A behind-the-scenes change to the technology underlying many cryptocurrencies, including Ether, is one step closer to addressing a major source of criticism: cryptocurrency’s environmental impact.
For years, cryptocurrencies such as Bitcoin and Ether have been chastised for the massive amount of pollution produced by the generation of the electricity used to mine them. Due to the high costs involved, miners frequently set up shops where power is cheap, typically because it comes from sources such as coal.
However, recent changes to a key blockchain used to power the Ether cryptocurrency, several rival cryptocurrencies, and projects based on non-fungible tokens, or NFTs, suggest that this may soon change. The change is expected to reduce the Ethereum blockchain’s energy consumption by 99 percent.
It also gives Ethereum an advantage over rival Bitcoin, which hasn’t made much progress in terms of energy efficiency. Despite being under pressure to consume less energy, Bitcoin has no plans to change its technology, as Ethereum did.
Last week, a mostly successful test simulated the larger merging of Ethereum’s proof-of-work and proof-of-stake chains, bringing the transition that is critical to Ethereum’s energy savings one step closer to reality. The price of Ether has outperformed Bitcoin over the last seven days, thanks in part to the news of the so-called merger.
Over the last week, Ether has increased by about 13% to around $3,007, while Bitcoin has increased by about 7% to $42,622.
The change comprises the Ethereum network, which employs proof of work. Previously, miners had to use powerful computers to solve complex math problems for recording a transaction on its blockchain—a transparent, digital ledger.
Following the environmentally friendly fix, miners will be able to verify transactions by staking some of their cryptocurrency in special wallets, a process known as proof of stake. The more cryptocurrency validators stake, the better their chances of validating the transaction and claiming a reward in crypto for doing so.
This process consumes less energy because it does not need the use of powerful computers to solve mathematical puzzles.
The Ethereum network is best known for its native cryptocurrency, Ether, which is the second most popular cryptocurrency after Bitcoin. It also hosts several well-known applications, including the NFT exchange OpenSea, the crypto wallet MetaMask, and the automated token exchange UniSwap.
Currently, Ethereum has two different chains: the old one that uses proof of work and the latest one that uses proof of stake. With a process known as the merge, Ethereum will be combining both chains and make a transition from proof of work to proof of stake, reducing its energy consumption in the process.
The merger was scheduled to be finished by the end of June. However, no specific date has been set, according to a blog post by the Ethereum Foundation, a non-profit dedicated to the network’s support.
Tim Beiko, an Ethereum developer who leads blockchain updates, told Fortune that the switch to proof of stake could happen this summer.
When the long-awaited merger occurs, environmentally conscious investors may be more likely to invest in projects that use the Ethereum blockchain. Furthermore, the change promises to make transaction validation less expensive since powerful computers will no longer be required.
