After the Bitcoin mining "crisis", Ethereum miners are also facing elimination

This article is from decrypt, original author: Jeff Benson

Odaily Planet Daily Translator | Moni

The upcoming proof-of-stake network will make Ethereum miners obsolete, but that doesn’t mean they’ll leave.

Like Bitcoin, Ethereum currently "mining" also requires a lot of energy to protect network security, create and distribute new digital currencies, and there are also many Ethereum miners around the world, and they also need to buy expensive mining machines to solve computing problems and earn the Ethereum network's native cryptocurrency ETH. However, if all goes well, Ethereum will undergo a major upgrade in 2022, fundamentally changing the way the network operates and how ETH tokens are created - in other words, Ethereum mining will become a thing of the past.

So, what does the future hold for miners currently mining on the Ethereum blockchain?

"prove"

The Bitcoin white paper was officially released in 2008, which demonstrated a new way to securely send money over a decentralized network using cryptographic concepts, which we are familiar with today: Proof of Work.

The Ethereum blockchain was officially launched in 2015. Like Bitcoin, the Ethereum blockchain uses the same proof-of-work consensus protocol. In short, proof-of-work is a way to ensure that computers agree on transactions and database states at any given time, which protects the network from potential double-spending or multi-spending attacks.

Although proof of work is a cryptographic algorithm, the Ethereum Foundation explains that "mining itself is the 'work', which is the act of adding valid blocks to the blockchain." Of course, the proof of work algorithm that uses a lot of computing power consumes a lot of electricity, which has become the main reason for environmental organizations to criticize cryptocurrencies.

To put it bluntly, Ethereum core developers have been working on changing the network consensus protocol from Proof of Work (PoW) to Proof of Stake (PoS), which consumes only a small amount of electricity to maintain the network while continuing to support larger transactions. The upgraded Ethereum network is called Ethereum 2.0 (ETH 2.0), and network security will be maintained by staking ETH tokens to ensure that attacks can be effectively prevented, because once bad actors carry out an attack, their staked tokens will be seized.

According to Ethereum core developer Tim Beiko, when Ethereum 2.0 is officially launched, the currently permitted proof-of-work Ethereum blockchain will be “merged” into the new proof-of-stake blockchain, which could happen before the end of 2021 — that is, all mining on the Ethereum network should be shut down by the end of the year. Tim Beiko said:

“Before the Ethereum network upgrades to 2.0, miners should prepare in advance to ensure that they will not lose money.”

But the question is, after the Ethereum 2.0 upgrade, what should the current miners do?

"merge"

Michael Carter, a cryptocurrency miner and host of the crypto YouTube channel BitsBeTrippin, doesn’t expect a massive drop in the ethereum mining market until the ethereum proof-of-work network and proof-of-stake mining “merge.”

But just in case, Michael Carter still put a lot of effort into estimating the profit. They analyzed at least 10 different scenarios to calculate the profitability of Ethereum mining in the next few months, such as high prices and high transaction volume, high prices and low transaction volume, etc. Although Michael Carter is a supporter of native Ethereum, he said he is ready to deal with the Ethereum 2.0 upgrade-"If another chain becomes more profitable, I will switch mining resources to the new chain."

Of course, Michael Carter is not in a hurry to switch the network. For those Ethereum miners with considerable cash flow, they can actually fight a "protracted war" now, that is, continue to hold ETH and wait for the price to rise.

Once Ethereum 1.0 and Ethereum 2.0 are merged, Michael Carter believes that current Ethereum miners should switch to other blockchains. There are two simple choices now, one is Ethereum Classic and the other is Ravencoin:

* Ethereum Classic is another chain that emerged from the Ethereum network hard fork in 2016. As of June 22, Ethereum Classic's market capitalization was approximately US$4.7 billion.

* Ravencoin is the native asset of the network used to transfer digital and tangible assets. As of June 22, Ravencoin's market value was approximately $436 million and the token price was around $0.05.

Neither Ravencoin nor Ethereum Classic is as well-known as the Ethereum blockchain and is not currently widely used in the crypto community. But that’s okay because the bottom line is that both digital currency blockchain networks can be mined, just like Ethereum 1.0, by computing devices using graphics processing units (GPUs).

However, in Michael Carter's opinion, the road for miners using application-specific integrated circuit (ASIC) miners may be more difficult in the future, because although ASIC miners have more powerful computing power, Ethereum has used algorithms to take away most of the mining advantages of such miners, and once Ethereum 2.0 is upgraded, they will not be able to switch to other networks to continue mining like GPU miners.

