Ethereum Merge has completed its long-awaited update, Buterin says
- The Ethereum blockchain completed its Merge upgrade early Thursday, cofounder Vitalik Buterin said.
- The Merge moves the crypto to a proof-of-stake mechanism, dramatically slashing energy usage.
The Ethereum blockchain completed its long-awaited Merge update early Thursday morning, the crypto project's cofounder Vitalik Buterin has said.
The upgrade promises to cut energy consumption for the network, which underpins the world's second-biggest cryptocurrency, ether. That should make it a more attractive asset for institutional investors, according to analysts.
"And we finalized!" Buterin said in a tweet just before 3 a.m. ET. "Happy merge all. This is a big moment for the Ethereum ecosystem. Everyone who helped make the merge happen should feel very proud today."
Ether was up 2.2% after the announcement, trading at $1,620 at last check Thursday. Leading crypto token bitcoin was up just 0.3% at $20,170.
The merge, which was in the works for almost seven years, moves ethereum from a proof-of-work to a proof-of-stake consensus mechanism — meaning that gas fees, or costs per transaction, will fall for the token. It should also make processing of transactions faster.
In a proof-of-stake mechanism, people are tapped to validate transactions according to the number of coins they hold and are willing to offer as a kind of down payment.
It's less energy-intensive than the proof-of-work mechanism, where computers compete against each other to solve complex puzzles to verify the network and mine ether.
Experts expect the upgrade could slash Ethereum's energy consumption by 99%. Buterin has previously said the aim is to eventually cut the blockchain's energy usage by up to 99.5%.
The upgrade could make ether more palatable to institutional investors that need to consider environmental, social, and governance (ESG) goals, analysts said. It could bring in firms that were shut out of the cryptocurrency because of its heavy energy costs.
"This improvement in environmental outcomes will likely open the door for institutional ESG investors to invest in ethereum," Deutsche Bank economist Marion Labouré said. "Desire for sustainable alternatives exists in the crypto space."
The Ethereum blockchain underpins some of the biggest and most popular Web3 and crypto projects, such as NFTs and smart contracts in decentralized finance.
Ether has fallen 56% in 2022 after surging five-fold last year. The Federal Reserve's interest rate hikes have weighed on investors' appetite for riskier assets.