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What happened
Ethereum (CRYPTO:ETH) is up 4.82% in the past 24 hours, to $3,235.69 per token as of 2:30 p.m. EDT. The token has been gaining momentum all week, with a return of 20.26% in the past seven days. Investors are still digesting Ethereum inventor Vitalik Buterin’s proposal for another major update to switch Ethereum to a proof-of-stake (PoS) protocol.
Image source: Getty Images.
So what
The environmental sustainability of crypto mining was a major reason behind the fear, uncertainty, and doubt (“FUD”) that plagued the crypto market for much of May to late July. For example, it takes as much energy to process one Bitcoin (CRYPTO:BTC) transaction as it does 1.2 million Visa transactions. That number is only going to rise in the future as Bitcoin’s mining difficulty increases exponentially as per design.
Last week, Ethereum creators launched the London hard fork. Among many things, the protocol change disincentivizes mining on its network — introducing the burning (or canceling) of transaction fees that will reduce mining revenue by 20% to 30%.
Now what
It was a stepping stone for Ethereum to transition to a PoS protocol. Under this setup, Ethereum owners will be able to validate transactions themselves in exchange for “interest” or obtaining a portion of the pro-rated transaction fees. Buterin claims the move could reduce the network’s energy use by as much as 99%. If successful, it would effectively resolve the “environmental FUD” surrounding Ethereum and cause the price of tokens to skyrocket. The update is already years in the making, so the outcome is very likely for the promising cryptocurrency.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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