To create and distribute new cryptocurrencies Ethereum is currently based on an energy-intensive process called mining, and Bitcoin…
As thousands of people around the world who help in this, known as miners, run millions of dollars of machines in a race to solve computing problems and earn rewards for Ether, the network’s native cryptocurrency.
But sometime next year, Ethereum will undergo a major update that will fundamentally change how the network works and how new currencies are created. Ethereum mining will be a thing of the past.
So where are all the miners going?
Approves
When the Bitcoin whitepaper was released in 2008, it borrowed the cryptographic concept as a way to make the decentralized network secure for sending money: working test…
The Ethereum blockchain, released in 2015, uses the same consensus protocol. Generally speaking, it is a way to ensure that computers always agree on transactions and database status. This protects the network from attacks that can waste funds multiple times.
Although the proof of work is an algorithm, the Ethereum Foundation Explain that “mining is” work “itself. This is the process of adding valid blocks to the chain. ” This work to increase computing power consumes a lot of electricity, and environmental groups often criticize cryptocurrencies.
Ethereum developers are working on porting the Proof of Work (PoW) network consensus protocol to proof of participation (PoS), which requires much less electricity to operate, but allows transactions on a much larger scale.
This network, named Ethereum 2.0will maintain security at the expense of people lending their tokens. Attacks can be avoided as deposits of malicious or inept participants will be taken as collateral.
According to ETH core developer Tim Beiko, when the current PoW chain “merges” with the new PoS chain and Ethereum 2.0 takes effect, which may happen before the end of the year, mining actually stops. “Miners should try to distance themselves before that,” he told Decrypt.
But where will they go next?
Merge
Michael Carter, Cryptocurrency Miner and YouTube Channel Host Bits be trippin ‘, does not foresee a sharp drop in production before the “merger”.
He looked at the numbers, calculating the profitability of mining Ethereum over the next few months using ten different scenarios – high price and high volume, high price and low volume, and so on. And although he is a supporter of the project, he is ready to allocate his mining resources if another currency becomes more profitable.
He is also in no hurry with this. Miners with significant cash flow can afford to hold Ether in the hope that the price will rise.
After the merger, he believes that agnostic miners have two simple choices. “At the moment it looks like it will be a mixture of Ethereum Classic and Ravencoin,” he said. ABOUT Ethereum ClassicWith a market value of $ 4.7 billion on June 22nd, it is a network that emerged from the Ethereum hard fork in 2016.
Ravencoin, which had a market value of $ 436 million on June 22nd and a sale price of $ 0.05, is the native token of the digital and tangible asset transmission network.
None of them are as well known and widely used as the Ethereum network. It does not matter. The important thing is that, like ETH, your tokens can be mined using GPU-powered rigs.
ASICs or Application-Specific Integrated Circuits are more powerful devices for miners, but Ethereum uses an algorithm that has most of the advantage.
Hence, GPU miners have a strategic exit. Meanwhile, according to Carter, ASIC miners have an even more difficult path ahead. “What’s going to be interesting is how many Ethereum ASICs everyone can lose,” he said. “They can’t go anywhere.”
Or how commented Reddit user: “They’ll be USELESS.”
a warning
The fact that Carter and the others will not leave the ship until Ethereum 2.0 arrives does not mean that all miners are happy with this change.
In July, the Ethereum network will undergo a major update that will change the order (and size) of payment for miners. London hard fork will include Ethereum Improvement Proposal (EIP) 1559that automates the amount of gas (read: fees) that blockchain users pay and then … burn.
ETH transaction fees will no longer go to miners, but will be turned into digital ash when sent to an address that no one can access. Thus, miners will receive the newly mined ether as a reward.
Although defenders EIP-1559 argues that this will benefit everyone, because a decrease in supply will lead to an increase in demand (and, in turn, the price of the currency), not all miners agree. Rival mining pools came to different conclusions: some supported, while others condemned the upgrade.
EIP-1559 kicks off an unofficial merge clock as it represents the point at which miners can start leaving the network. (After all, the network will stop mining in a few months anyway.) But they risk missing out on a big salary.
“If the miners leave before the merger, the hash rate will decrease and other validators will get more profit,” Beiko told Decrypt. In other words, the fewer people mining, the easier it will be for those who stay to get rewarded in ETH.
Given the scale of mining that must be distributed to keep the network secure, this does not necessarily lead to some risk.
“We need some miners before the merger, but there will be no risk to the security of the network if they come out slowly before that, ”Beiko said. “In reality, however, most mining farms have already paid for their infrastructure, so they have an incentive to mine to the last block since their fixed cost has already been used up.”
While it is possible that some mining groups with obsolete equipment will “come out” as the merger approaches, Will Foxley from Compass Mountain, said Decrypt:
“A lot of people think that with the advent of fusion, there really is a huge accumulation of energy for mining, because they want to get as much Ether as possible before the upgrade takes place, knowing that fusion will increase the price of the coin.”
Who is ready?
“Everyone knows Ethereum will move to proof of participation,” Carter said. But some have done more than others to prepare.
“The best pools I’ve seen … have been anticipating this event and have taken development seriously in recent years,” Foxley said. For example, F2Pool, the second largest mining pool for ETH, has already prepared a new Ethereum 2.0 validator pool.
Perhaps not coincidentally, F2Pool also backed EIP-1559 in January, pointing to a rise in the price of Ether over time, even with decreasing block rewards.
Also, “JK” from F2Pool, wrote“We’ve already learned an expensive lesson by not alliance with key users and developers in other industries. During the DAO hard fork, the lead developers and contributors consistently relied on the current version of Ethereum to help it evolve and grow to its current state. ” According to him, Ethereum Classic is developing more slowly.
They don’t want to be left behind again.
ABOUT SparkPool which controls nearly a quarter of Ethereum’s hash rate – meaning it is capable of mining one out of every four blocks – opposes EIP-1559, calling the update “wealth distribution” and “tyranny of the majority.”
According to Foxley, SparkPool is also “aggressively against” the merger. But he said, “I don’t think they can do much, and I think they know it.”
In fact, this is true, but not literally. According to Beiko, miners can simply fork Ethereum, which does not turn into proof of participation, and create a kind of “Ethereum Classic 2.”
SparkPool and others are likely to change over time – and the Ethereum protocol – or be left behind.
* Translated and edited with permission Decrypt.co
