The second largest cryptocurrency, Ethereum, has switched to a proof-of-stake protection system, which is based on the need to prove that a certain amount of funds is stored in an account. The method is an alternative to proof-of-work, which was previously used by Ethereum, and in which an account with high computing power had a higher probability of confirming a block.
In this way, the cryptocurrency has reduced its energy needs. The transition, called The Merge, has been in the works since 2020, it won’t change anything for the average Ethereum user, but it will make miner power unnecessary.
The transition began on September 6th when the Bellatrix update was activated. It is now complete after mining the Terminal Total Difficulty block that triggered the Paris update. The technical part is completed, now we need to wait for the results.
There is a risk of bugs, hacker attacks, and price volatility in the coming hours and days. There is also the risk of forks, where miners create multiple versions of Ethereum on different chains, leading to confusion and an environment conducive to fraud.
The Ethereum Foundation estimates that the transition to proof-of-stake will reduce electricity costs by more than 99%. This means that Ethereum now meets the environmental, social and governance (ESG) requirements that have been the concern of regulators that have deterred businesses from participating in new sectors such as DeFi and NFT.