When a 20% reduction in production meets a redistribution of computing power, ETC miners are looking for a way out in the bear market

After ETH switches to PoS, GPU miners are likely to "join" ETC. Can ETC handle it? With the completion of a new round of 20% production cuts, where is the future of ETC?

Author | Han Ling

Source | Liandede

At 14:07 on March 17, the Ethereum Classic (ETC) block reached the scheduled production reduction height of 10,000,000, and initiated a 20% production reduction. The reward for each block has been reduced from 4 ETC to 3.2 ETC. It is expected that the daily mining reward will drop from about 26,000 ETC to about 21,000 ETC.

"Halving" and "Halving means bull market" once became the focus of market discussion in early 2020. However, the expected halving/production reduction has not yet arrived, and the crypto market has experienced a round of "price halving". On March 12, Bitcoin suddenly fell below the $5,000 mark from around $7,500, and then the entire digital currency market began to plunge sharply, with the cryptocurrency market shrinking by $74.5 billion in one day.

Judging from the performance of ETC, after the overall market crash on the night of March 12, it is currently trading sideways at a low level. According to CoinMarket data, as of 9:00 on March 18, ETC was trading at $4.5, down 0.2% in 24 hours.

When production cuts encounter extreme market conditions, can ETC still bring some new expectations to the crypto market?

"The market conditions before the ETC production cut, including this production cut, were definitely affected by the global epidemic, but how the market conditions will develop after the production cut actually depends on the control of the epidemic. If the epidemic can be well controlled, then the market conditions after the ETC production cut are still worth looking forward to," said Xu Kang, head of the ETC Asia-Pacific community, in an interview with ChainDD.

Xu Kang further explained that the halving market is divided into two parts: the first part is the "expected market" before the halving, that is, everyone thinks that the digital currency may be halved, and there will be an expected hype, and then there will be a small wave of market pull-up. After the halving, the funds of BTC or ETC will have a greater increase. He pointed out that this epidemic has greatly affected the expected market before the halving, and the real market will be generated in a period of time after the production reduction. For example, the last ETC production reduction was on December 11, 2017. Before the 11th, there was already a wave of expected hype, and the capital flow was considerable, but the historical highest price of ETC was a few weeks after the production reduction.

Note: Unlike Bitcoin, which is halved every four years, ETC's deflation mechanism is: when the block height reaches 5,000,000, the block reward will be reduced by 20%, and then reduced by another 20% every 5,000,000 blocks, and the production reduction cycle is about 2.38 years. The term "halving market" as a whole includes "production reduction market".

Source: Tokenview

Miners frequently switch computing power

Will not bring big benefits

"The current short-term price decline will not have a large-scale impact on miners' mining behavior. Miners are more concerned about increasing their profits in a long-term stable market. When the epidemic is under control, the price of ETC will return to normal, and the impact on miners will be minimized." Xu Kang told Liande.

There is no doubt that the reduction in ETC production will directly reduce the income of miners, which is a general consensus in the market. At the same time, under the background of the general decline of cryptocurrencies, the reduction in production and the low price have made the income of miners increasingly meager. How to maintain the income of miners and make them firm in their belief and continue mining under the situation of production reduction has become a problem that needs to be solved in the current crypto market.

Xu Kang believes that the production cut will reduce the miners' income on the surface, but due to the particularity of the halving market, if the market is promising for a period of time in the later period, the price of a single digital currency can rise, which can offset the impact of the reduction in block rewards on miners to a certain extent.

"To ensure miners' continued and stable income, the most important thing is to avoid switching between different graphics cards and mining machines as frequently as possible," said Xu Kang.

If a miner thinks that a certain digital currency has a higher short-term return, he will switch to mining this currency, which will cause the computing power of his original network to decrease, because after the computing power is switched, the mining difficulty will decrease, which will benefit the miners who insist on mining a currency. Therefore, it is a better solution for miners to stick to mining a digital currency that they are more familiar with.

In addition, from the perspective of "cryptocurrency policy", ETC is very similar to Bitcoin. For every 5 million blocks of ETC, the block reward decreases by 20%. The average block time of ETC is about 12 seconds, and 5 million blocks take about 2 years, with a 20% reduction in production in 2 years. It can be found that ETC has a fixed monetary policy like Bitcoin, and this monetary policy ensures that ETC assets are deflationary and will not be infinitely over-issued like sovereign currencies.

He said that from the current personal input-output ratio, ETC and ETH are still the digital currencies with the highest input-output ratio. This year, ETH is expected to switch to POS. For miners using AMD graphics cards (referring to AMD graphics card mining machines), continuing to mine on ETC in the future will have a relatively fixed income.

ETH computing power is migrating to ETC on a large scale?

At present, the handling fees of various mining pools are basically zero. In other words, the income of miners comes largely from mining. Mining pools such as Ant Pool and F2pool that mine ETC also have computing power in ETH. After the production cut, the mining rewards of miners will be reduced by 20%. Whether miners will migrate their computing power to ETH is also a problem worthy of vigilance.

