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It is 2pm Universal Coordinated Time (utc) on August 18th and all over the world people are dialling in to a fortnightly “core developers” Zoom call, which is broadcast live on YouTube to anyone who wants to watch. None of the participants have their cameras on. Most appear as just black squares with names—including one labelled Vitalik, behind which lurks Vitalik Buterin, the inventor of Ethereum.
A handful of users have adopted a panda avatar, with cartoon faces swaying and smiling in time to their human counterparts. That they picked the monochrome bear is thanks to Hsiao Wei Wang, an Ethereum researcher, who created a meme showing two bears, one black and one white, doing the “fusion dance” from Dragon Ball z, a popular anime show. In the show the dance fuses two creatures into a single, stronger one. The panda—a combination of the two bears—has since become a symbol for “the merge”.
The merge is the name the crypto-community has given to the point at which the Ethereum blockchain will transition from using “proof-of-work” as a consensus mechanism, the method by which all the computers maintaining a blockchain agree to add new transactions to it, to using “proof-of-stake”. They call it the merge because, for almost two years, a separate proof-of-stake blockchain, called the Beacon chain, has been whirring alongside the original Ethereum one for developers to test, improve and test again. The Zoom call is for the developers to agree on when the two chains will join together. The date and time of the event will depend on how much computer power is being used to maintain the blockchain, but should happen at around 1am utc on September 15th.
This is no mere technical tweak. It is a complete overhaul of a $200bn piece of software that has been running for seven years, which will, if all goes to plan, be implemented with no downtime. People in crypto like to compare the process to changing the engine of an aeroplane mid-flight. Proof-of-work is hugely energy intensive, requiring vast amounts of computing power, and has resulted in blockchains, like Ethereum and Bitcoin, consuming as much energy as small countries. Proof-of-stake will require 99.9% less energy to maintain. The effect on emissions will be as though, overnight, the Netherlands had been switched off (see chart). More important still, the merge will, if successful, suggest that Ethereum has the capacity for self-improvement, opening the door to more sweeping changes.
Crypto is in need of good news, for the past year has been a torrid one. A handful of dodgy deposit-taking ventures have gone bust, wiping out savings; a crypto hedge fund has blown up; a stablecoin was revealed to be anything but stable. The total market capitalisation of crypto has crashed to around $1trn, about $2trn lower than it was this time last year. Ethereum’s improvements would not unpick any of this destruction. But, by reducing its environmental impact and highlighting the potential for future improvements, it would suggest that crypto has a brighter future than many now appreciate.
The idea for the Ethereum blockchain was first published in 2014 by Mr Buterin. As with Bitcoin, it is a large database of all the transactions that have ever taken place in the cryptocurrency. But Mr Buterin’s crucial insight was that the blockchain could do much more than that—it could also keep track of lines of code. This allows Ethereum to record transfers of the currency, but also of all the assets and functions that are maintained in “smart-contracts”, self-executing agreements in which a chain of actions follows when certain conditions are met. That Ethereum validates code has made it possible for developers to build a large network of financial institutions, like exchanges and lenders, in code on the Ethereum blockchain...
more at The Economist