FT Cryptofinance: Ethereum is preparing to give up his energy -consuming blockchain

In the crypto country, breathless pitches cost 10 cents about technologies that will change the industry. Exceptionally there is one in front of the door that could partially justify the hype.

In recent years, discussions about the future of crypto usually result in a semi-mythical event at an indefinite point in time, which is known as "Merge" and Ethereum, one of the leading blockchain networks in the industry.

It is important because it faces one of the sharpest reviews of crypto: that the industry devours huge amounts of energy if the planet urgently needs to reduce its consumption.

After years of talk, the Merge is temporarily scheduled for mid -September.

There is a bit to unzip, so first the basics. The Ethereum blockchain is one of the great hopes of crypto because it aims to make digital main books more than a simple database for transactions. But like the Bitcoin blockchain, it devours a lot of energy. The developers behind Ethereum have long talked about their solution, which should change the way the transactions on the blockchain are verified.

to use the industry jargon, it would move from a proof-of-work to a proof-of-stake blockchain. Ethereum would no longer be secured by energy -intensive mining, but by individuals (called "validators") who use their own capital in the network itself. But will the layer work as intended?

Alex de Vries - better known as his nickname "Digiconomist" - has great hopes and tells me: "It is difficult to say what things will look like.. But reducing energy consumption by 99 percent appears realistic". De Vries estimates that the CO2 footprint of the Ethereum network is currently comparable to the Finland.

These high climate costs have caused the regulatory authorities to criticize the proof-of-work system, which is based on both Ethereum and Bitcoin. Last year, the EU legislators almost fully banned the digging of cryptocurrencies, and if the merger went smoothly, the supervisory authorities in Sweden are already waiting in the starting blocks to draw their attention to the controversial industry.

"The regulatory authorities are literally waiting for Ethereum to go to the Proof of Stake successfully before they proceed against Proof of Work," said de Vries.

A meeting between the Swedish supervisory authority for financial services and the environmental authority in the past year indicates some of the considerations.

"If Ethereum is able to postpone itself, we could ask for the same thing from Bitcoin. We have to protect other sustainable cryptoma coins," says the protocol.

But it could be easier to say than done. Bitcoin-which still uses a proof-of-work system-is by far the most active crypto token worldwide, and despite the latest crash, there are many Bitcoin defenders.

Then of course Bitcoin's obvious success must be taken into account as a safe network. Bitcoin has never been chopped in a crowded field of security defects, in contrast to a series of proof-of-stake cryptocurrencies, which are said to be the greener future of the industry.

So

It is not excluded that the merge will be a success, but the criticism of the environmental impact of crypto does not pass. It can even exacerbate the test defined by the supervisory authorities.

I would like to hear from you. Will the merger change its view of Ethereum? And what does that mean for the future of Bitcoin? Send me an email to scott.chipolina@ft.com.

The Highlights this week

• It was a difficult week for those who preach the unchangeable resistance of blockchains. After a digital token protocol called Nomad in the amount of 190 million

• The crypto exchange Coinbase forged a deal with black skirt that gives the customers of the giants of wealth better access to crypto. The partnership is the latest sign that traditional investors can switch to digital assets even after a dramatic sale on the entire cryptom market.

• at a time when companies such as Robinhood and Coinbase dismantle personnel, Ripple is in full swing when recruiting. After the company has started the year with around 500 employees, the company wants to increase its number of employees to 850 by the end of the year. "The last 18 months have been our most successful and fastest growth phase so far," Ripple’s European Managing Director Sendi Young told me this week.

• The Bitcoin maximist Michael Saylor resigns from his role as Chief Executive from Microstrategy after the software company has reported a reduction of almost $ 1 billion in recent years. Saylor believes that his new role as CEO will help him "to concentrate more on our Bitcoin acquisition strategy".

Soundbite of the week: if you have recently lost your life savings. . . "Stay steadfast".

Sandeep Nailwal, co-founder of the well-known crypto platform Polygon, had some selected words that were probably little comfort for those messengers who had lost money at the Hack of Wallet this week.

"My heart goes to the members of the Solana community who have lost their life savings in the continued attack. Stay strong, these are the growth pain that the entire blockchain industry has to go through. This moments lead if they are properly handled, too much strength for every ecosystem."

data-mining

The merger of Ethereum seems to be scheduled for the next month and crypto prices have increased in the past few weeks. Last month, Bitcoin and Ether, the native tokens on Ethereum blockchain, increased by about 15 percent and 45 percent.

These points make this a good week to take an inventory about how much of the wider cryptomarkt Bitcoin and ether are. According to Crypto Compare, the two flagship cryptocurrencies in the industry make up 62 percent of the wider cryptoma market.

Interestingly, the crypto crash has contributed little to change things. Bitcoin remains firmly at the top with a 43 percent market share, as at the beginning of the year. Ethereum is 19 percent, which corresponds to a decrease of 2 percentage points in the previous course.