The long-awaited Ethereum (ETH) update could finally happen soon.
The Ethereum “merge,” which will switch the network from the intensive proof-of-work consensus mechanism to proof-of-stake, is expected to occur in mid-September. Developers at the leading altcoin suggested last month that the merge could happen as early as Sept. 19.
Amid the crypto winter, Ethereum managed to gain more than 59% last month in anticipation of its upcoming merge. But even with those gains, ETH is still down 58% year to date.
Ethereum co-founder Vitalik Buterin, told Bankless last week: “I basically expect that the merge is going to be kind of not priced in, by which I mean like not even just like market terms but even just kind of like psychological and narrative terms.”
While crypto experts’ opinions vary on whether ETH is underpriced, most see a bright road ahead of the second-largest crypto.
According to Kraken Intelligence’s latest Monthly Market Recap and Outlook report, there are several signs of rising investing confidence in Ethereum: volatility has decreased, and outflows of Ethereum were more than double the inflows in July.
“ETH is holding value during this crypto winter against [Bitcoin] BTC, a significant departure from the prior cycle. All eyes are on the merge, the most significant milestone to Ethereum’s scaling roadmap since the launch of the Beacon Chain in late 2020. If successful, the industry will have the clarity to take a longer-term outlook on Ethereum,” says Thomas Perfumo, head of business operations and strategy at Kraken.
What Is Ethereum 2.0?
Ethereum 2.0 is a new version of the Ethereum blockchain that will use a proof of stake consensus mechanism to verify transactions via staking.
Ethereum 2.0’s staking mechanism will replace the proof of work model where cryptocurrency miners use high-powered computers to complete complex mathematical functions known as hashes. The mining process requires an ever-increasing amount of electricity to verify Ethereum transactions before they are recorded on the public blockchain.
Proof-of work-systems devour a tremendous amount of electricity. Bitcoin mining, for example, currently consumes electricity at an annualized rate of 127 terawatt-hours (TWh). That’s currently higher than the power consumption of the entire country of Norway.
ETH currently has an annual power consumption roughly equal to Finland, producing a carbon footprint similar to Switzerland. Fortunately, the merge is expected to reduce Ethereum’s carbon footprint by up to 99.95%, addressing one of the major criticisms of the cryptocurrency.