The removal of Ethereum’s energy-intensive Proof-of-work (PoW) system is expected to see Ether (ETH) “flow into the institutional world”according to several fund managers and co-founders.
On Thursday, Ethereum officially moved to a Proof-of-Stake (PoS) consensus mechanism, which is expected to reduce the power consumption used by the network by 99.95%according to the Ethereum Foundation.
The update ends the need for the Ethereum network to rely on miners and energy-consuming mining hardware to validate transactions and build new blocks, as these functions are now replaced by validators that “stake” your ETH..
“The merge will reduce worldwide electricity consumption by 0.2%” – @drakefjustin
— vitalik.eth (@VitalikButerin) September 15, 2022
“The merger will reduce global electricity consumption by 0.2%” – @drakefjustin
In a statement to Cointelegraph, Charlie Karaboga, CEO and co-founder of Australian fintech company Block Earner, said the network’s transition to PoS “will drive the future of money to be more internet-based.”.
Said Ethereum would become “the settlement layer that everyone will accept and trust, especially as the spotlight shines brighter than ever on the issue of sustainability in cryptocurrency mining.”.
Markus Thielenchief investment officer at digital asset manager IDEG, said it had been in talks with sovereign wealth funds and central banks to help build their digital asset portfolios, but direct investment had often been “rejected due to energy concerns”.
But now that the Ethereum network has transitioned to PoS, this issue is much less of a concern, he said:
“Although demand has been strong, the missing link was an underlying zero emissions financial infrastructure. With the move from Ethereum to PoS, this last pillar of concern is clearly resolved.”
Henrik Andersson of Apollo Capital told Cointelegraph that ESG had become a “big factor” behind institutional investment decision-making in recent years.
Andersson said he thinks cutting 99.95% of power consumption on Ethereum would drastically improve ETH’s ESG score, which in turn would “make it more attractive to institutional investors” in the long run.
Blockworks co-founder Jason Yanowitz told his 92,900 followers on September 15 that “a green ETH” will be the “best narrative” in crypto history as crypto mining and PoW plague the industry for some time.
Yanowitz pointed out that, until now, the “bitcoin is bad for the environment” narrative has been “very shocking”, adding that it spread like wildfire” and “has probably had the most negative impact on asset performance”.
“Most of the big institutions have ESG mandates,” Yanowitz said.:
“Fidelity, BlackRock, Goldman, etc… whether they like it or not, they now have to consider the environmental impacts of their investments.”
However, this is now old news for Ethereum, as Yanowitz adds that the biggest take on the Merger is that “Ethereum goes green”, which becomes highly attractive to large corporations that have ESG mandates to adhere to.:
“This will be the best narrative that cryptocurrencies and ETH have ever seen. It will flow into the institutional world, where investors will buy ETH because it satisfies its ESG mandate.”
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