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- Ethereum's first major upgrade since Merge is complete: Binance
Ethereum's first major upgrade since Merge is complete: Binance
Anyone who has been paying attention to the crypto world has heard about ‘The Ethereum Merge’. After 8 long years, the Merge finally took place on September 15.
Founded by Vitalik Buterin in 2013, Ethereum, which ran on a framework called ‘proof of work,’ has been upgraded to the new ‘proof-of-stake’ mechanism. The upgrade process, called The Merge, has reduced Ethereum's energy consumption by ~99.95%. The Merge, which changes how transactions occur and how ether tokens are created, could give Ethereum a major advantage as it seeks to surpass rival blockchain bitcoin.
"We believe this is a significant moment that will lead to ETH outperforming the broader crypto market for some time," said Richard Usher, head of over-the-counter trading at London-based crypto firm BCB Group.
Most blockchains devour large amounts of energy and have come under fire from environmentalists and some investors. Before the software upgrade, which is known as the Merge, a single transaction on Ethereum used as much power as an average US household uses in a week, according to researcher Digiconomist.
In addition to energy consumption, high costs and slow transaction times are key issues facing the Ethereum network. Merge will not immediately tackle these problems, though some analysts say it lays the ground for Ethereum's expansion.
The move will give investors access to more than $30 billion of the digital tokens.
Known as Shapella, the latest upgrade to the Ethereum blockchain since its Merge upgrade will enable investors to redeem an offshoot of ether tokens that they have deposited in return for interest on the blockchain network over the past three years.
Such so-called "staked ether" tokens currently account for about 15% of all ether tokens, according to data firm Dune Analytics, and are worth some $31 billion.
"The Shanghai/Shapella Upgrade is complete. Deposits & withdrawals for ETH, OP, ARB and ERC-20 tokens via the Ethereum, Optimism, and Arbitrum networks are now back online," Binance said in a tweet.
The changes will likely lead to heightened volatility for ether, investors have predicted.
Some believe that widespread redemptions could lead to a wave of selling, in turn weighing on the price of ether, whose market value of about $230 billion is topped only by bitcoin.
"The release of this previously unrealised investment may lead to significant downward price pressure if it is immediately liquidated," Deutsche Bank analysts said in a note.
In its last significant upgrade, Ethereum in September drastically reduced its energy usage - a move proponents said would give Ethereum an advantage as it seeks to surpass bitcoin.
But ether has continued to lag its larger rival, gaining just under 60% this year versus a more than 80% jump for bitcoin.
After trillions of dollars were wiped from the crypto market in a bruising 2022, the sector has rallied in 2023 on expectations that central bank interest rate hikes are slowing.
Ethereum has grown popular in so-called decentralised finance applications, which offer financial services while avoiding traditional industry gatekeepers such as banks.
It remains, however, little used in mainstream commerce or finance.
