Ethereum blockchain set for 'monumental' overhaul

Ethereum blockchain set for 'monumental' overhaul

Enthusiasts hope a greener ethereum will spark wider acceptance
Enthusiasts hope a greener ethereum will spark wider acceptance. Photo: INA FASSBENDER / AFP/File
Source: AFP

New feature: Check out news exactly for YOU ➡️ find “Recommended for you” block and enjoy!

An army of computer programmers scattered across the globe is set to attempt one of the biggest software upgrades the crypto sector has ever seen this week to reduce its environmentally unfriendly energy consumption.

Developers have spent years working on a more energy-efficient version of the ethereum blockchain, a digital ledger that underpins a multibillion dollar ecosystem of cryptocurrencies, digital tokens (NFTs), games and apps.

Ethereum -- the second most important blockchain after bitcoin -- burns through more power each year than New Zealand.

Experts say the changeover, expected to take place between Tuesday and Thursday, would slash energy consumption by more than 99 percent.

Enthusiasts hope a greener ethereum will spur wider adoption, particularly as a way of enabling banks to automate transactions and other processes.

But so far the technology has been used largely to create speculative financial products.

Read also

Energy majors exaggerating green performance: analysis

PAY ATTENTION: Follow us on Instagram - get the most important news directly in your favourite app!

The ING bank said in a recent note that the switchover might help ethereum gain acceptability among policymakers and regulators.

"This in turn may provide a boost to traditional financial institutions' willingness to develop ethereum-based services," the bank said.

'Technological milestone'

The switchover, dubbed "the merge", will change the way transactions are logged.

At the moment, so-called crypto miners use energy-guzzling rigs of computers to solve puzzles that reward them with new coins -- a system known as "proof of work".

The new system will get rid of those miners and their computer stacks overnight.

Instead, "validators" will have to put up 32 ether (worth $55,000) -- ethereum's cryptocurrency -- to participate in the new "proof of stake" system where they earn rewards for their work.

But the merge process will be risky.

Read also

Apple unveils new gadgets despite supply chain woes

Blockchain company Consensys called it a "monumental technological milestone" and the biggest update to ethereum since it was launched in 2015.

Critics have questioned whether such an upgrade will pass off without incident, given the sector's history of instability.

Ethereum went offline in May for three hours when a new NFT project sparked a surge in buyers that overwhelmed the network.

Several exchanges and crypto companies said they would halt transactions during the merge process.

'Decentralised and complicated'

The upgrade also faces a possible rebellion from crypto mining companies whose business will be severely damaged.

They can try to hijack the process or create a "fork", basically a smaller blockchain that would continue with the old mechanism.

Bitcoin is the last major blockchain to use the energy intensive mining process that requires rows of energy-guzzing computers
Bitcoin is the last major blockchain to use the energy intensive mining process that requires rows of energy-guzzing computers. Photo: Mark Felix / AFP/File
Source: AFP

And even if the "merge" is successful, ethereum will still face major hurdles before it can be more widely adopted.

For example, it is expensive to use and the update will not reduce fees.

Read also

Berlin tech show facing up to era of energy scarcity

And the wider crypto sector is beset by wildly fluctuating prices, security flaws and an array of scams.

Crypto lawyer Charles Kerrigan from the firm CMS told AFP that ethereum was "decentralised and complicated" and had not yet been tested enough for governments and banks to get onboard.

"There have been questions about how easily it could deal with upgrades of the type that traditional software vendors provide to customers," he said.

"A successful merge will answer those questions."

New feature: Check out news exactly for YOU ➡️ find "Recommended for you" block and enjoy!

Source: AFP

Authors:
AFP avatar

AFP AFP text, photo, graphic, audio or video material shall not be published, broadcast, rewritten for broadcast or publication or redistributed directly or indirectly in any medium. AFP news material may not be stored in whole or in part in a computer or otherwise except for personal and non-commercial use. AFP will not be held liable for any delays, inaccuracies, errors or omissions in any AFP news material or in transmission or delivery of all or any part thereof or for any damages whatsoever. As a newswire service, AFP does not obtain releases from subjects, individuals, groups or entities contained in its photographs, videos, graphics or quoted in its texts. Further, no clearance is obtained from the owners of any trademarks or copyrighted materials whose marks and materials are included in AFP material. Therefore you will be solely responsible for obtaining any and all necessary releases from whatever individuals and/or entities necessary for any uses of AFP material.

Tags: