How Will the Ethereum 2.0 Upgrade Affect ETH Miners?

The headlines circulating in crypto circles in recent months about the Ethereum network have mainly covered the high gas fees and slow speeds of the network. This lack of scalability on the network has led many DeFi developers to look for other alternatives such as Solana and Polygon. However, Ethereum is planning to launch an ETH 2.0 upgrade that will solve these issues.

The ETH 2.0 upgrade will affect DeFi developers who have launched their projects on Ethereum and affect Ethereum miners. This is because the ETH 2.0 will come with a proof-of-stake concept, meaning that Ethereum miners may become obsolete.

Transition to PoS Mechanism

Currently, Ethereum uses the same mechanism as Bitcoin to mine and distribute new tokens. In addition, the Proof of Work mechanism is energy intensive. The ETH 2.0 upgrade will step in and change all this by transforming how the Ethereum network operates. As such, Ethereum mining will no longer happen.

The Proof of Work framework is slowly losing its dominance in the crypto market because of its heavy reliance on electricity. This reliance has even created controversy over how Bitcoin mining is harmful to the environment. Ethereum developers want to shift to a proof of work (PoW) consensus that is less energy intensive and also offers more scalability.

Ethereum 2.0 will merge its current PoW chain into the PoS chain to jumpstart the upgrade. The shift is expected to happen before the end of the year, according to Ethereum’s developers. After that, mining on the Ethereum network as we know it will be halted, and hence miners are prone to face hard times ahead.

How will this Affect Miners?

One of Ethereum’s core developers, Tim Beiko, has urged miners to take a break from mining because of the launch of the ETH 2.0 upgrade. According to him, miners should ‘plan conservatively’ to ensure they are not left with unused resources once the Ethereum 2.0 upgrade is rolled out.

There are several ways that Ethereum miners can plan for ETH 2.0. The first is that they can choose to go long and continue mining ETH under the current PoW chain before it becomes obsolete. By doing this, miners can choose to hold the Ethereum mined for the long term and wait for a price hike, under which they will potentially earn profits.

The other option miners will have is to transition to other networks that still rely on the Proof of Work chain. Although the other options for miners are not as popular as Ethereum, miners will have their next base of operations.

Alternative Mining Opportunities

Currently, the best alternatives for miners are Ravencoin and Ethereum Classic. Even though these networks are not as widely used as the Ethereum blockchain, their native tokens can be mined using rigs that use graphics processing units (GPUs). This means that GPU miners can choose the two as an exit strategy.

The Ethereum network is also made of application-specific integrated circuit (ASIC) miners, who are more powerful. However, these miners will be at the greatest disadvantage once the ETH 2.0 chain is rolled out because they will not have anywhere to go. Thus, these miners will be the most affected by the transition.

However, not all miners will wait until the merge happens before jumping ship. Some miners may leave before the merge to save some costs, and if this happens, the hashrate will drop significantly. This means that miners who will be left on the network will be more profitable. There will be few people mining Ethereum, hence making the process much easier.

Beiko had initially stated that miners would be needed on the network until the merger. “Realistically, though, most miners have already paid for their infrastructure so have an incentive to mine up to the last block given that the8ir fixed cost is spent,” Beiko said.

The best course of action for miners is to remain proactive not to be caught unawares by the upgrade. A gradual halt in operation will also help them lower the security risk and become profitable until the end.

F2Pool, the second-largest mining pool on Ethereum, has already developed an ETH2.0 validator pool to ensure they are not left behind after the switch. Such measures are what will keep miners going even after the upgrade.

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