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NEW DELHI : Despite a decline in crypto prices worldwide, Ether has been trending higher in the past month. The native token of the Ethereum blockchain was priced at $1889.96 at the time of writing. That’s up from around $1300 in July. What’s pushing up its price?

Why this sudden interest in Ether?

Ethereum, the second-largest blockchain after Bitcoin, is set to migrate to a new process of authenticating transactions on 15 September. The move, called ‘Merge’, takes the platform from ‘Proof of Work’ (PoW) to ‘Proof of Stake’ (PoS). Merge is one of the most awaited events in blockchain history and is said to have made Ethereum more attractive for developers, leading to more transactions and hence higher prices. Ether, the official token of the Ethereum blockchain, has seen its price double since falling below $1,000 in June this year.

Proof of Work vs Proof of Stake?

PoW and PoS are consensus mechanisms, which help miners validate transactions through a process called mining. This requires a lot of computing power, which in turn requires energy, most of which comes from fossil fuels. In the PoW system, miners compete against each other to solve complex cryptographic puzzles to validate transactions, and the first to solve the puzzle wins the reward in the form of new cryptos. PoS limits the number of miners who can compete by adding a set of rules to the system, and requires miners to put up their own ‘stakes’. It requires miners to purchase the native token of the blockchain and whether they’re allowed to mine depends on these stakes. As a result, it reduces the overall impact on the environment, but also creates greater barriers to entry.

What is Merge?

At the moment, Ethereum mainly works on the PoW system; but the move to PoS started in August last year. Merge is basically the final upgrade and will convert Ethereum to a completely PoS-based system. In March, founder Vitalik Buterin said that the system has been in the works for seven years. The PoS blockchain—called Beacon Chain—has been under test for over 18 months now.

Why is Proof of Stake important?

According to Ethereum’s official website, the blockchain presently consumes around 112 terawatt-hour (TWh) of electricity per year. This creates carbon emissions of around 53 metric tons per year. While Ethereum’s electricity consumption is equivalent to the entire country of The Netherlands, its carbon emissions are equivalent to Singapore’s. It claims that moving to the PoS blockchain will reduce its energy consumption to “less than 0.05%" of what it was before.

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