Ethereum completes long-awaited energy-saving ‘Merge’ upgrade
Ether surged more than fivefold in 2021, outperforming Bitcoin by a wide margin, in part on optimism over the Merge
Crypto’s most important commercial highway, Ethereum, just got repaved.
The blockchain network completed the crypto world’s biggest and most ambitious software upgrade to date, according to its co-founder Vitalik Buterin in a Twitter post Thursday.
And we finalized!
Happy merge all. This is a big moment for the Ethereum ecosystem. Everyone who helped make the merge happen should feel very proud today.
— vitalik.eth (@VitalikButerin) September 15, 2022
Called the Merge, it replaced power-hungry computers that were used to order transactions on the network with a more energy-efficient setup using piles of the network’s native token, Ether, placed in special, so-called staking wallets. As a result, Ethereum’s energy consumption will decline by an estimated 99 per cent.
Such a coup has never been attempted in cryptography before, not to mention Ethereum, where there are about 3,500 active decentralized applications, ranging from exchanges to games and processing billions of dollars worth of cryptocurrency. For many years, the work on the merger has not changed the work of end users in Ethereum, but it is a key step towards further updates that will make the network faster and cheaper, and should also further increase its popularity and use.
The merger also changed the properties of Ether, making it more like income-generating securities. According to tracker Betting Rewards, the delivered ether will generate revenue, which is expected to be about 5.2% after the merger. Combined with the expected net decline in the supply of Ether tokens shortly after the update, this should make the coin more attractive to investors.
Ether has grown more than fivefold in 2021, surpassing Bitcoin by a wide margin, partly due to optimism about the merger. Both tokens have been struggling since they hit record highs in November, and ether has dropped more than 50 percent this year.
The software update is called a merger because the existing Ethereum blockchain will be merged with a parallel network that has been running for almost two years to test the proof-of-stake concept. In general, the issue of updating has been considered for more than seven years.
Even though the merger is complete, it could be followed by days or even weeks of failures, depending on what happened after some previous Ethereum software updates. Concerned about bugs and hacks, crypto exchanges such as Coinbase Global have suspended Ethereum-related withdrawals and deposits for about the time of the software update. Crypto lender Aave suspended the borrowing of ether before the merger.
The concern is compounded by the likely creation of copies of Ethereum that still use energy-consuming computers called miners. These forks, such as EthereumPOW, create their own copies of Ether coins, which are provided to all holders of the main ether. Tokens may have some value. But the existence of several versions of Ether, each of which works in a different chain, can create confusion and lead to attacks and fraud. The same can be said about copies of other tokens working in branched chains.
While all the applications and wallets currently used in Ethereum have been replicated on branched chains, most applications are likely to be hacked, as key players – among them the issuer of the stable coin USDC Circle and oracle Chainlink provider – have stated that they will not support branched versions. Whether branched chains will be able to remain viable in the long term remains to be seen.
Large teams of Ethereum developers from all over the world have been working on the merger for many years. At the end of 2020, they debuted the Beacon Chain, a parallel network that tested order transactions using betting coins or a system called proof of stake. As a result of the merger, Beacon was merged with the main Ethereum network using miners and made Beacon Ethereum a way to test the order of network transactions.
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