Xu Kang told Liandede, "A more likely trend or a trend that is happening now is the large-scale migration of ETH computing power to ETC."

He believes that the migration of ETH computing power to ETC mainly depends on the following factors. First, at present, ETC's input-output ratio is relatively high, often on par with ETH, and sometimes even surpasses ETH; secondly, ETH's mining algorithm is the same as ETC, using the same Ethash mining algorithm, and the ecosystem is integrated, so switching from ETH to ETC mining is almost zero cost (hardware and software) for miners; finally, the equipment for ETH and ETC mining is the same, both are A-cards, so migrating computing power from ETH to ETC is the most economical and simplest way.

In the second half of this year, both ETH and ETC networks will face the same problem, that is, the size of DAG will reach 4G. If it reaches 4G, some miners on ETH and ETC who use 4G graphics cards for mining may be forced to shut down.

Now the core team of the ETC community, including the leaders in the community, are actively discussing how to delay the time it takes for the ETC network to reach 4G, so that miners using 4G graphics cards for mining will still have mines to mine for at least some time this year.

In addition, ETH will complete the 2.0 upgrade this year, when the Ethereum block generation algorithm will be switched to PoS block generation verification. In this way, the PoW ETH chain will continue to be maintained for a while, but it will eventually be fully converted to PoS on the ETH network, which will inevitably lead to their computing power looking for some other PoW operating networks for mining.

According to CoinMarketCap, ETC’s current market value is US$524 million, ranking 19th in the cryptocurrency market value. Although there is still a large gap with ETH, it is the second most popular graphics card mining currency after ETH.

According to Tokenview, the average daily computing power of the Ethereum network is 162.35TH/s, and the average daily computing power of the ETC network is 9.7TH/s. It remains to be seen whether ETC can "take over" enough computing power from ETH (ETH has a market value of $12.574 billion, ranking second in the market).

In the live broadcast room of F2Pool, minerOS co-founder Zhang Songqing pointed out that after ETH switches to PoS, GPU miners are likely to "join" ETC. Judging from the current market value of ETC, it is far from enough to take over the computing power of ETH, but compared with other currencies, ETC is more likely to take over the computing power.

ETC Direction:

Continue to improve compatibility with the ETH network

As we all know, ETC is a forked currency that was hard forked from ETH (Ethereum) after 1,920,000 blocks, and its functions are similar to Ethereum. In recent years, ETC has a very obvious development trend of continuously improving its compatibility with the ETH network to enrich its own ecological applications.

Since the second half of last year, ETC has carried out the Atlantis hard fork. This update attempts to make the network more compatible with ETH. To this end, Atlantis implemented the function of the Ethereum Byzantine fork. On the afternoon of January 12, 2020, ETC completed the Agharta hard fork upgrade at block height 9573000. The Agharta hard fork aims to make Ethereum Classic compatible with Ethereum, achieve interoperability between ETC and ETH networks, and continuously enrich the ecology and application scenarios of Ethereum Classic.

Xu Kang talked to Liande about the key direction of ETC development this year, "It is still to continuously improve the compatibility of ETC and ETH network." ETC's next hard fork upgrade is defined as phoenix, which will continue to be compatible with a hard fork upgrade of the Ethereum network Istanbul Brown. He believes that ETC and ETH can be fully compatible, so that DApps on ETH can be easily copied or migrated to some blockchain projects, and even the DApps on ETC can communicate directly with the DApps on the ETH network, so as to achieve mutual integration of the two ecosystems.

Last year, the ETC Asia Pacific Community planned a collaboration between ETC and ETH, one of the topics of which was to operate ETC as a data availability layer for ETH. This means that after ETH reaches 2.0, it may be possible to process some high-throughput, high-frequency transactions and applications that require high performance support on ETH, and then use the PC network as an underlying blockchain network to perform some confirmations that require high security, so that the two networks can complement each other.

The ETC network has a natural advantage in being the data availability layer of ETH. In all aspects, especially its technical architecture, ETC and ETH are highly compatible. Xu Kang believes that after the hard fork upgrade that started last year, ETC and ETH will achieve a fully compatible and controllable operating system.

Since last year, ETC has made breakthrough progress in platform applications, infrastructure, and ecological services. 2020 will be a breakthrough year for ETC. On the one hand, yesterday's ETC production cut has a positive driving effect on the development of ETC itself and the entire cryptocurrency market. On the other hand, ETC continues to improve its compatibility with the ETH network, enriching the application ecology, and enhancing the value attributes of the public blockchain while strengthening community functions.

Xu Kang said in an online live broadcast that a large number of various types of DApps will soon appear on ETC, including DeFi ecosystems such as lending, exchanges, and stablecoins. After ETH is converted to PoS, ETC can serve as the data availability layer of ETH2.0 and be responsible for security confirmation.