Bitcoin is the one that gets most of the attention in the global crypto market, but Ether, a currency based on the Ethereum platform, will face a so-called "merger" next month.
According to experts in the field, it is one of the most significant blockchain upgrades in the history of the crypto market.
To understand what the "merger" means, we spoke with Idan Levin, a venture capital investor at the Collider Fund and a member of the Crypto Companies Forum.
The Ethereum platform is actually the basis of a decentralized financial system.
If Bitcoin only allows buying, storing and transferring currency, the Ethereum block allows building a system of applications for banks and exchanges that are based on the same platform.
"Basically, they are trying to replicate the traditional financial industry into Ethereum," explains Levin.
What is the "merger" move?
"If we take ethereum for a car, then the 'gas' is the ether currency, and the engine is based on operators who are engaged in mining - a model called 'Proof of Work' - proof of work. This engine requires a very high use of electricity.
"In fact, the platform engine will change and move to a Proof of Stake model. This model will reduce by 99.9% the electricity consumption that was required in the previous model. The model is based on a very sophisticated protocol that was built over more than 7 years and emphasizes the economic interest of the miner".
What does reducing electricity consumption mean?
"The ethereum platform, as well as other cryptocurrencies, have faced criticism over the years about increased electricity consumption for the mining process. All this criticism will be irrelevant. Ethereum will become green and allow institutional entities and large investors to use this platform without being criticized for pollution."
Who is responsible for this move?
"The transition to Proof of Stake is very complex, because Ethereum is a decentralized system, there is no one who manages it. The move is the result of work by teams from all over the world who collaborated. These are teams of companies with a financial interest in the field, of the Ethereum Foundation (a non-profit organization) and of programmers who really believe in the platform."
Will there be an increase in the volume of transactions?
"One of the challenges in blockchain is to increase the number of transactions per second. This challenge has greatly limited the use of these networks.
"In Ethereum's development plan, it is expected that the volume will increase through all kinds of systems and startups. We will reach many more transactions per second in the coming years, but this is not going to happen immediately after the merger."
Is there a risk in the merger?
"It's a very complex event for which a lot of preparations were made in advance. But it's experimental technology, it's at the forefront of innovation, and something can always happen."
How was the Ether currency affected in the last weeks leading up to the merger?
"You have to separate the things. The price of the currency is affected by macro movements and what happens in the traditional financial markets, mainly by risk assets such as technology companies and the Nasdaq index.
"In the last two years, the correlation with the Nasdaq has increased significantly, and we don't know if it will continue.
This happens because the force that drove people to buy stocks of tech companies is the same force that drove them to buy Bitcoin or Ethereum.
Many people see Ethereum as a kind of future 'bet' on a very interesting technology, but one that will happen in the future."
A lot of things to solve
Do you believe that cryptocurrencies will be tradable on a daily basis?
"Yes, it's an amazing technology, but there are many things that need to be solved, such as development, cyber and increasing transactions per second. There are things that are solved, but it takes time.
"If all the citizens of Israel were to come and say 'I want to use ethereum', I would say that it is not possible, we are not there yet. I totally see it happening, but it will take many years. Until it reaches the common citizen it is going to take between 5 and - 10 years - but these are only general estimates."
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