The second most important cryptocurrency in the world, ether, has switched to a new, more environmentally friendly business model.
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Until now, cryptocurrency “mining” (the process of creating or transacting a unit, which involves the simultaneous use of many computers) consumed the same amount of energy as the Netherlands, according to the Ethereum Foundation. With the transition, called “fusion”, its managers say energy consumption will be reduced by 99.9%.
Ethereum co-founder Vitalik Buterin says the ‘merger’ has been planned for years — Photo: Getty Images via BBC
Although cryptocurrencies have been a business revolution, their impact on climate change is huge due to the amount of electricity used by the computers that operate their stores.
The transition to the new model, says Vitalik Buterin, co-founder of Ethereum (a digital platform whose currency is ether), has been on the horizon since the cryptocurrency’s launch in 2014, but has been delayed due to the technical complexities involved. It’s like rebuilding the foundations of an already standing skyscraper.
The transition took place in the early morning hours of this Thursday (15). Analysts are still monitoring whether the merger worked. If there are any problems, it could significantly threaten the cryptocurrency ecosystem, affecting both large and small investors around the world. But if all goes well, consumers shouldn’t notice any changes.
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Why do cryptocurrencies pollute so much?
Unlike traditional currencies, cryptocurrencies are a digital currency system where people make direct online payments to each other and there is no central bank. Instead, transactions are managed on what is known as a blockchain.
Blockchain is a decentralized global network of high-powered computers that allows you to create or “mine” digital currencies. And until now it was through a model known as “proof of work” or PoW system. The model works as follows: in order for A to transfer Bu in cryptocurrencies, he sends a message to the network, which is added to other messages from other transactions.
Together they form a “block” that is converted into an encrypted code. In turn, each “miner” competes with the others to try to solve that code and are rewarded with new coins for their work. After the transaction is resolved, it is verified by other miners and the transaction is confirmed. In addition to this complexity, the process requires a lot of calculations and a lot of computer time. So, a lot of energy.
How Ethereum is changing to become more environmentally friendly
What will change from now on is that the PoW system’s blockchain will be merged (what they called merging or “merging”) with a carbon copy called the Beacon Chain.
Behind this name hides a new encryption system for Ethereum’s cryptocurrencies: the “proof-of-stake” or PoS system. The PoS system greatly reduces the number of computers needed to maintain the blockchain. Cryptocurrency miners have been replaced by a smaller number of “validators” of transactions.
In addition to reducing energy demand, the PoS system reduces the amount of coins given as rewards — thus generating digital currencies.
Another change is that laptops and desktops can be used with this system, instead of the powerful GPUs (data processing units) that were used until now. It has been announced that the adoption of proof of stake will reduce energy consumption by about 112 terawatt hours per year to 0.01 terawatt hours per year.
The “fusion” as a whole is expected to save a large amount of energy per year, roughly the same as Chile’s energy consumption.
“It’s really exciting and a big achievement. Yes, there’s nervousness in the sense that things probably won’t go 100% right, but that’s to be expected,” says Justin Drake, a researcher at the Ethereum Foundation.
“We now have an infrastructure that allows us to continue even if parts of the network go down for whatever reason.” As a result of the “merger,” some analysts expect ether to overtake bitcoin, the largest cryptocurrency by market capitalization. leader in total value of all currencies.
The other side of the coin is that cryptocurrency miners will have to find a new way to monetize their equipment or sell it. Some reports suggest that GPU sales have already begun.
Dubai-based cryptocurrency mining company Prima Technologies is investing tens of thousands of dollars in replacing its ether mining GPUs, now favoring even more expensive rigs that are more power-hungry — but capable of mining bitcoins.
“It’s difficult because no other PoW currency is as profitable as Ethereum,” said spokesperson Ammar Lashkari.
“We will keep some of our Ethereum computers and start mining altcoins, but it won’t be the same so we will slowly diversify into bitcoin mining.”
In Staffordshire, UK, Ash Andrews hopes to continue to profit from mining other coins using its existing equipment.
“I have mixed feelings about the merger. It was a quiet time for us miners just mining Ethereum, and now we’re going to have to switch to another currency. It’s a lot of changes,” Andrews says. Some are more optimistic about the future of GPU mining.
Josh Riddett, CEO of Manchester-based Easy Crypto Hunter, believes that mining less popular coins will prove profitable.
“During Ethereum’s price spike, every mining rig we had was making $150 a day, which is pretty crazy. coins in three or five years?”