Ethermine, the world’s largest Ethereum mining pool provider by computing power, shut down its servers for miners after the Ethereum blockchain underwent a major software upgrade, drastically reducing its energy usage.
The move followed Ethereum’s highly-anticipated software revamp, dubbed the Merge, which shifted the most used blockchain from a proof of work consensus mechanism to proof of stake earlier today.
It is no longer possible to mine Ether on the network, since the powerful graphic cards used to validate transaction data are being replaced with investors that stake Ether. The validators will secure the Ethereum blockchain and validate data on the network.
A few days after the Merge, the company will trigger an automatic payout to its miners for any unpaid balances. Ethermine has also launched an Ethereum staking pool last month, where Ether holders will be able to deposit their coins and earn yields.
Nearly 10 lakh people with more than $10 billion worth of computer equipment had mined Ether at one point.
According to the Ethereum Foundation, the new system will use 99.95% less energy. 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.
Ether mining: The multi-billion dollar industry
Ether mining had developed into a multi-billion dollar industry over the last several years. The activity involved miners competing against each other to be the first to solve mathematic puzzles and earn a reward in the token.
Mining pools like Ethermine aggregated computing power from a group of miners to increase the probability of winning Ether before distributing the rewards among miners. The company usually charged a fee for providing their services.
Most blockchains devour large amounts of energy and have come under fire from environmentalists and some investors. Before the software upgrade, a single transaction on Ethereum used as much power as an average US household uses in a week, as per 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 is the second most important blockchain after bitcoin, but it has faced criticism for burning through more power each year than New Zealand.
The cryptocurrency ether fell as much as 4% to $1,571, a move analysts put down to a cautious mood for risk assets more generally.
Investors bet ahead of Merge that the upgrade would bolster the price of the ether token. Ether has gained around 85% from its June lows, outperforming larger rival bitcoin’s 15% gain. Overall, however, cryptocurrencies have suffered this year, with bitcoin and ether both down by around 55%.
Ethereum took market share from bitcoin ahead of the Merge, and now accounts for about a fifth of the $1 trillion cryptocurrency market. Bitcoin’s share has dropped to 39.1% from this year’s peak of 47.5% in mid of June.
With agency inputs
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