Ethereum, the world’s second most valuable cryptocurrency, has completed a massive software upgrade that its backers claim will slash its carbon footprint.
The long-awaited revamp, which is known as “The Merge,” will reduce ethereum’s energy consumption by nearly 99.95%, according to the Ethereum Foundation, a nonprofit organization dedicated to supporting the cryptocurrency and its related technologies.
“The Merge refers to the original Ethereum Mainnet merging with a separate … blockchain called the Beacon Chain,” it added.
Until now, both ethereum and bitcoin were running on a mechanism called “proof-of-work,” under which high-powered computers were required to solve complex puzzles. The merger moves ethereum to a mechanism called “proof-of-stake,” which is much more energy efficient.
“Happy merge all,” Vitalik Buterin, the 28-year-old Russian-Canadian programmer who helped create Ethereum said on Twitter. “This is a big moment for the Ethereum ecosystem. Everyone who helped make the merge happen should feel very proud today,” he added.
The co-founder said that the upgrade will “reduce worldwide electricity consumption by 0.2%.”
While cryptocurrencies have seen a phenomenal rise in the last few years, observers say they’re terrible for the environment. According to Digiconomist, a platform that tracks crypto energy usage, a single Ethereum transaction is equivalent to the weekly power consumption of an average US household.
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Earlier this month, Digiconomist said that the power saved as a result of the upgrade would “likely be equivalent to the electrical energy consumption of a country like Portugal.” It could also become the “final nail in the coffin” for bitcoin’s transaction mechanism.
Ethereum was down 0.7% after the news, trading at $1,592.78, but analysts say the upgrade could have a big impact on the crypto world in the long run. The world’s most valuable cryptocurrency, bitcoin, was down almost 1%, trading at $20,174, according to CoinDesk.
“It’s been a long time in the making and the question on traders’ lips right now is will it be the next bullish catalyst for cryptos or a “sell the fact” event,” wrote Craig Erlam, a senior market analyst at Oanda, in a note on Thursday.
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