The world’s second most important cryptocurrency, ether, has shifted to a new, greener operating model.
So far, cryptocurrency “mining” (the process of creating or transacting a unit, which involves the simultaneous use of several computers) has consumed about the same amount of energy as the Netherlands, according to the Ethereum Foundation. With the transformation dubbed “fusion,” its managers say energy consumption will drop by 99.9%.
While cryptocurrencies have been a business revolution, their impact on climate change is huge due to the amount of electricity used by the computers running their trading.
Vitalik Buterin, co-founder of Ethereum (the digital platform whose currency is ether), says a shift to the new paradigm has been on the horizon since the cryptocurrency launched in 2014, but has been delayed due to the technical complexity involved. It’s like rebuilding the foundations of an already existing skyscraper.
The move took place in the early hours of Thursday (9/15). Analysts are still watching whether the merger is successful. If there is any issue, it could seriously jeopardize the cryptocurrency ecosystem, affecting investors large and small around the world. But if all goes well, consumers shouldn’t notice any changes.
Why is cryptocurrency so polluting?
Unlike traditional currencies, cryptocurrencies are a digital money system where people make direct online payments to each other and there is no central bank. Instead, transactions are managed in what is known as a transaction blockchain.
the blockchain It is a decentralized global network of high-powered computers that allows the creation or “mining” of digital currencies.
So far, this has been done through what is known as the ‘Proof of Work’ model or the Proof of Work system.
The model works like this: in order for A to make a transfer to B in cryptocurrencies, it sends a message to the network, which is added to other messages from other transactions. Together they form a “block” that is converted into an encrypted code. In turn, each “miner” competes with the others to try to solve that code and is rewarded with new coins for that work.
Once the process is resolved, it is verified by other miners and the transaction is confirmed.
With this complexity, the process requires a lot of calculations and a lot of computer time. So a lot of energy.
How is Ethereum changing to be greener?
What will change from now on is that the blockchain The Proof of Work system (what they called it merge or “merger”) with a carbon copy called a beacon chain. Behind this name is the new cryptographic system for the Ethereum cryptocurrency: the “Proof of Stake” or PoS system.
PoS dramatically reduces the number of computers required for maintenance blockchain. Cryptocurrency miners are being replaced by fewer “validators” of transactions.
In addition to reducing energy demand, the PoS system reduces the amount of coins awarded as rewards – which is how digital currencies are generated.
Another change is that laptops And desktop computers They can be used with this system in place of the powerful data processing units (GPUs) that have been used so far. It has been announced that the adoption of PoS will reduce energy consumption by about 112 TWh per year to 0.01 TWh per year.
“Integration” as a whole is expected to save a significant amount of energy per year, about Chile’s energy consumption. “It’s really exciting and a great achievement. Yes, there are tensions in the sense that things probably won’t work 100% okay, but that’s to be expected,” says Justin Drake, a researcher at the Ethereum Foundation.
“We now have an infrastructure that allows us to continue even if parts of the network go down for any reason.”
As a result of the “consolidation,” some analysts expect ether to overtake bitcoin, the highest-grossing cryptocurrency by market capitalization, as the leader in total value of all currencies.
The other side of the coin is that of cryptocurrency miners who will either have to find a new way to make money from their equipment or sell it.
Some reports indicate that GPU sales have already begun.
Dubai-based cryptocurrency miner Prima Technologies is investing tens of thousands of dollars to replace the GPUs that mine ether, and is now prioritizing hardware that’s more expensive and more power-hungry – but capable of mining bitcoins.
“It is difficult as there is no other cryptocurrency as profitable as Ethereum,” said company spokesperson Ammar Lashkari. “We’ll keep some of our Ethereum computers and start mining altcoins, but it won’t be the same, so we’re slowly diversifying into bitcoin mining.”
In Staffordshire, UK, Ash Andrews also hopes to profit from other coin mining with his existing hardware.
“I have mixed feelings about the merger,” says Andrews. “It was a quiet time for us miners, just mining Ethereum, and now we have to switch to another coin. That’s a lot of changes.”
Some are more optimistic about the future of GPU mining.
Josh Reddit, CEO of Manchester-based Easy Crypto Hunter, believes mining lesser-known coins will eventually be profitable.
“During Ethereum’s price peak, each of our mining rigs was making $150 a day, which is pretty insane. Coins in three or five years?”
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