In the words of one Reddit user:

“ASIC mining machines will become useless in the future.”

"warn"

Unlike Michael Carter and other miners who are ready to "jump ship" after the Ethereum 2.0 upgrade, not all Ethereum miners are happy with the current upgrade arrangement.

This July, the Ethereum network will undergo a major update that is expected to bring significant changes to how (and how much) miners are paid. The update, which will be implemented in the so-called “London” hard fork, will include Ethereum Improvement Proposal EIP-1559 — after which the Ethereum blockchain will automatically calculate the amount of gas (Ethereum’s network fee) paid by users and then… destroy it.

That is to say, in the future, ETH transaction fees will no longer be paid to miners, but will be sent to an address that no one can access and eventually destroyed into ashes... This means that after the "London" hard fork is completed, Ethereum miners can only get newly minted ETH as a reward. Although supporters of EIP-1559 believe that this upgrade will ultimately benefit everyone on the network (because the reduction in supply will increase demand, which can in turn push up ETH prices), not all miners think so - there is no doubt that some people support it, and some people condemn it.

EIP-1559 sets an unofficial “game clock” for Ethereum network integration, as it also represents the point at which miners may begin to abandon the Ethereum network (which will likely be abandoned in a few months anyway). However, if miners leave Ethereum now, they may miss their last chance to “get rich.”

Ethereum core developer Tim Beiko explained:

“If miners leave the network before EIP-1559 is deployed to the Ethereum blockchain, the hashrate will decrease and other miners will gain more profit. In other words, the fewer people are mining, the easier it will be for those who stay to earn ETH.”

Given that Ethereum must conduct distributed "mining" to ensure network security, once a large number of miners leave the network, it may also bring certain risks to the blockchain.

Tim Beiko continued:

“Before EIP-1559 is deployed to the Ethereum blockchain, we actually need some miners, but if they gradually leave the network before the network is upgraded, it may bring security risks to the current network. But in fact, most miners have invested a lot of costs in infrastructure such as mining machines. Considering that miners have spent a lot of fixed costs, they should have the motivation to mine to the last block.”

Although some miners with outdated mining equipment may "jump ship" as EIP-1559 is deployed to the Ethereum blockchain, there will still be miners on the Ethereum network. Regarding this phenomenon, Will Foxley of Compass Mining said:

“Many people think that the deployment of EIP-1559 to the Ethereum network will cause miners to leave, but at least before the deployment, the Ethereum blockchain still attracted a large number of miners to mine. This is because they want to get as much ETH as possible before the merger, because they know that once EIP-1559 is deployed, the price of ETH will rise.”

Are you ready?

Michael Carter stressed:

“Everyone knows that Ethereum will switch to the Proof-of-Stake consensus algorithm, but only those who are prepared can cope with this change. Some mining pools have been preparing for changes to the Ethereum network for several years. For example, F2Pool, the second largest mining pool in Ethereum, has already built an ETH 2.0 validator pool.”

Perhaps coincidentally, some mining pools announced their support for EIP-1559 as early as the beginning of this year, which shows that some people in the market already clearly know that once this Ethereum Improvement Proposal is deployed, the price of ETH will rise over time.

From past experience, any blockchain network needs to stand on the side of core users and contributors, otherwise it will pay a high price, such as the previous TheDAO hard fork. The good news is that key developers and core contributors have been actively building Ethereum, helping it thrive and develop to its current state.

However, there are also voices of opposition to the EIP-1559 proposal in the Ethereum community, and SparkPool is one of them. Currently, SparkPool controls nearly a quarter of Ethereum's computing power, and they believe that the EIP-1559 proposal is "wealth distribution and the tyranny of the majority." However, Will Foxley of Compass Mining believes that SparkPool's opposition to the deployment of EIP-1559 may not succeed:

“I don’t think there’s anything they can do, and I think they realize that.”

However, in theory, for ETH miners who are dissatisfied with the EIP-1559 proposal, they also have ways to deal with it, such as creating another Ethereum fork, like "Ethereum Classic 2.0", and insisting on not switching to the proof-of-stake consensus algorithm.

The Ethereum protocol will eventually change, and miners on the PoW network will face elimination. What the final outcome will be, perhaps only time can give us the answer.

This article is translated from https://decrypt.co/74262/what-happens-ethereum-miners-after-eth-2. If reproduced, please indicate the source.