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The Ethereum cryptocurrency is undergoing a major change on Thursday, September 15.
CRYPTOCURRENCES – “The Merge”: in English, the merger. Prepared for months, it should take place on Thursday, September 15, marking a new page in the history of cryptocurrencies for those familiar with the industry, changing the technology that operates one of the most popular currently, Ether.
To understand what is at stake in this merger of more than 200 billion euros, which may even be of interest to the general public and not just to speculators, you must start by explaining how the currency to which this extraordinary event relates has, works.
Ether is a cryptocurrency that exists thanks to blockchain technology. To be precise, it works on the Ethereum protocol. A program launched in 2015 with dazzling success: today, Ethereum is the most widely used blockchain in the world by crypto enthusiasts, just after the famous Bitcoins.
There are currently 71 million online wallets intended to pay with Ether, or to receive this virtual currency. Today, more than 120 million Ether have been issued, each with a value of more than 1690 euros. Their total value thus amounts to 228 billion euros.
55,000 euros for a transaction
What happens on September 15 that is so important? With “The Merge”, Ether changes the software in a way. Until now, every transaction made in Ether, verified by another remote computer, was chosen on the blockchain – which is why the operation of this cryptocurrency is described as “decentralized”.
In order to perform this check, from which he withdrew a hard and stumbling payment, he had to solve one very complex equation faster than the others. The first computer to solve the equation becomes a validator, which then approves the transaction that just happened on the blockchain.
Blockchain is the technology behind bitcoin and other cryptocurrencies. Simply put, financial transactions are encrypted and verified in “blocks” that are added together. Everything is presented in the form of a large public register known for being tamper-resistant as any change of information must be made simultaneously by all users.
It is this system, called “Proof of work”, that the Bitcoin cryptocurrency still uses today. But Ethereum is about to switch to another system. He no longer has to solve an equation, but simply puts some of his money as collateral to become a validator.
Specifically, if X makes a trade with Y on the Ethereum blockchain, Z will propose to validate it, as before. But to be elected, this time he has to immobilize 32 ETH (Ether) or 55,000 euros for the time of the trade. This financial risk makes it possible to guarantee that the transaction is not fraudulent with regard to the operation of the blockchain.
This is called a “Proof of stake”, which other cryptocurrencies are already using to work. Ethereum has been experimenting with it for almost two years, in parallel with its “Proof of work” operation. This merger is an opportunity to move completely to “Proof of stake”.
Fast and energy-efficient transactions?
“To give you an idea, Ethereum is like a plane that wants to switch engines in flight”summarizes Grégory Raymond, editor-in-chief of TheBigWhale.io, a newsletter specializing in cryptocurrencies. “Ethereum has been flying two engines at once for almost two years now, and the next step this week is to unplug the first and run only the second. »
What for? First, to give this technology a boost. Proof of work is tedious, as it requires the massive computing power provided by mining companies around the world, which use numerous computer graphics cards to validate transactions.
Computer graphics cards used to mine cryptocurrencies.
Today, validating an Ether transaction takes anywhere from a few minutes… to several hours. Worse yet, the transaction can remain in limbo forever, in the absence of an available validator.
The “Proof of stake” technology promises transactions as fast as a credit card. And the energy balance, particularly worrisome in the world of cryptos, is highlighted even more by the proponents of this merger: Ethereum leaders pledge to reduce their blockchain’s carbon footprint by…99.9%, with the move to proof of commitment. All because it is no longer necessary to mobilize graphics card farms. These gains, if verified, will not be an unnecessary luxury: Ethereum today mobilizes 112 terawatt hours, the equivalent of the electricity consumption of the Netherlands.
Wider adoption in the offing
Does everyone have a share in the success of “The Merge”? Not quite. The owners of server farms that have been used for ETH trades so far will suddenly be out of activity. However, there are ways out for Grégory Raymond, who invokes the “other protocols” still using the “Proof of Work”, or even participating in the metaverse sector that “would also require significant graphics resources”.
Other critics are concerned about the centralization that could result from this change. Richer users, those with 32 Ethers to bet (ie more than 51,000 euros at the time of publication of these rules), will indeed be the only ones who can participate in the validation. Small portfolios will still be able to participate by pooling their funds on collaborative platforms, but the danger remains that very large players will monopolize the operation.
If these fears are being swept away by crypto enthusiasts, it’s because they have high hopes for this change: “In recent years, many large companies have been on the run from the crypto sector”remembers Gregory Raymond, “because its operation was incompatible with their commitments to sustainable development”. With a greener operation, Ethereum could attract players who have been reluctant to use cryptocurrencies until now.
However, this is one of the thorns on the side of “cryptos”: Currently, an overwhelming majority of cryptocurrency exchanges are used for speculation only, with more than rare uses in the real world. The slowness of the protocols, the fluctuation of prices or the energy-intensive aspect of these currencies still make them unattractive to many people compared to traditional currencies.
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