FHundreds of cryptocurrencies are feverishly approaching mid-September. The biggest event of the year is coming, some even calling it the most significant moment in the history of cryptocurrency: the reform of the Ethereum blockchain.
It sounds complicated, very technical and like a niche topic for computer nerds. But this change has an impact far beyond the world of crypto. Because it means Ethereum uses much less energy, which is good for the environment. And it could also put other cryptocurrencies such as Bitcoin under pressure.
Climate sinful cryptocurrencies
Because cryptocurrencies are often pilloried as climate sinners. Ethereum currently consumes almost as much electricity as the South American country Chile. The electricity needed for a single Ethereum transaction could power an average household for almost seven days, according to data from the Digiconomist blog. Almost all of that should be gone by now. The developers promise a 99% reduction.
It has been planned for many years to change the mechanism. But the date has been pushed back several times. Are the developers finally going through with this reform? If so, will it work? Crypto fans are watching the situation closely.
Ethereum was initially developed in 2013 by a group of programmers. The leader of the team is Russian-Canadian Vitalik Buterin. Experts often compare Ethereum to a platform suitable for a wide variety of applications, such as digital art or the metaverse. It is a parallel world on the Internet, similar to a video game. Above all, tech companies like Mark Zuckerberg’s Meta, formerly Facebook, want to expand this digital world.
“The importance of Ethereum could become much more important in the long term than the current market value suggests,” says Hartmut Giesen, crypto expert at Sutor Bank. The currency of this system is called Ether. Overall, the cryptocurrency is currently worth around $200 billion. For comparison: Bitcoin is worth around $400 billion.
An ether currently costs just under $1700, at its peak in November 2021 it was around $4900. Cryptocurrencies are known to be very volatile and are therefore considered a highly speculative investment. As the reform approached, the rate rose again. Data from asset manager Coinshares shows that around $160 million has been poured into ether over the past few weeks. With Bitcoin, on the other hand, investors even withdrew their money.
A new mechanism is coming
In order to understand how much cryptocurrencies harm the environment and what is changing now with Ethereum, you need to know very roughly the technology behind them. The transfer mechanism of cryptocurrencies plays an important role in this regard. Simply put, a transaction raises the question of who verifies it.
Because in the world of crypto, there is no central authority such as a bank watching everything closely. Users prefer to settle this among themselves. This is why cryptocurrencies are also said to be decentralized. All transfers are recorded in the blockchain. It functions as a digital notebook to which all users have access.