Ethereum blockchain has finished a significant software upgrade.

The co-founder and inventor of the Ethereum blockchain tweeted on Thursday that the software has been updated, significantly decreasing the amount of energy it uses.

99% less energy will be used by the new system, according to the Ethereum Foundation. The improvement is seen by supporters of Ethereum as a key benefit as it competes with competitor blockchain bitcoin.

The majority of blockchains use a lot of energy and have drawn criticism from investors and environmentalists. According to researcher Digiconomist, before the software patch known as Merge, a single Ethereum transaction consumed as much energy as the typical American household consumes in a week.

The upgrade has altered how ether tokens, the second-largest cryptocurrency behind bitcoin, are created as well as how transactions on the Ethereum network take place.

Ethereum has switched from a "proof of work" system, in which power-hungry computers validate transactions by solving difficult mathematical puzzles, to a "proof of stake" system, in which people and organizations act as validators and use their ether as collateral in exchange for winning newly created tokens.

Vitalik Buterin, an inventor, wished everyone a "happy merge" in a tweet. "The Ethereum ecosystem is at a pivotal point at this time."

As of 0713 GMT, the price of the cryptocurrency ether had barely changed and stood at $1,633.The majority of blockchains use a lot of energy and have drawn criticism from investors and environmentalists. According to researcher Digiconomist, before the software update known as the Merge, a single Ethereum transaction consumed as much energy as the typical American household consumes in a week.

A "proof of stake" system, in which individuals and organizations act as validators and use their ether as collateral to win newly created tokens, has replaced Ethereum's previous "proof of work" system, which required energy-guzzling computers to validate transactions by solving difficult math problems.

In 2013, Ethereum was created. Many aspects of the much-hyped but as-yet-unrealized "Web3" vision of the internet, where crypto technology dominates applications and commerce, are said to be supported by it.

It drives blockchain-based covenants known as "smart contracts," which are thought to have applications in traditional banking and other sectors, as well as platforms for cryptocurrency offshoots like decentralized finance and non-fungible tokens.

Ether, a cryptocurrency, dropped as much as 4% to $1,571, which analysts attributed to a generalized reluctance to invest in risky assets.

Investors predicted that the upgrade will increase the value of the ether token before Merge. Since its June lows, Ether has increased by nearly 85%, outpacing bitcoin's 15% growth.

Before the Merge, Ether surpassed Bitcoin in market share, and it now makes up roughly 5% of the $1 trillion cryptocurrency market. The percentage of bitcoin has decreased from this year's peak of 47.5% in mid-June to 39.1% now.

The Ethereum network faces a number of problems, including high fees and sluggish transaction times in addition to energy usage. Merge won't solve these issues right away, but some analysts believe it will pave the way for Ethereum's growth.

Marc Arjoon, an Ethereum research analyst at digital asset manager CoinShares, said that the improvement of Ethereum's environmental, social, and corporate governance (ESG) credentials "would be helpful for regulatory-driven organizations who wish to start to explore the Ethereum ecosystem."