Who will survive the Ethereum "merger" - mining pools or miners?

In the past few years, more and more people have joined the ranks of mining, and many miners receive virtual currency rewards by providing computing power for encrypted networks. Of course, Ethereum, as the world's second largest cryptocurrency network, has no shortage of miners participating, and they compete to provide computing power in exchange for ETH as mining rewards. However, a huge change is coming to the Ethereum mining market, and thousands of other miners may soon end their mining careers. This is because Ethereum is about to usher in the biggest update since its inception - "The Merge".

The Ethereum "merge" (previously known as Ethereum 2.0) means that the main network will merge with the beacon chain responsible for the proof-of-stake system, and the consensus mechanism will be fully transitioned from proof-of-work (PoW) to proof-of-stake (PoS). From now on, "Ethereum mining" will no longer exist. For various reasons, the Ethereum "merge" has been postponed many times, but if nothing unexpected happens, the update should be completed before the end of this year.

‎As the “merger” date approaches, most miners cannot avoid such a terrible question: where will they go if they make a living by mining Ethereum? ‎

Mining pool or miner, who will survive to the end

‎According to the Ethereum Foundation, Proof of Stake (PoS) will reduce the energy usage of the entire Ethereum network by 99%, while also reducing the generation of new ETH and distributing rewards in smaller blocks, which is an environmentally friendly measure. ‎However, for mining pool miners and other independent Ethereum miners, this update of Ethereum has a far-reaching impact on them. Because for now, Ethereum miners obtain new ETH by providing a lot of computing power (called proof of work), and after the "merger", these network participants called "validators" need to stake a large amount of ETH to obtain rewards (called proof of stake), which makes the mining hardware that they originally spent a lot of money to buy useless in proof of stake. ‎

After Ethereum switched to proof of stake, participants needed to stake at least 32 ETH to have a chance to receive rewards. In order to get higher returns, "validators" should try to stake more ETH than this. Therefore, this condition alone has already excluded many people, not to mention the need to create and maintain your own staking pool, which will be much more complicated than maintaining a bunch of mining machines. After all, the era of making money simply by buying equipment is about to pass, and if you want to continue to benefit, you have to make changes in time.

‎On the other hand, for mining pools, this "merger" has almost no impact on them. This is because mining pool companies have never actually provided computing power themselves. All they do is coordinate pool members, find new users, and provide infrastructure that satisfies customers. Therefore, they have never invested money in mining equipment, so they don't have to bear losses due to equipment decommissioning. It is for this reason that some industry-leading Ethereum mining pools have begun to transition to staking pools, coordinating and aggregating the ETH of a large number of individual "mortgagors" to obtain more ETH rewards. ‎

The world’s second largest mining pool, F2pool, and its sister company Stakefish have long been preparing for Ethereum’s transition to proof-of-stake by sharing and deploying human resources.

l EtherMine, the world's largest Ethereum mining pool, is also transitioning to proof of stake: the company has just launched a staking pool service - EtherMine Staking beta. ‎

It is worth mentioning that although the combined computing power of Ethermine and F2pool accounts for nearly half of all the computing power of Ethereum mining, these companies adopt a business model of charging individuals for mining fees, but they do not participate in mining themselves, so they will not be affected by Ethereum's shift from proof of work to proof of stake.

Is there a better option ?

If some independent miners are unable or unwilling to create their own staking pool business, do they have any other options?

Of course, they can sell their mining equipment and join the staking pools of large companies; or they can keep their hardware equipment (which must be more general GPU mining equipment, not ASIC miners) to mint other types of cryptocurrencies.

‎But obviously, neither of the above options is ideal. ‎First, the return rate of staking a small amount of ETH in a large staking pool is much lower than mining; second, since the demand for other cryptocurrencies (such as Ethereum Classic, Ravencoin, and Ergo) is much lower than that of ETH, the profit margins miners get from mining with existing equipment are also much lower. ‎As a result, miners cannot recover the high cost of purchasing mining equipment.

Will miners choose to keep pace with the times, or be left behind by them ?

‎As mining pools gradually transition to proof of stake, industry insiders have noticed that the composition of new staking pool participants is completely different from that of miners, which is exactly what Ethereum expects. Because for those who have already purchased mining equipment, using their hardware facilities to participate in "verification" is a complete overkill; while for those who have not purchased mining equipment, the cost is much smaller, because the "verification" process does not require professional equipment and can be completed on a home computer. ‎

‎When talking about the issue of miner transformation, Butta, chief marketing officer of EtherMine's parent company Bitfly, was optimistic. He said the company's goal is to help miners on the current platform move from proof of work to proof of stake. Butta pointed out that most of the current stakes on EtherMine's new staking platform come from existing miners, so they are confident that they can lead the miners to move forward. ‎

‎The wheel of time is rolling forward, and the long-awaited Ethereum "merger" will finally come. Frankly speaking, Ethereum miners do not have too many choices. At present, all they can do is continue mining until the "merger" comes. In the end, no matter what choice Ethereum miners make (whether to continue mining or switch to staking), it will no longer be easy to continue to earn income through Ethereum. As for whether to choose to go left or right on this fork, I believe every Ethereum miner already has the answer in his heart.

Part of this article is compiled from decrypt