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NextGen Magazine

 
 

Ethereum’s Upgrade Aims to Cut Energy and Heighten Acceptance

By:
S.J. Steinhardt
Published Date:
Sep 12, 2022

Blockchain company Ethereum’s long-awaited, energy-reducing software upgrade is expected this week, Reuters reported.

The company claims that the "Merge," as the upgrade is called, will reduce its energy consumption by about 99.95 percent. It will do so by moving from a “proof or work” system that requires computers to consume vast amounts of energy—as they solve complex mathematical questions in order to determine cryptocurrencies’ value—to a “proof of stake” system called the "Beacon Chain." This protocol works by having “individuals and companies act as validators, using their ether as collateral, in a bid to win fresh tokens,” according to Reuters.

In addition to reducing the company’s energy consumption, the move may boost Ethereum’s ambition to increase the use of its blockchain, while widening acceptance of its ether token, a nonfungible token (NFT) that the company promotes as a digital asset in the emerging era of decentralized finance. This upgrade is seen by some as an advance for those ambitions

Ether is the second-largest cryptocurrency after bitcoin, with a market capitalization of around $200 billion, according to data site CoinGecko. There are around 1 to 1.5 million transactions per day on the Ethereum blockchain, compared to Bitcoin's 200,000 to 300,000, according to CoinMetrics data.

Ether is still more popular as a trading option than as a means of payment.

Investors and environmentalists have criticized the energy use of blockchain technology. Reuters references research firm Digiconomist, which found that “the entire Ethereum network consumes more electricity than a number of countries.” Other companies have built noisy digital mines that never stop, according to the Washington Post.