficient following years of development.

It is seen as a big deal replacing one way of running a blockchain, known as proof-of-work, with another: proof-of-stake.

Justin Drake, a researcher at the non-profit Ethereum Foundation, compared this to ‘switching out an engine from a running car’.

What is actually seen as pathbreaking in this entire operation is that Ethereum would now consume 99.9 percent or less energy. According to one estimate, it is equivalent to Finland suddenly shutting off its power grid.

This gains a lot of significance as cryptocurrencies in past drew condemnation for their high energy needs.

There is no wonder then that environmental charities including Greenpeace, WWF and International Animal Rescue even abandoned cryptocurrencies over climate change concerns.

For both bitcoin and Ethereum, high energy demand was seen as a big negative factor for the blockchains, keeping many pro-environment personalities at bay.

Elon Musk reversed his plans to accept bitcoin for payments for vehicles because he did not want to do this at the cost to the environment.

According to Ethereum’s developers, the upgrade will make the network more secure and scalable. It is vital to note that Ethereum houses a $60 billion ecosystem of cryptocurrency exchanges, non-fungible token (NFT) marketplaces and other apps.

When the Merge officially kicked in, over 41,000 people were tuned in on YouTube to an "Ethereum Mainnet Merge Viewing Party."

After nearly 15 minutes, the much-awaited event finally took place. This means it could be declared a success. The ether price was largely flat after the Merge. Even on Friday, ether was trading 7.7 percent lower at $1,468 at 17.00 IST.

Twitter was riddled with memes around Ethereum Merge. 

This merge got a thumbs from the industry. CoinSwitch Kuber's CEO Ashish Singhal in a statement, said: “The Merge was first proposed in 2014. It got delayed, then again, and then again. But Ethereum developers and Vitalik Buterin kept building, kept iterating. Now, a greener, more secure Ethereum is here. Moral of the story: Keep Building. Success will follow.”

WazirX founder and CEO Nischal Shetty, in a similar statement wrote, “Ethereum has played a large part in helping build the Web3 ecosystem. It’s the OG of smart contracts. Congrats to the entire team & ecosystem on the Ethereum Merge event. Let’s keep building the crypto ecosystem together.”

Gaurav Mehta, founder of Catax crypto taxation and forensics start-up, believes that with Ethereum’s merge, demand for bitcoin to become environmentally friendly will grow even more. Bitcoin, the world’s most popular cryptocurrency, uses more electricity than many countries.

“The fact that the Ethereum merger reduced the energy footprint by 99 percent while rendering the Ethereum mining sector using graphic cards obsolete demonstrates that stakeholders can act for the greater good even when economic incentives work against them. Demand for graphics card is going to cool down and reaction will visible of stock price of listed semi-conductor manufacturing companies,” said Mehta.

“Ethereum network is the core of the multibillion-dollar crypto economy, which includes tokens, NFTs, and thousands of DApps. It may be considered as a rolling track, and a successful upgrade is more akin to replacing a truck's chassis than its tyres. Now, the demand for the bitcoin network to become more environmentally friendly will witness new impetus,” he said.

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First Published: 17 Sep 2022, 12:00 PM IST