Ethereum currently uses energy-intensive mining to generate and distribute new tokens. Thousands of miners all over the world use mining machines worth millions of dollars to solve complex calculation problems, compete with each other, earn ETH and help maintain network security.
At present, Ethereum has 3815 nodes, mainly distributed in the United States, Germany and China. Source: ethernodes.org
However, at some point next year, Ethereum will undergo a major upgrade, which will completely change the operation mode of the network and the generation mode of the new ETH. Mining in Ethereum will become a thing of the past. So where will all the Ethereum miners go?
Network proof mechanism
In 2008, Bitcoin White Paper was released, which used a cryptography concept-workload proof to create a decentralized network that can transfer money safely.
In 2015, Ethereum’s main online line used the same consensus agreement. Workload proof is simply a mechanism to ensure that all node computers reach a consensus on transaction and database status, which can protect the network from double-flower attack (the same fund is used multiple times).
The process of mining requires a lot of computing power, so it consumes a huge amount of electricity, which is why cryptocurrency is frequently criticized by environmental organizations. The core developers of Ethereum have been working hard to change the consensus mechanism of the network from proof of work (PoW) to proof of rights and interests (PoS), which means greatly reducing the power consumption and improving the scalability of the network.
Ethereum 2.0 maintains network security by pledging tokens. Once bad participants destroy the network, the pledged coins will be confiscated.
According to Tim Beiko, the core developer of Ethereum, it is expected that before the end of this year, the current PoW chain will be “merged” into the PoS chain, and mining will be closed. All miners should make conservative plans and finish mining before 2021.
Eth1.0 and Eth2.0 are merged.
Michael Carter, a miner in Ethereum, calculated the profit of mining in the next few months under several different market conditions. He believes that before the merge of Eth1.0 and Eth2.0, the revenue of mining industry is not expected to change on a large scale.
However, he also said that now he is also paying close attention to other PoW chains, and is ready to switch mining resources once there are other chains with higher returns.
It will be even more difficult for miners who use ASIC to mine. “ASIC mining machines will become useless and miners will lose almost everything.” GPU miners have exit strategies.
At present, a better switching direction is the double digging of Ethereum Classic and Ravencoin. Ethereum Classic is a chain produced by the hard bifurcation of Ethereum network in 2016. Its current market value is 41.6 billion USD, ranking 15th among all cryptocurrencies. Ravencoin has a market value of $2.889 billion, and its current price is $0.05. Both coins are much smaller than Ethereum, but they can both use GPU for mining.
Adding insult to injury: EIP-1559
In July, Ethereum will undergo a major upgrade, which will change the income structure and amount of miners. This upgrade, called Ethereum Improvement Proposal (EIP) 1559, will automatically price the gas fee and destroy it.
The transaction fee of Ethereum will no longer be paid to miners, but will be sent to a black hole address to be destroyed. Miners can only get newly minted ETH as a reward. Supporters of EIP-1559 believe that this will benefit everyone, because the reduction of ETH supply will push up the price of coins, but most miners don’t think so. Many mining pools have come to the opposite conclusion and strongly condemn EIP-1559.
After EIP-1559 goes online, a large number of miners may choose to leave. EIP-1559 will mark the miners’ beginning to abandon a node of Ethereum network (hey, anyway, the network will give up mining in a few months. )
If a large number of miners quit before the merger, the hash rate will be reduced, and the remaining miners will get higher profits. In other words, the fewer people who dig the mine, the higher the income everyone gets.
Beiko said: “We need some miners to dig all the way to the last block before the merger to ensure the security of the network. In fact, most miners have invested a lot of money to build infrastructure. Considering these fixed costs, they are motivated to mine to the last block. “
Everyone knows that Ethereum will turn to proof of rights and interests, but some people start to make preparations earlier than others.
One of the fastest responding mining pools is F2Pool, which is the second largest mining pool in Ethereum. An Ethereum 2.0 verifier pool has been established.
Coincidentally, F2Pool was also the first big mine pool to stand up for EIP-1559. They pointed out that although this proposal will lead to a reduction in block rewards, the price of ETH will increase with time.
JK, the head of F2, said that we have learned a costly lesson about the consequences of not taking the side of the core users and contributors in the community. In 2016, The DAO event caused a hard bifurcation of Ethereum. Key developers and core contributors have been on the side of the present Ethereum, helping it grow and develop until today. In contrast, the development speed of Ethereum classics is relatively slow. We don’t want to be left behind this time.
SparkPool, which controls a quarter of the computing power of Ethereum, openly opposes EIP-1559, calling it “redistribution of wealth” and “tyranny of the majority”. At the same time, SparkPool also strongly opposed the Eth 2.0 merger.
According to Beiko, ETH miners can create a fork of Ethereum without PoS certificate and become “Ethereum Classic 2”. SparkPool and other large mining pools will be left behind if they don’t want to upgrade with Ethereum network.
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