Six years in the making, the most sophisticated upgrade in crypto’s history is complete.
At 6:42 A.M. Coordinated Universal Time (2:42 A.M. EDT), the Ethereum blockchain merged with a special-purpose decentralized ledger called the Beacon Chain, concluding its transition to near-carbon neutrality.
The shift may not only mute criticism of blockchain energy usage and serve as a boost to the struggling industry, but it could also help take crypto mainstream. Ethereum underpins the vast majority of Web3 applications such as decentralized finance protocols and non-fungible tokens (NFTs), as well as ether, the second-largest cryptocurrency with a $195 billion market value. The token has risen 3% since the Merge was completed but is currently trading at $1,593, down 0.81% over the past 24 hours.
Since its inception, Ethereum has been based on the proof-of-work system for running a blockchain. Popularized by bitcoin, it relies on operators of powerful computers, known as miners, who validate each new block of transactions added to the chain by solving complex math puzzles and get rewarded for their efforts in the blockchain’s cryptocurrency. The approach has drawn widespread criticism from crypto-skeptics and environmentalists because of its immense energy usage—Ethereum’s carbon footprint has been compared to that of Finland.
Starting today, Ethereum will use an alternative mechanism called proof-of-stake. Miners are being replaced with validators, who pledge, or stake, ether tokens as collateral to verify transactions and accrue interest on the staked assets as a reward. As a result, the network’s energy usage should drop by more than 99%, according to the Ethereum Foundation.
Blockchain analytics company Nansen estimates that Ethereum bulls have already staked 11.3% of the ETH
However, a cohort of miners, stripped of a source of income and left with expensive hardware, have been preparing to fork, or split the chain, maintaining a proof-of-work version. “ETHW mainnet will happen within 24 hours after the Merge,” the group, led by prominent ex-miner Chandler Guo, tweeted on Sept. 12. The exact time is yet to be announced.
If the fork is successful, ETH holders could receive an equivalent amount of new Ethereum proof-of-work tokens, but it remains unclear how much traction ETHPoW can get or whether it will be accepted by vendors in the same way ether is.
ETH holders may still be experiencing service interruptions as major crypto exchanges including Binance, Coinbase, Kraken and FTX announced they would be briefly pausing deposits and withdrawals for ETH and Ethereum-based tokens at various points during the Merge.
Over 41,000 people tuned in for the Ethereum Mainnet Merge Viewing Party on the Ethereum Foundation’s YouTube channel.