Popular cryptocurrency blockchain Ethereum has completed its long-awaited transition to Proof-of-Stake (PoS), a new transaction verification technique.
The software upgrade, better known as “The Merge,” has been in the works for years and was completed Thursday morning.
After the update, Ethereum has switched from the previous Proof-of-Work (PoW) consensus mechanism to the more environmentally friendly PoS system.
“The merger represented the official switch to using the Beacon Chain as the engine of block production,” Ethereum said.
“Mining is no longer the means to produce valid blocks. Instead, the proof-of-stake validators have taken on this role and are now responsible for checking the validity of all transactions and proposing blocks.’
Ethereum says no transaction history was lost in the move.
“When Mainnet merged with the Beacon Chain, it also merged the entire transaction history of Ethereum.”
According to German research firm Crypto Carbon Ratings Institute (CCRI), Ethereum power consumption is expected to drop by a staggering 99.988% after the merger.
The network used to consume over 23 million MWh annually – enough to power about 2.3 million average American homes for a year – but in the future it could need just over 2,600 MWh per year.
This dramatic change should reduce Ethereum’s total carbon dioxide (CO2) emissions by 99.992% – from 11 million tons per year to about 870 tons.
Proof of Work versus Proof of Stake
The merge eliminates Ethereum’s reliance on the proof-of-work consensus method, which required significant computing power from all nodes on the Ethereum blockchain.
PoW requires crypto miners to solve energy-intensive computational problems to verify new blocks on the chain. Each verified block brought in new tokens in return.
Bitcoin, the world’s largest cryptocurrency, still uses PoW, and its power consumption has drawn much criticism and resentment.
Ethereum’s PoS technique eliminates the PoW process. Mining new blocks is no longer necessary as the network is secured with tiered Ethereum coins and validators.
It is likely that the demand for GPUs, which miners have bought en masse to perform computations, will fall dramatically as a result.
In a report on the environmental impact of cryptocurrencies released last week, the White House said that crypto asset activity in the US is comparable to the country’s greenhouse gas emissions from railroad diesel fuel.
Ethereum’s value has surged more than fivefold over the past year, outperforming Bitcoin, in part due to confidence in the merger.
However, since hitting record highs in November, both coins have struggled, with Ethereum down more than 50% this year — though that’s more a reflection of the broader crypto crash than a loss of confidence in the merger.
There is disagreement among experts about the next change in direction for Ethereum.
While some believe the merger will be transformative and significantly boost Ethereum’s value, other analysts are less optimistic.
The outcome of the merger will ultimately determine what happens to Ethereum’s price over the next few months.
The results will have significant implications not only for the Ethereum network but also for the cryptocurrency market as a whole, as an update of this magnitude is prone to bugs and other technical issues.