Ethereum is finally preparing to launch its Ethereum 2.0 upgrade later this year, ending a long series of delays, the network will begin to evolve towards a proof of participation model.
As a result, the network will abandon the proof of work consensus algorithm, leaving Ether miners ( ETH ) very few options. As their equipment becomes obsolete, they will be forced to start mining altcoins or re-certifying themselves as ETH actors . So what is the current state of ETH operations , and what exactly will happen to the industry as a result of the upcoming transition?
GPU vs ASIC
The Ethereum consensus is currently based on the PoW system, which is similar to that of Bitcoin ( BTC ). Therefore, the extraction process is almost identical for Ethereum , as miners use their compute resources to earn rewards for each block they manage to complete.
However, there is still a major difference between these processes. As Bitcoin mining has become almost entirely dependent on ASICs - large, noisy machines designed specifically for cryptocurrency mining that are mostly grouped in regions where electricity is cheap - the PoW hashing algorithm of Ethereum , called Ethash, was designed to favor GPUs issued by global chip manufacturers like Nvidia and AMD. GPUs are much cheaper and more accessible than ASICs, as Thomas Heller, the global trade director of the F2Pool cryptocurrency mining pool, explained in a conversation:
“Because ASICs are very specialized machines, when a new generation comes out, it's often a huge technological leap. Thus, their hash rate is much higher and energy efficiency is better than the previous generation. This means that these manufacturers have spent a lot of money to research and develop it. Their machines are often quite expensive, while GPUs are much more affordable. "
Heller added that those who use GPU miners “ have a lot more flexibility in what you can exploit.” For example, an Nvidia GeForce GTX 1080 Ti card - a popular choice - can handle more than 15 different currencies, while ASIC units generally only support one currency.
However, the Ethereum network is not entirely safe from ASIC miners - at least in its current state. In April 2018, Bitmain released the Antminer E3, an ASIC produced specifically for Ethereum's mining . Although it is a largely successful model that has a hashing rate of 180 megahash per second and a power consumption of 800 watts, it has received mixed reactions from the Ethereum community . A substantial portion of GPU platform owners appear to have suffered loss of profits once the ASICs were plugged in, while some were even forced to switch to different networks.
“It is in the white paper that ETH must be resistant to ASIC. I hope the white paper represents something "was one of the main comments in the ar / EtherMining thread on the Antminer E3 at the time it was announced. "Only USD 800 for 180mh" another Reddit user have argued. “Hardfork or die eth .”
Some users of Ethereum have then suggested that Bitmain of extraction device could lead to greater centralization and increase the chances of an attack by 51%. Soon, a group of developers proposed "proof of programmatic work" or ProgPoW - an extension of the current Ethereum algorithm , Ethash, designed to make GPUs more competitive, thereby promoting decentralization.
According to a March article co-written by Kristy-Leigh Minehan, co-creator of ProgPoW, around 40% of Ethereum's hash rate is generated by Bitmain ASICs. Alejandro De La Torre, vice president of Poolin - the sixth largest ETH pool - confirmed that "GPU operation is still dominant" for the Ethereum network , adding:
“Right now the profit from ETH mining is not high, and the management threshold and cost of GPU devices are higher than those of Asic devices. Compared to Asic devices, however, GPU devices are more flexible than in, you can switch to other rooms with different slots. “
ProgPoW has not yet been integrated into Ethereum , and it is unclear when this will eventually happen - in March, major Ethereum developers wondered if ProgPoW would actually benefit the network for nearly two hours and did not managed to reach consensus. A representative of Bitmain said that the mining giant does not plan to extend the life of Antminer E3 to operate after October 2020: "To our knowledge, mining will end approximately in October or some time after .
A secure but uncertain future
Indeed, Ethereum will abandon mining in the future. Scheduled for launch later in 2020, Ethereum 2.0 is a major network upgrade on the blockchain that is designed to move its current PoW consensus algorithm to PoS where miners are virtual and called "block validators".
More precisely, they are randomly selected taking into account the wealth of users in the network or their "stake". In other words, the more PoS validators choose to bet coins, the more coins they accumulate as rewards.
According to co-founder of Ethereum , Vitalik Buterin, the network will become more secure and more expensive to address than Bitcoin as a result of the transition, although the die beats the best consensus algorithm existed for years in the cryptographic community . However, it is still unknown when Ethereum 2.0 will launch , as many bugs and management issues would delay the process.
