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Like other cryptocurrencies, Ethereum has been strongly criticized for its particularly high energy footprint: the blockchain generates around 50 to 60 million tonnes of CO2 per year. Its creator, Vitalik Buterin, has therefore started an update, called The Merge, aimed at drastically reducing this energy cost. Transaction validation will now rely on a new process requiring up to 99% less energy than at present.
The changeover is operated this week, between today and Thursday, by hundreds of programmers around the world. This is Ethereum’s biggest update since its inception in July 2015. While the technology has so far been used primarily to create speculative financial products, this change could boost Ethereum’s reputation. A “greener” blockchain is likely to gain acceptance with policy makers and regulators.
” This in turn could give a boost to the desire of traditional financial institutions to develop Ethereum-based services. “, declared the bank ING to TechXplore. The Merge introduces a new way to record transactions. Currently, “miners” use extremely power-hungry computers to solve complex calculations that allow them to earn Ether — a consensus mechanism known as “proof of work.” The new Ethereum will put an end to this competition between miners: only one validator will be selected to carry out the operation.
From proof of work to proof of stake
Ethereum is the second largest cryptocurrency after Bitcoin (one Ether is worth just under 1700 euros to date). Both, like other cryptocurrencies, consume a lot of energy, because mining – the process by which transactions are verified, recorded and secured in the blockchain – requires the use of powerful computers capable of solving operations. complexes, which operate 24 hours a day.
This is the principle of the validation method by proof of work (or proof of work): miners provide the network with computing power to update the decentralized database by adding new blocks. To do this, they must encrypt all of the transactions in a block, as well as the encrypted transactions in the previous blockchain. The first miner to solve this cryptographic problem is rewarded, so they all compete with each other.
With The Merge, Ethereum switches to another validation method : proof of stake, also called proof of stake (proof of stake). While proof-of-work requires users to run hashing algorithms multiple times or solve mathematical puzzles to validate transactions, proof-of-stake involves proving possession of a certain amount of cryptocurrency in order to qualify for the validation of additional blocks, and possibly receive a reward. Concretely, the “validators” will have to pay 32 Ethers (i.e. approximately 54,400 euros) to participate in this new system.
The advantage? Proof of stake requires much less powerful machines, which can even be hosted by any private individual (thus we are completely the opposite of “mining farms”). In theory, the approach therefore improves the decentralization and security of the Ethereum network.
The process began in December 2020, with the start of the “Beacon Chain”, which allowed developers to work on the new blockchain without touching the mainnet. The merger of the two branches will be carried out this week. Note that the initial blockchain will always exist as long as miners and developers secure it; it should nevertheless quickly disappear in favor of Ethereum 2.0.
A particularly risky operation
” A monumental technological step ”, it is in these terms that the blockchain company Consensys described the current procedure. The switchover of the blockchain is indeed not easy to achieve and some critics expect some incidents. When in doubt, several exchanges and cryptocurrency companies said they would halt trading during the entire merger process.
Note that if the upgrade goes smoothly, Ethereum will still face major obstacles, which prevent it from having the same notoriety as Bitcoin. Overall, the cryptocurrency industry doesn’t have the best of reputations: it’s characterized by wild price swings — and currently, on a sustained decline, raising fears of another crypto winter — security breaches, and a host of scams .
Ethereum, in particular, has already shown some weaknesses in the past. A year after its launch, in July 2016, an Ether investment fund (named TheDAO) suffered a major cyberattack that forced the Ethereum team to reprogram the blockchain to reverse the effects of the hack and re- credit the funds investment fund. Around 15% of Ether miners refused to implement this change at the time, leading to the creation of two separate blockchains.
As of March 2022, the Ronin Network — a cryptocurrency system on which the hugely popular video game “Axie Infinity” is based — also suffered a major attack. Security vulnerabilities allowed hackers to steal over 173,000 ether and over 25 million USDC. This is one of the biggest cryptocurrency heists in history. In May, it was not a theft but an overload that damaged Ethereum: an influx of buyers caused by a new NFT project got the better of the network, which found itself offline for three hours.
In addition to the new security problems that this transition to Ethereum 2.0 could cause, this upgrade could lead to some form of rebellion by cryptocurrency companies, whose activities will necessarily be impacted. In particular, they could try to hijack the process or create a hard fork, a smaller blockchain, which would rely on the old mechanism. A new movement, EthPoW, which aims to promote this hard fork, he’s already been talked about a lot.
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The Ethereum network begins a major upgrade to reduce its energy cost by 99%
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