The crypto community is celebrating the coming of Ethereum 2.0, but there are also concerns for miners. Since Ethereum has switched to a proof-of-stake model, mining Ether will no longer be necessary. Because of this, mining machines will become obsolete, leaving miners with fewer options.
The central theses
- Ethereum Merge is the transition from proof-of-work consensus mechanisms to a proof-of-stake model.
- The move to proof-of-work would affect the $19 billion Ethereum mining industry.
- There are two exits for miners; By mining other altcoins similar to Ethereum Classic or mining the proposed Ethereum fork.
Where will the Ethereum miners go from here?
The Ethereum mining industry has thrived and prospered, as has the Ethereum network. According to an estimate by crypto research group Messari, it is worth $19 billion.
After moving to a Proof-of-Stake model, the mining machinery is no longer required as Ethereum 2.0 relies solely on Ether staking to validate transactions and secure the chain. Miners have a few options. They can either start mining altcoins using modified mining rigs, or they can sell mining rigs and use the money to buy Ether, thus becoming validators of the Ethereum blockchain.
Ethereum Classic could be a savior
Currently, there are few blockchains running on Proof-of-Work consensus that are GPU-compatible, which can offer Ethereum miners the luxury of a GPU-compatible blockchain. The chief of them that comes close is Ethereum Classic (ETC), which was founded in 2016 after the attack on the Ethereum network. In the last few weeks, Ethereum Classic price has increased due to mining demand.
However, there are some disadvantages. If Ethereum miners turn to ETC or GPU compatible altcoins, it will result in a drop in profitability for current miners. For better orientation: An influx of miners into a network leads to an increase in the hash rate, which determines the computing power of a network. It will therefore lead to an increase in mining difficulty, indicating the difficulty of creating a block, and lower earnings for miners.
Proposed Ethereum Hard Fork could be an option
In July 2022, Chinese Ethereum miner Chandler Guo launched a campaign against the merger, saying it would result in job losses for Ethereum miners. Guo and other developers proposed a hard fork that would keep the proof-of-work mining model. A hard fork is a radical upgrade of a blockchain that permanently changes its functionality.
Guo and the group dubbed the cryptocurrency EthereumPoW (ETHW). He tweeted in July, “Ethpow is coming soon.” It seems the hard fork will happen after the Ethereum merge Some large Ethereum mining pools are expected to support EthereumPoW (ETHW) and it is possible that some miners will opt for the proposed Ethereum fork. Meanwhile, Coinbase has confirmed that it would consider listing fork Ethereum.
What is Ethereum 2.0?
The merge is Ethereum’s transition from the Proof-of-Work (PoW) consensus model to the Proof-of-Stake (PoS) model on the Beacon Chain. Once complete, it will lead to the birth of Ethereum 2.0. It is the new mainnet in which all activities carried out before the merger will continue.
The move to the network’s proof-of-stake consensus will result in miners validating transactions rather than solving math problems. This process has several advantages including lower energy intensity, improved network security, more scaling possibilities, etc.
What is Ethereum mining?
Ethereum mining is the process of creating and generating new Ether (ETH) coins and verifying transaction blocks. Once this is done, the blocks are added to the immutable blockchain ledger. The process is no longer needed as the Ethereum blockchain network is now based on a Proof-of-Stake model that does not require Ether to be mined.
What will become of mining?
Option one: Miners would need another proof-of-work cryptocurrency like Ethereum Classic compatible with Graphics Processing Unit (GPU) to work with it.
Option two: Miners operate the proposed fork network tagged ETHPoW. It is up to the miners to figure out which option suits them perfectly.
The final result
There are some positive signs that mining will continue to be popular regardless of the success of Ethereum 2.0. Even though Ethereum mining may be over, there are ways to continue mining other cryptocurrencies by modifying equipment. However, we have yet to see the long-term results.