“The Merge refers to the original Ethereum Mainnet merging with a separate … blockchain called the Beacon Chain,” it added.
Until now, both ethereum and bitcoin were running on a mechanism called “proof-of-work,” under which high-powered computers were required to solve complex puzzles. The merger moves ethereum to a mechanism called “proof-of-stake,” which is much more energy efficient, as it does away with the need to have computers compete against each other. Instead, users deposit their ether to participate in the race for more currency.
With this switch, ethereum hopes that it “will improve security, reduce energy consumption, increase the number of users on the network, and grow its market cap,” Deutsche Bank research analyst Marion Laboure wrote in a note this week.
“Happy merge all,” Vitalik Buterin, the 28-year-old Russian-Canadian programmer who helped create Ethereum said on Twitter. “This is a big moment for the Ethereum ecosystem. Everyone who helped make the merge happen should feel very proud today,” he added.
The co-founder said that the upgrade will “reduce worldwide electricity consumption by 0.2%.”
Ethereum was down 0.7% after the news, trading at $1,592.78, but analysts say the upgrade could have a big impact on the crypto world in the long run. The world’s most valuable cryptocurrency, bitcoin, was down almost 1%, trading at $20,174, according to CoinDesk.
“It’s been a long time in the making and the question on traders’ lips right now is will it be the next bullish catalyst for cryptos or a “sell the fact” event,” wrote Craig Erlam, a senior market analyst at Oanda, in a note on Thursday.