Ethereum Power-Saving Upgrade Set For This Week

An upgrade to the Ethereum blockchain intended to drastically reduce its power consumption may take place this week after multiple delays, and could fuel broader use of the token and its underlying technology.

The upgrade, called the “Merge”, is to switch the blockchain from a “proof of work” system to a “proof of stake” protocol, which the Ethereum Foundation says will use 99.95 less energy.

The proof of stake consensus system is energy-intensive by design, requiring individuals and organisations to solve complex mathematical problems in order to validate transactions, while in proof of stake it is groups’ holdings in the cryptocurrency that enables them to be recognised as validators.

Proof of stake

Under proof of work a single Ethereum transaction currently requires as much power as the average US household uses in a week, according to research firm Digiconomist.

While the exact timing of the Merge remains unknown, sites tracking the blockchain predicted this week that it would take place early on Thursday, while the Ethereum Foundation predicted it would happen sometime during the 10 to 20 September period.

Ether has the second-greates market capitalisation after Bitcoin, at about $200 billion (£171bn), but its blockchain processes some 1 million to 1.5 million transactions per day, compared to 200,000 to 300,000 for the Bitcoin blockchain.

The Ether currency has gained about 65 percent in value since the end of June amidst broader volatility as buyers await the Merge, with some analysts saying this means little price jump is expected once the upgrade actually takes place.

Mainstream adoption

However industry watchers said the shift could boost adoption of Ether and its blockchain.

Bank of America said the Merge may allow some institutional investors who were barred from buying tokens that run on a proof-of-work system to purchase Ether for the first time.

UBS head of FX strategy James Malcolm said the move was a “very material development in the overall evolution plan for Ethereum”.

The Merge is the first of five upgrades planned for Ethereum, with the next being the “Surge”.

The others, which include the “Verge”, the “Purge” and the “Splurge”, are all intended to make Ethereum more scalable, decentralised, secure and energy-efficient.