Ethereum, the most widely used blockchain for NFTs and Web3 metaverses, had made a huge processing upgrade to tackle one of the biggest barriers to adoption in the finance, and marketing, world.
The switch is designed to use 99.9% less energy consumption to validate transactions than the previous mining process.
The upgrade, called the ‘Merge’, marks the transition from a proof-of-work mechanism, performed by crypto miners, to a proof-of-stake mechanism, performed by crypto stakers.
As a result, the Ethereum blockchain will no longer require miners, who will be fully replaced by stakers.
The upgrade will also allow Ethereum to achieve greater scale, with faster transaction speeds and lower transaction fees.
“Rebuilding the foundations of a skyscraper while it remains standing”
Ethereum’s native token, ETH, is the second largest cryptocurrency after Bitcoin with a market capitalization of approximately $200bn.
The task has been a huge undertaking, often described as ‘rebuilding the foundations of a skyscraper while it remains standing’.
Ethereum currently uses as much energy as a medium-sized country. Other cryptocurrencies, including the biggest, Bitcoin, will remain as energy-intensive as before.
The Ethereum blockchain supports not only the Ethereum currency but also hundreds of millions of dollars' worth of other coins and crypto products like NFTs.
The move is not without its risks. The switch could spark, bugs, hacks, confusion in chains and price instability.
No more manic miners wasting efforts (and carbon)
Before the Merge, Ethereum ran on proof-of-work, where computers competed to solve puzzles to add a new block to the chain.
This resultied in huge amounts of energy waste as all miners are competing to solve the puzzle at the same time, but only one could win; all other energy was wasted. By contrast, Proof of staken has validators who’ve put up their Ethereum as collateral.
If the miners use unethical practices, they lose the Ethereum they staked.
The growth of 'blockchain marketing'
While blockchain is currently used almost exclusively for buying, selling, and trading cryptocurrency, marketers are starting to apply use the ‘digtal ledger’s’ transparency to tackle privacy and ad fraud issues.
Blockchain in marketing can create a more secure relationship between brands and their customers, letting them design more targeted advertisements without needing to share as much data with so many companies.
A solution to ad fraud?
With traditional computing systems, data is typically stored on a client-server network and relies on one central database. This model places a lot of control in the hands of internet providers as a "trusted third party."
Blockchain turns this model on its head, decentralising data by hosting transaction blocks on thousands of computers worldwide. Most importantly, this data is available for anyone to find and verify on a public ledger.
Using the open ledger, blockchain lets advertisers identify the source of fraudulent or wasteful clicks and blacklist fraudsters. While latency issues and wide-scale adoption present barriers, blockchain could theoretically be scaled to combat fraud issues across all ad networks. For example, Toyota has had early success employing blockchain to identify fraudulent clicks and traffic helping to reduce wasteful spend.