Ethereum has completed a long-awaited upgrade to its system in a move that is expected to lower its energy costs and is intended to pave the way for further use of crypto technology in mainstream finance.
The update, known in the industry as “Merge,” which changes the way new transactions are verified in the Ethereal blockchain, completed early Thursday, said co-founder Vitalik Buterin.
Ethereum powers large swathes of the Web3 world, which includes applications like digital collectibles and decentralized financial systems.
the milestonepromised by the developers for many years, was hailed as one of the most significant moments in the short history of cryptocurrencies by fans, who planned “merge parties” in cities around the world and followed the viewing parties live on social networks.
“This is the first step in the great journey of Ethereum to become a very mature system. There are still steps to go,” Buterin told the developers.
The merger marked a high-stakes test for the cryptocurrency sector after a plunge in token prices this spring wiped $2 trillion off the value of digital assets and shook faith in the market.
Changing the architecture that underpins the $200 billion ether cryptocurrency, the Ethereum blockchain’s flagship token, and tens of billions of other related assets and applications is fraught with risks, from technical mishaps to disputes between participants in the decentralized network, even after the merger took place. finished.
Its backers hope a successful merger will boost confidence in Ethereum, launched in 2015 by Russian-Canadian programmer Buterin, and the multitude of tokens and projects running on it. block chainas well as strong criticism about its energy consumption.
However, the Ethereum developers said that they would need to monitor the network for the next few hours and days to make sure the upgrade runs smoothly.
“It’s a complicated task,” said Edouard Hindi, chief investment officer at crypto hedge fund Tyr Capital. “A fine forgotten melody. . . it could generate a lot of volatility, and the market is in a state of panic.”
The merger represents just one step in a plan outlined by Ethereum developers to overcome limits on network capacity, which are seen as a major obstacle to achieving widespread adoption of decentralized finance.
“[The Merge] it solves one problem, but it doesn’t solve many other problems,” said Lars Seier Christensen, co-founder of Saxo Bank, who now runs a blockchain project called Concordium.
Ethereum, like bitcoin, has until now relied on network participants solving complex mathematical problems to validate new blocks, a process called proof-of-work. The energy consumption of Ethereum was similar to that of Finland.
The merger refers to the moment when the existing Ethereum blockchain is linked to a new network where transactions are validated by a group of individuals and corporations who have staked their own tokens as collateral for the network’s security, a system called proof of participation.
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The Ethereum Foundation estimates that replacing proof-of-work will reduce the energy consumption of the blockchain by about 99.95 percent. It will also eliminate the need for Ethereum miners, companies that make money by validating new blocks through proof of work.
The anticipation of the Merger has helped boost the price of ether, which is up 75 percent from its low point in June. Ether has gained ground against bitcoin, which has recovered just 15 percent over the same period.
However, the years-long effort to complete the upgrade underscored the difficulty of making improvements to the Ethereum blockchain. Transactions on the network are still hampered by slow speeds and high costs, which critics say limit the system’s ability to grow.
Hindi said the merger was “just a step in the right direction. There are three or four more steps. It is a two or three year process. It is a great, great plan that is being implemented and we will have many surprises along the way, good and bad.
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