It's a big moment for the crypto community: Ethereum 2.0 is a reality – yet the price of the cryptocurrency has barely reacted. Did something amiss?
After several months of waiting, it finally happened. Following a highly complex software update, the cryptocurrency Ethereum (ETH) has been converted to low-power operation. In technical circles, through a process called «The Merge».
According to the Ethereum Foundation, the switch in the hedging process for transactions on the ETH blockchain reduces power requirements by 99.95 percent, in what ETH co-founder Vitalik Buterin called a «big moment» for the ecosystem.
Experts Argue
The Ethereum blockchain is a publicly viewable database that stores and verifies information and transactions in a secured encrypted manner. Ether is the cryptocurrency that is exchanged on the ETH blockchain.
It is second only to bitcoin in the crypto world in total value, with ETH having a market capitalization of around $200 billion, while Bitcoin's (BTC) value is about $414 billion.
As was evident at a three-day Ethereum conference in Zurich this week, experts are divided on whether ETH and BTC are comparable. As blockchain expert and founder of the company HOPR Rik Krieger explained, BTC is nothing more than a payment system, while ETH represents an infrastructure in which a decentralized financial and economic world can be realized. In this respect, ETH needs to be seen in a much broader context, he said.
A Type of Lottery
The shift from the «proof of work» process to «proof of stake» (PoS) means that with this consensus process, crypto investors deposit a certain number of digital coins to participate in a sort of lottery. Each time a transaction needs to be validated, a participant (staker) is selected from the lottery pot to verify the exchange and receive new coins in return.
German economist Philipp Sandner told Deutsche Presse-Agentur (DPA) that with each passing hour, the risk of «The Merge» failing becomes smaller. «Whether technical problems – from uncontrolled spin-offs or the network coming to a standstill – have not arisen, however, will only be seen in a few hours or even days,» he said. Around the time of the switch, most trading exchanges had suspended trading in Ether.
Epochal Switch
Contrary to some speculation surrounding the merge about price gains, the ETH price was little changed Thursday, trading steady at $1,590. But even if the hoped-for price advances have yet to materialize, the significance of this switch is epochal, as experts say.
Because for the first time in the history of cryptocurrencies, a major digital asset backed by billions of dollars has changed protocol on the fly - open-heart surgery, so to speak.
Fundamental Reform Underway
Ethereum 2.0 delivers new perspectives and climate friendliness to the cryptocurrency, as well as greater scalability. This is likely to have triggered a fundamental reform process that could help the corresponding cryptocurrencies to achieve a new status.
That was frequently the criticism of bitcoin and blockchain in the past, that running it required the energy equivalent of powering an entire country the size of Sweden or Malaysia, according to a «Harvard Business Review» report last year. With the new protocols and less energy consumption, it remains to be seen if ETH will become attractive for ESG investment portfolios.
