Ethereum Blockchain Slashes Energy Use With 'Merge' Software Upgrade

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The new system will use 99.95% less energy, according to the Ethereum Foundation.

The Ethereum blockchain has undergone a major software upgrade, drastically reducing its energy usage, its inventor and co-founder tweeted on Thursday.

The new system will use 99.95% less energy, according to the Ethereum Foundation. The upgrade, 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 U.S. household uses in a week, according to researcher Digiconomist.

With the software upgrade, Ethereum has moved from a "proof of work" system, in which energy-hungry computers validate transactions by solving complex maths problems, to a "proof of stake" system, where individuals and companies act as validators, using their ether as collateral, to win newly created tokens.

"Happy merge all," inventor Vitalik Buterin said in a tweet. "This is a big moment for the Ethereum ecosystem."

Ethereum was born in 2013. Proponents say it will form the backbone of much of the widely hyped but still unrealised "Web3" vision of an internet where crypto technology takes centre stage in applications and commerce.

It powers platforms involving crypto offshoots such as decentralised finance and non-fungible tokens, and is