Business News/ Markets / Cryptocurrency/  What merge of Ethereum blockchain means for cryptocurrencies?

Known as the Merge, Ethereum’s revamp will make it vastly more energy efficient and over time pave the way for it to scale up and become quicker, according to the network’s developers. They say an update years in the making will go smoothly, though some investors are wary of possible hiccups. the software upgrade has been in the works for years, and it will change the way Ethereum orders transactions to become more energy efficient.

It is an update to the Ethereum blockchain, which moves it from the current proof-of-work (PoW) consensus mechanism to the more environment-friendly proof-of-stake (PoS) system.

Exchanges and lending platforms began temporarily disabling Ethereum-related services before the Merge, which is due to be completed in the next few hours. If all goes to plan, they will later come back online once the revamp is done.

Ether has climbed about 80% since a mid-June low, far outstripping Bitcoin, partly on Merge hype. That rally is cooling and another market risk is that investors will take profits, judging the narrative has played out for now.

But the medium and longer term Ether outlook is brighter, according to Stefan Rust, chief executive of blockchain development house Laguna Labs. In a note, he said Ether could top $3,000 by the end of this year and possibly achieve the so-called “flippening" in time, referring to the idea that its market value might overtake Bitcoin’s, reported Bloomberg.

The PoW system of mining cryptocurrencies, used by tokens like Bitcoin, allows all miners to lend computing power to validate crypto transactions, and hence draws a lot of computing power. Since most of this power comes from fossil fuels, POW mining is said to be bad for the climate. On the other hand, PoS limits the number of miners, hence reducing the total power consumed by crypto mining.

Both Bitcoin and Ether are down more than 50% in 2022, hurt by rising interest rates that sucked liquidity from global markets. Cryptocurrencies traded in tight ranges on Thursday as the clock ticked down to a major software upgrade of Ethereum, the most commercially important blockchain in the digital-asset sector.

Ethereum is a blockchain-based software platform that can be used for sending and receiving value globally with its native cryptocurrency, ether, which is the second-biggest digital token. 

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Updated: 15 Sep 2022, 08:53 AM IST
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