The energy consumption of cryptocurrencies is often critically compared to that of entire countries.

After all, Finland's electricity consumption for the blockchain is required solely for the cryptocurrency ether: more than 100 terawatt hours per year.

On Thursday there was a software change that some consider groundbreaking.

The procedure for confirming transactions within the system as trustworthy has changed.

This eliminates the weakness of the high energy consumption.

Hanno Mussler

Editor in Business.

  • Follow I follow

Blockchains are public data sets that are used to send cryptocurrencies such as bitcoin and ether, as well as contract documents, from one network participant to another.

New data is appended to the previous chain as new blocks.

So far, cryptographic puzzles have been behind them, the solution of which requires a lot of computing power.

Transactions should be tamper-proof.

If you want to outsmart the blockchain, you would have to use more than 50 percent of the total computing power in the system.

In reality, this does not appear to be practically feasible with established cryptocurrencies.

This procedure is called Proof of Work.

On the other hand, there is the more modern method “Proof of Stake”.

It relies on users having to deposit units of cryptocurrency to confirm transactions.

In order to manipulate this process, a user would have to own more than half of the entire currency - practically impossible with a market capitalization of ether of more than 200 billion euros.

Users need to be patient

Since 2020, the Ethereum Foundation has been testing a new blockchain that works with Proof-of-Stake - the Beacon Chain.

It uses only a fraction of the energy, according to the foundation a whopping 99.95 percent less than Proof of Work.

On Thursday, during a live stream on YouTube, the Ethereum mainnet, Ethereum's original blockchain, was merged with the Beacon Chain.

40,000 viewers watched as the moderator with the username Superphiz celebrated the "merge": "We had imagined it just the same.

Nonetheless, it is overwhelming to see the transition in reality now.

Nothing has changed in the foreground for users, but everything has changed in the background.” Lots of pathos, little behind it?

Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, disagrees: He now sees ether on the way to becoming a global currency.

Since the network validators would only have to check smaller units of the Ethereum blockchain against fraud in the proof-of-stake process, the transaction costs should – unlike before – fall as the number of users increases (scalability).

"The revolution in the financial sector should thus pick up speed," says de la Rubia.

"Suddenly, tens of thousands of business models that were previously offered by traditional financial institutions at more favorable conditions are now paying off," he adds.

Other experts are more cautious about the short-term consequences.

"For the time being, nothing will change in terms of the speed and fees for the transactions," Sven Hildebrandt replies.

He works for Boerse Stuttgart Digital Ventures GmbH and specializes in blockchains.

Rather, the change that has now taken place is the basis for "building a fast and efficient infrastructure with the subsequent upgrades".

It is currently difficult to predict when that will happen.

What's not so often jokingly called in the crypto world: Soon...!