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WHY THIS MATTERS IN BRIEF

Crypto mining is now using more energy than many countries and it’s unsustainable so Ethereum has move to POS to reduce energy use in a move that might also help DeFi establish itself.

 

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Ethereum, the second largest cryptocurrency, which this year could see transactions exceed $8 Trillion, has completed a plan to reduce its carbon emissions by more than 99% as it follows in the footsteps of Chia which touted itself a while ago as the world’s first “green” cryptocurrency. The software upgrade, known simply 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.

 

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Vitalik Buterin, ethereum’s inventor, announced the completion of the plan on Twitter on Thursday morning, tweeting “Happy merge all.”

 

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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%.

 

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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’s market cap 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.

 

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“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.”

Alexander added that the ethereum blockchain is a key feature of the Web 3.0 world – a catch-all term for the latest iteration of the internet – including its role as a base for Non-Fungible Tokens (NFT).

“It powers the smart contract transactions on Ethereum that underpin web3 and therefore the digital economy today,” she added.

About author

Matthew Griffin

Matthew Griffin, described as “The Adviser behind the Advisers” and a “Young Kurzweil,” is the founder and CEO of the World Futures Forum and the 311 Institute, a global Futures and Deep Futures consultancy working between the dates of 2020 to 2070, and is an award winning futurist, and author of “Codex of the Future” series. Regularly featured in the global media, including AP, BBC, Bloomberg, CNBC, Discovery, RT, Viacom, and WIRED, Matthew’s ability to identify, track, and explain the impacts of hundreds of revolutionary emerging technologies on global culture, industry and society, is unparalleled. Recognised for the past six years as one of the world’s foremost futurists, innovation and strategy experts Matthew is an international speaker who helps governments, investors, multi-nationals and regulators around the world envision, build and lead an inclusive, sustainable future. A rare talent Matthew’s recent work includes mentoring Lunar XPrize teams, re-envisioning global education and training with the G20, and helping the world’s largest organisations envision and ideate the future of their products and services, industries, and countries. Matthew's clients include three Prime Ministers and several governments, including the G7, Accenture, Aon, Bain & Co, BCG, Credit Suisse, Dell EMC, Dentons, Deloitte, E&Y, GEMS, Huawei, JPMorgan Chase, KPMG, Lego, McKinsey, PWC, Qualcomm, SAP, Samsung, Sopra Steria, T-Mobile, and many more.

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