With Ethereum’s transition to proof-of-stake (PoS) now behind us, more and more observers are pointing to the environmental benefits of the network, saying that investors concerned about environmental, social and governance criteria (ESG) will flock to ETH as they learn more about it.
Since Ethereum’s transition from proof-of-work to proof-of-stake – an event known as the The Merge (fusion in French) – the network uses 99.95% less energy according to the Ethereum Foundation. The co-founder of Ethereum, Vitalik Buterinretweeted a statement on Thursday that said “The Merge would reduce global electricity consumption by 0.2%.”
Bitcoin, by comparison, continues to rely on the much more energy-intensive proof-of-work system as its consensus mechanism.
It’s no surprise that Ethereum’s promise of dramatically reduced energy consumption is attracting “ESG” investors, who consider it important to reduce energy consumption and – in particular – carbon emissions. .
According Conor Svensson, CEO and Founder of Web3 Labsthe move to proof-of-stake for Ethereum could even make Bitcoin and other networks that remain on proof-of-stake less attractive to investors.
“If I look at companies that are looking to invest in cryptocurrencies, based on ESG, I imagine that many of them will be slightly reluctant to expose themselves to Bitcoin when there is another asset that does not use not huge amounts of energy,” Svensson said in a recent Evening Standard article, while also noting:
“I am convinced that Ethereum will overtake Bitcoin in the long term”.
ESG stands for Environmental, Social and Governance, and so-called ESG investing has become extremely popular among retail investors and financial institutions in recent years. According to a Bloomberg article on ESG investing, assets managed by ESG funds are expected to reach $41 trillion by the end of 2022with ESG-related assets now representing one in three dollars managed worldwide.
ETH is the second most valuable cryptocurrency in the world, with a market capitalization of just over $173 billion. at the time of this writing. And although some believe ETH will one day overtake BTC, an event dubbed “the flippening,” ETH’s market capitalization still remains less than half that of BTC.
The price of ETH fell immediately after The Merge, and was, as of 21:50 UTC on Friday, down 4.2% in the last 24 hours, to a price of $1435.
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