The Ethereum Revolution: Does Less Electricity Mean Less Bitcoin?

The second most important digital currency has undergone a change that will save on energy expenses.

If you didn't understand this sentence, you probably aren't in the blockchain game yet.

On the other hand, if you did understand, you probably also share the feeling that this is nothing less than a revolution in the crypto world

Tal Navarro

09/21/2022

Wednesday, September 21, 2022, 11:50 p.m

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Last week, a historic move was completed in the crypto world: the Ethereum blockchain network switched from Proof of Work to Proof of Stake verification method: that is, instead of performing electricity-consuming calculations for adding new units to the blockchain, from whence the network will lock some of the coins -ETH, and will work to verify new transactions.

Since the verifiers "risk" (staking) their own coins, they have an interest in enabling the proper operation of the network.

This is a real revolution.

The merger is called Ethereum 2 for a reason: the Ethereum network powers Ether, the second most important cryptocurrency (after Bitcoin), most of the entire NFT market, as well as many important Ethereum-based Layer 2 coins such as Polygon and coins more

All these add up to an aggregate value of at least sixty billion dollars.

Through what is known as the "merger" (that is, this transition to an alternative consensus mechanism), network activity will save 99.9% of electricity consumption as it was before the merger,

This is quite a big deal, since one of the strongest objections to crypto is that crypto mining is harmful to the environment: as far as Ethereum is concerned, this problem no longer exists (out of the top ten cryptocurrencies, only two of them, Bitcoin and Dogecoin, currently operate on a Proof- of-Work devours the energy).

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No longer a power hog.

Ethereum (Photo: ShutterStock)

The merger is something that has been in the air for a long time;

Eight years were waiting for him, and more than once it seemed that he would never happen;

So much so, that when they started the merger, tens of thousands of people watched it live on YouTube.

However, now that the system upgrade has finally arrived, it is worth discussing what is expected in the Ethereum environment going forward.

The term "merger" indicates the merging of the Ethereum network with the Beacon Chain, a mechanism designed to enable staking on Ethereum, and transition to the Proof Of Stake mechanism.

However, the final upgrade has not yet been completed: "This is the first step in Ethereum's journey to become a more mature system, but there are more steps left," said yesterday Vitalik Buterin, one of the founders of Ethereum and the visionary behind the network.

Vitalik's intention is that a solution is still needed for other problems that exist in the network, apart from electricity consumption, i.e. the high gas fees and the low scalability, i.e. Ethereum's ability to handle a reasonable volume of transactions (these will be solved in the next stage of upgrading the system, called sharding, so they will divide their size of the bricks in the blockchain to 1/64).

The optimism did not seep in

Tal Nebro (Photo: Yehats)

However, even though the merger went through with great success and without any glitches at all, the optimism did not fully permeate the crypto market.

After the merger, the price of ETH continued to fall to the $1,350 area, and while it is still relatively far from the bottom of the crypto winter, it is still very far from the peak price of nearly $5,000.

It seems that in the end, a successful merger was already embodied in the price of the currency in the last months, and in any case, its impact is low compared to the negative sentiment in the market in relation to crypto (even Bitcoin broke the support it had at $20,000).

Here we actually get to the bottom line: the Ethereum merger basically means that the currency will be greener, but not faster or cheaper.

Beyond that, for average crypto traders and Ethereum holders, the merger shouldn't change anything.

As of right now, it also shouldn't eliminate its obvious competitors, such as Solana and Polkadot.

The winds of crypto winter are still blowing outside, and nothing substantial should happen in this regard.

However, a foundation has been laid here for more commercial companies that feared for their image due to the use of polluting crypto, will now embrace the use of NFTs.

Also, an infrastructure was laid so that Ethereum could, when the day comes, be a currency used by tens of millions of people around the world.

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• Digital currencies

• Bitcoin

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