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  • The Ethereum blockchain completed its Merge upgrade early Thursday, co-founder Vitalik Buterin said.
  • The merger moves cryptography to a proof-of-stake mechanism, dramatically reducing power consumption.
  • Analysts said this should attract institutional investors to Ether, which rose 2.2% on the news.

The Ethereum blockchain has completed its long-awaited Merge Update early Thursday morning, said crypto project co-founder Vitalik Buterin.

The upgrade promises to reduce the power consumption of the network, which underpins the world’s second largest cryptocurrency, Ether. That should make it a more attractive asset for institutional investors, analysts say.

“And we have finalized! Buterine said in a tweet just before 3 a.m. ET. “Happy merging everyone. It’s a great moment for the Ethereum ecosystem. Everyone who helped make the merger happen should be very proud today.”

Ether was up 2.2% after the announcement, trading at $1,620 when last checked on Thursday. Leader crypto token bitcoins rose just 0.3% to $20,170.

The merger, which had been in the works for nearly seven years, shifts Ethereum from a proof-of-work to a proof-of-stake consensus mechanism, meaning gas fees, or costs per transaction, will drop for the token. This should also speed up transaction processing.

In a proof-of-stake mechanism, people are asked to validate transactions based on the number of coins they hold and are willing to offer as a kind of down payment.

It consumes less power than the proof-of-work mechanism, where computers compete to solve complex puzzles to verify the network and mine the ether.

Experts expect the upgrade could reduce Ethereum energy consumption by 99%. Buterin previously said the goal is to eventually reduce blockchain power consumption by up to 99.5%.

The upgrade could make ether more palatable to institutional investors who need to consider environmental, social and governance (ESG) goals, analysts said. This could attract businesses that have been shut out of the cryptocurrency due to its high energy costs.

“This improvement in environmental outcomes will likely open the door for ESG institutional investors to invest in Ethereum,” said Deutsche Bank Economist Marion Labouré. “The desire for sustainable alternatives exists in the crypto space.”

The Ethereum blockchain powers some of the largest and most popular Web3 and crypto projects, such as NFTs and smart contracts in decentralized finance.

Ether is down 56% in 2022 after quintupling last year. The Federal Reserve’s interest rate hikes weighed on investors’ appetite for riskier assets.

Read more: An Ethereum developer who has spent the last 4.5 years upgrading his network explains why the merger will be the most important event in crypto history since the invention of bitcoin and ether

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