Thousands of people, engaged in trading in Ethereum, use an energy-intensive process to solve computational problems and earn ETH. The process called “mining” is similar to the one that is being used in cryptocurrency. ETH is the native currency of Ethereum, and miners operate millions of dollars to earn it.
Ethereum mining is set to undergo a major transformational change. Within the next year, we are going to see major changes in how Ethereum operators work and how new ETH is created. This change will bring the curtain down on Ethereum mining. What does it mean for Ethereum miners?
Since 2008, Bitcoin has been using a concept, that was actually borrowed from Cryptocurrency, to safely send and receive money. The concept is known as ‘proof of work’.
When the Ethereum blockchain was launched in 2015, it embraced the same concept. In this process, the computers agree on the transactions and the status of the database at any given time. This protocol protects the network from cyber-attacks and prevents funds to be spent multiple times.
Ethereum.org defines Proof-of-Work protocols as a process that allows the nodes of the Ethereum network to agree on the state of all information recorded on the Ethereum blockchain, and prevents certain kinds of economic attacks.
The process is energy-intensive, as it consumes lots of electricity. This is the reason why many environmental groups are vehement opponents of cryptocurrencies.
Ethereum’s core developers are working on the process to make the protocol more environment-friendly and less energy-intensive. The new process called proof of stake (PoS) will replace the existing consensus protocol, proof of work (PoW). Proof of stake (PoS) will not only consume less electricity but will also increase the volume of transactions. More transactions will be possible at less energy consumption.
This will be done through Ethereum 2.0. The new network will maintain security through people pledging their tokens. Bad or inept actors will not be able to resort to illegal practice as the new network can easily track them and take their deposits.
The current PoW chain is expected to be fully integrated with PoS chain before the end of the year. With this merger, Ethereum 2.0 will be borne, effectively putting an end to mining. Miners should try to break even before the birth of Ethereum 2.0.
Michael Carter, a cryptocurrency miner and host of YouTube channel BitsBeTrippin, has tried to calculate Ethereum mining’s profitability over the coming months taking into account different scenarios. He took into account ten factors to arrive at the conclusion that mining will see a massive dropoff.
High price and high volume, high price, and low volume scenarios are some of the scenarios he took into account to predict the profitability of Ethereum miners.
However, he himself is ready to switch to more profitable chain that PoS is likely to be. Big players can afford to wait and watch. They can hold to Ether expecting that price will go up in near future.
Blockchain-agnostic miners have two options to follow: Ethereum Classic and Ravencoin. Ethereum Classic owes its origin to Ethereum network while Ravencoin is the native asset of a network for transferring both digital and tangible assets.
Despite some recent gains, neither Ethereum Classic nor Ravencoin, is as popular as the Ethereum blockchain. Graphics processing units (GPUs) miners are already thinking about exit strategy. ASIC (application-specific integrated circuit) miners face an uncertain future. Some predict that ASIC will become useless.
A major overhaul with the Ethereum network is expected in July. It is also likely that miners will not be paid ETH transaction fees. Ethereum Improvement Proposal (EIP) 1559 will be used by “London Hard Fork”. This is expected to automate the amount of fees blockchain users pay.
Many consider EIP-1559 nothing but “wealth distribution” and “a tyranny of the majority.” Some miners are trying to prevent the merger, but there’s much they can do.
One option ETH miners are simply left with one option: they can create a fork of Ethereum that doesn’t turn to proof of stake and create “Ethereum Classic 2.”