Ethereum’s largest upgrade to date just took place, in what could be a game changer for the crypto sector as a whole. The update was designed to reduce Ethereum’s energy consumption by more than 99%.
Why Does Crypto Negatively Impact the Environment?
Ethereum, the second biggest cryptocurrency in the world, completed its software upgrade yesterday. Cryptocurrency has been experiencing a steady increase in popularity, backed by some of the world’s biggest financiers. However, the dark side of crypto comes from its volatility and the hugely negative environmental impact that it has.
In order to yield cryptocurrencies, crypto miners use computer systems to verify transactions and create new crypto. The downside of this is that it is incredibly energy consuming. In fact, a single Ethereum transaction can require the same amount of power used by the average US household in a week.
Ethereum’s Software Update
The latest update from Ethereum, known as ‘The Merge’, will use ‘proof-of-stake’ rather than ‘proof-of-work’. In layman’s terms, that means they will be relying on validators rather than miners. The validators will enter a lottery for a chance to sign off on new transactions and receive new tokens. This is a far more energy efficient method than large banks of computers running for multiple hours at a time to solve puzzles.
Cut Energy Consumption by 99.95%
The new upgrade is a long time coming and developers have been working on building the new system for years – 9 teams and over 100 developers. As a result, Ethereum is expected to cut their energy consumption by a staggering 99.95%. Not only that, but it could even make its transactions more secure.
However, the upgrade is not without its risks, as crypto experts worry that potential glitches in the new system could allow scammers to steal tokens.
What This Means
This software update will not only establish more sustainability for he network, but has also removed one of the key entry barriers for some investors: the contribution to the climate crisis. With a heavily reduced energy consumption, Ethereum has the potential to offer investors all the benefits of cryptocurrencies, without the heavy burden of their carbon footprint.
Due to the upgrade, there will also be a significant reduction in supply of ether tokens. This could mean that in the following weeks and months, ether may become a deflationary currency, driving up the price of the token.