Another supposed advantage of a PoS system is that it is much more energy efficient than PoW block chains. According to Digiconomist data, the total annualized cryptocurrency footprint is 59.31 terawatts per hour, which is comparable to the energy consumption of the whole country of Greece. However, Bitcoin may not be as bad for the environment as it seems thanks to a July 2019 report that estimates that 74% of Bitcoin's mining is done using digital sources. 'renewable energy.
What will happen to the real Ethereum miners ? According to the documentation for the Casper upgrade that is part of the Ethereum 2.0 roadmap , the network will initially support a hybrid model involving both PoW and PoS, thus leaving some space for block validators and GPU / ASIC miners. "There will certainly be a transition period where both networks work," said Jack O'Holleran, CEO of Skale Network - an Ethereum- based blockchain platform , noting that this process will take some time:
"Most ETH1s ??will certainly take time to transition to ETH2 - potentially years, not months. The good news about the slowness of this transition is that the DApp and DeFi platforms will be able to move as they please on the basis of real evidence of viability, security and adoption. This is a positive net for the Ethereum ecosystem . "
Mine or not mine?
Once Ethereum is fully executed on PoS rails, miners will have two options. One is to sell the equipment and use that money to accumulate more ETH and start staking, while the other option, which is available exclusively for GPU miners, is simply to switch to other Ethash networks and exploit altcoins. Nick Foster, a representative from the US-based Kaboomracks dealer, said that most ETH miners will choose the latter option:
"I would say that most miners are not really in the mining industry to get ETH or a specific piece. Yes, a number are mine, but I object to the idea that a large population of altcoin miners hold their coins indefinitely. "
Foster went on to describe how he went about mining Ravencoin (RVN), Ethash's peer-to-peer blockchain asset, with his 3 GB GPU unit once it was no longer profitable. for mine ETH : “It's mining crow, and I instantly sell to BTC for stability and sell to USD to pay for my power right after. I would say that a lot of people use a strategy like this. "
As Foster summed it up, he expects ETH miners to leave the network, while new players - those who have not invested in electrical infrastructure or platforms - will stake out the ETH . He described the following scenario:
"I can not imagine how silly I would be if I found a five year lease with power of $ 0.04, and I was mining ETH and I decided to sell everything and keep paying my lease to be able to bet ETH as a replacement. ”
Marc Fresa, the founder of the mining firmware company Asic.to, shared this feeling during a conversation: “If you are invested in the mining sector, you don't want to stake out since you have the buildout.”
Ethereum Classic ( ETC ), a more conservative version of the blockchain that has no plan linked to PoS, is one of the main altcoins likely to benefit from the departure of Ethereum PoW miners . Since it also runs on the Ethash algorithm, its hash rate could peak significantly due to the potential migration of miners caused by the launch of Ethereum 2.0.
Larger mining pools for ETH are left with similar options. Asked about his company's post-PoW plans for Ethereum , Heller said that F2Pool had launched a sister company called issue.fish earlier in 2018, after the announcement of the Ethereum PoS upgrade. Because the change has been repeatedly delayed, stake.fish has started to offer staking services for other PoS and PoS delegate projects like Tezos ( XTZ ), Cosmos ( ATOM ) and Cardano ( ADA ). As for Poolin, it “may temporarily give up supporting the mining ofETH ”, following the transition to PoS, said De La Torre.
Will the rest of the network notice it?
Regarding the Ethereum ecosystem as a whole, experts reassure that the transition to PoS will be simple, and network participants - occasional users and decentralized applications built on Ethereum - will hardly notice the change. Viktor Bunin, a protocol specialist at blockchain infrastructure company and a member of the Libra Association, Bison Trails, echoed this sentiment in a conversation, adding:
“The main Ethereum network we know today should be added as a fragment on ETH2 in phase 1.5. All that will change is the consensus mechanism, so DApps and users should not notice any changes. "
Bunin went on to say that: “Any fear that the network will split, with some people staying on the PoW chain or that DApps will be disrupted, is exaggerated.” In addition, O'Holleran said that " ETH 2 is a new network that will operate on a new token and a new inflation model", explaining:
“The connection is that everything will be composable and compatible with the Ethereum ecosystem and that the tokens from the first network can be burned and replaced by tokens from the second network. This means that DApps and users will not be directly affected until they manually switch networks. The indirect and immediate impact will be linked to how the supply and perceived value affect the price of tokens on the two networks. "
For now, it is clear that there should be no shortage of Ethereum block validators . According to a recent report from cryptocurrency analyst Arcane Research, the number of Ethereum wallet addresses that include or exceed 32 ETH - the minimum amount required for staking - is approaching 120,000.
