Ethereum, the second largest cryptocurrency, has completed a plan to to reduce its carbon emissions by more than 99%.
The software upgrade, known as “the merge”, will change how transactions are managed on the ethereum blockchain, a public and decentralised ledger that underpins the cryptocurrency and generates ether tokens, the world’s most popular cryptocurrency after bitcoin.
Vitalik Buterin, ethereum’s inventor, announced the completion of the plan on Twitter on Thursday morning, tweeting “Happy merge all”.
The move means that ethereum will no longer be created by an energy intensive process known as “mining”, where banks of computers generate random numbers that validate transactions on the blockchain and generate new ether tokens as part of the process. The process, known as “proof of work” in the cryptocurrency world, will now move to a “proof of stake” system, where individuals and companies act as validators, pledging or “staking” their own ether as a form of guarantee, to win newly created tokens.
Ethereum mining used up as much electricity as Austria, according to the Digiconomist website, at 72 terawatt-hours a year. Alex de Vries, the economist behind the website, estimates that the merge will reduce the carbon emissions linked to ethereum by more than 99%.
De Vries added that the move could represent 0.2% of the world’s electricity consumption disappearing overnight. However, he said bitcoin remained the biggest single contributor to the crypto world’s carbon footprint.
“All eyes will be on bitcoin. It remains the largest polluter in the crypto space. Even today bitcoin is responsible for as much electricity consumption as Sweden. And we know that’s not going to change,” said De Vries.
Ethereum rose 2% to $1,630 (£1,417) after the move, according to website coinmarketcap, valuing the currency at just under $200bn. Bitcoin is worth $387bn, having fallen sharply from its peak of more than $1tn last year.
Carol Alexander, professor of finance at University of Sussex Business School, said the merge was a significant event for the crypto industry
“The merge is the most important event in blockchain history,” she said. “In my opinion, today marks the beginning of the end of bitcoin’s dominance over crypto assets. Ethereum is achieving something that bitcoin never could because bitcoin is a purely speculative asset and its mining network would never agree to drop that source of income.”
But bitcoin is defined by its conservatism. The cryptocurrency’s pseudonymous founder, Satoshi Nakamoto, famously disappeared without a trace shortly after it began to take off, and without the founder’s blessing, every attempt to push through significant changes to the structure of the network has failed. Bitcoin “forks” with names such as Bitcoin SV, Bitcoin Cash, Bitcoin Gold and Bitcoin Classic have all tried and failed to succeed in replacing the original flavour of the currency, and the bitcoin community is rallying around proof of work, arguing that it remains the only proven way of securing a cryptocurrency at scale.