The world’s second-largest cryptocurrency network, Ethereum, is about to switch to a new system that will use far less electricity.
Why is this important: One of the biggest hits on cryptocurrencies centers around the huge amount of energy it networks consume. But with this change, trading in one of the main currencies will not be more energy intensive than playing an online video game.
How it works: Cryptocurrency networks use what is called “consensus mechanismsto ensure transactions are valid. These tools keep track of who owns what and ensure that no one is spending currency that is not their own.
- The original consensus mechanism, “proof of work,” is why crypto uses so much energy.
- Ethereum is moving to a new strategy, “proof of stake”. It will be an expensive change, but after that, Ethereum’s power consumption could be only around 1% of what it was before, according to the Ethereum Foundation.
- The switch, known as the Fusionis should happen a little after midnight Eastern time tonight. Users shouldn’t notice anything different once this happens.
Yes, but: So far, Ethereum has used a lot of energy, but Bitcoin has always been – and will continue to be – the biggest energy consumer in the industry, by far.
Our thought bubble: Years in the making, The Merge is easily the biggest cryptocurrency moment of 2022, after the bull market ended in May.