The shedding of Ethereumโs energy-intensive proof-of-work (PoW) system is expected to see Ether (ETH) โflow into the institutional world,โ according to a number of fund managers and co-founders.
On Sept. 15, Ethereum officially transitioned to a proof-of-stake (PoS) consensus mechanism, which is expected to cut energy consumption used by the network by 99.95%, according to the Ethereum Foundation.
The upgrade effectively ended the need for the Ethereum network to rely on miners and energy-guzzling mining hardware to validate transactions and build new blocks, as these functions are now replaced by validators who โstakeโ their ETH.
“The merge will reduce worldwide electricity consumption by 0.2%” – @drakefjustin
โ vitalik.eth (@VitalikButerin) September 15, 2022
In a statement to Cointelegraph, Charlie Karaboga, CEO and co-founder of Australian fintech company Block Earner said the networkโs transition to PoS would โdrive the future of money to be more internet-based.โ
He said that Ethereum would become โthe settlement layer that everyone will accept and trust โ especially when the spotlight is shining brighter than ever on the issue of sustainability in crypto mining.โ
Markus Thielen, Chief Investment Officer of digital asset manager IDEG said that he had been in discussions with sovereign wealth funds and central banks to help build their digital asset portfolios, but direct investment had often been โvoted down due to energy concerns.โ
But now that the Ethereum network has transitioned to PoS, this issue is much less of a concern, he said:
โWhile demand has been strong, the missing link has been an underlying zero-emissions, financial infrastructure. With Ethereum moving to PoS, this clearly solves this last pillar of concern.โ
Henrik Andersson of Apollo Capital told Cointelegraph that ESG had become a โbig factorโ behind institutional investment decision making in the last few years.
Andersson said he believes the 99.95% energy consumption cut on Ethereum would dramatically improve ETHโs ESG score, which in turn would โmake it more appealing for institutional investorsโ over the long-term.
Blockworks co-founder Jason Yanowitz told his 92,900 followers on Sept. 15 that โGreen ETHโ will be the โbest narrativeโ in cryptoโs history, with crypto mining and PoW long plaguing the industry.
Related: How blockchain technology is used to save the environment
Yanowitz noted that until now, the โBitcoin is bad for the environmentโ narrative has been โso impactful,โ adding it spread like wildfireโ and โhas probably had the most negative impact on the asset’s performance.โ
โMost large institutions now have ESG mandates,โ said Yanowitz.
โFidelity, BlackRock, Goldman, etc… whether or not they like it, they now have to consider the environmental impacts of their portfolios.โ
But that is now old news for Ethereum, with Yanowitz adding that the most important takeaway from the Merge is that โEthereum becomes greenโ which becomes highly appealing to large corporationsย who have ESG mandates to comply with:
โThis will be the best narrative crypto and ETH has ever seen. It will flow into the institutional world, where investors will buy ETH because it satisfies their ESG mandate.โ
