What to do when ETHEREUM Miners are not welcome anymore?

What to do when ETHEREUM Miners are not welcome anymore?

What to do when ETHEREUM Miners are not welcome anymore?

THE LONDON HARD FORK and EIP 1559

On August 5th 2021 12:33:42 PM +UTC with block 12965000 an important history was written the London Hard Fork and along with that EIP 1559 went live. Now the Gas fee(mining Fee) on ETH mining will no longer be given to the miners instead it will be burned into nothingness. A move which directly hits on the revenue of the Ethereum miners, 


We have covered in detail about the EIP 1559 which was part of the London Hard Fork here

Read More: Sesterce Blog- Ethereum's Gas Fee Problem and EIP 1559


The miners who are securing and supporting  the ETH network with their PoW are now being alienated and will eventually be phased out with the implementation of Proof of Stake(PoS)

Vitalik Buterin says

.Ethereum has aggressively been working to move away from the energy-intensive proof-of-work process to the proof-of-stake system. The proof-of-stake transition will end Ethereum’s mining process once activated. This means that the Ethereum mining industry will become irrelevant once the protocol migrates to a proof-of-stake model.

Staking and Proof of Staking is now the a buzz word which is now being adopted rapidly due the environmental concerns due to cryptomining.

Read More: Understanding the Business of Staking.

While all these things unfold an impending question arises 


What next once ETH mining results in zero revenue?

Or What would happen to the Mining Market once the second most popular coin stops supporting the mining? Once Ethereum merges with the Ethereum 2.0 Beacon Chain, mining on the network will become obsolete. 

For miners, there will be 

  • No block subsidies, 
  • No transaction fees and 
  • certainly No miner extractable value (MEV). 

Revenue from transaction fees and MEV will instead be awarded to users who contribute to network security by staking their coin holdings in increments of 32 ETH.


Is this the END of the Road for ETH Mining Rigs ?

We asked the same question within our mining community to understand their opinion


The general opinion within the community showed that this is not the end of the road; these mining rigs have a lot of coins yet to be mined. 

Youssef El Manssouri Founder & CEO of Sesterce on Twitter suggested that the miners should do a discovery for new projects or they can simply transition to ETH Classic (ETC)


The Sesterce community on Twitter shared their opinion that this is not the end of the road, a lot many coins yet to mine but just not ethereum.

Let's explore what options the ETH miners have now.

Becoming a Validator Node: Staking Ethereum

Staking is the act of depositing 32 ETH to activate validator software. As a validator you’ll be responsible for storing data, processing transactions, and adding new blocks to the blockchain. This will keep Ethereum secure for everyone and earn you new ETH in the process. This process, known as proof-of-stake, is being introduced by the Beacon Chain.

Once ETH 2.0 gets live revenue from transaction fees, MEV will instead be awarded to users who contribute to network security by staking their coin holdings in increments of 32 ETH. Mining operators will always have an option to become a Validator Node Operator and  consistently be awarded in ETH.


Pro & Cons of Staking:

Pros

  • Zero or minimal operating cost : Validators don’t need energy-intensive computers in order to participate in a proof-of-stake system – just a laptop or smartphone. This will make Ethereum better for the environment.
  • It is very easy to stake: With easier hardware requirements and the opportunity to pool if you don’t have 32 ETH, more people will be able to join the network. This will make Ethereum more decentralized and secure by decreasing the attack surface area.

Cons

  • Limited revenue : For miners who are used to revenues from PoW might see the staking revenue meagre in comparison. Currently staking rewards are approximately between 6% to 7%(APR) for ETH deposit of 32 ETH.  Such a low yield might not be a convincing reason for staking given that a few mining operators may not even have 32 ETH and BTC is considered a better store of wealth.
  • Steep Penalty: Although you can earn rewards for doing work that benefits the network, you can lose ETH for malicious actions, going offline, and failing to validate.
  • You can stake in multiples of 32 ETH which means if you don’t have 32ETH you might liquidate your other assets could be Bitcoin or other altcoins. Since BTC is considered a better store of value becoming a validator might be a less profitable investment


Mining Ethereum Classic

One of the most popular and obvious choice open for miners is to move to the Original Ethereum the Ethereum Classic(ETC), ETH and ETC are currently powered by Ethash hashing algorithm of which ETC will not move to PoS and continue using Proof of Work in their network. 

Ethereum Classic is an open-source, decentralized, blockchain-based distributed cryptocurrency platform that runs smart contracts. Ethereum Classic was formed—as a result of a hack of the network—in 2016. The original Ethereum blockchain was split in two with Ethereum Classic being the original and Ethereum being the newer blockchain

Pros & Cons of mining ETC:

Pros

  • Minimal transition efforts: Since ETH Classic & ETH work on Ethash which is a Proof of Work hashing algorithm created specifically for and by Ethereum (ETH). Transition of mining operators from ETH to ETC classic will not require any hardware upgrade or additional investment.
  • In comparison to other altcoins ETC is well recognised and adopted. ETC has 128.88 million coins in circulation with a market capitalization of $8.08 billion. ETC trades at $62.29, while ETH trades for more than $3,232 per coin as of Aug 13, 2021

Cons

  • The future of Ethereum Classic looks less bright than Ethereum since Ethereum is considered the more legitimate of the two networks, especially with the security concerns of Ethereum Classic. Investors have lost confidence in ETC over the years due to hacks into the system, and until ETC can redevelop its code and software to prevent future hacks.
  • Since Crypto world is slowly coming under regulation, uncertainty remains surrounding the regulatory landscape for Ethereum Classic as well as other, less popular blockchain networks.

New Discovery : ALTCOINS

Ethereum was launched about six years ago on 30 July 2015 with launch price next to nothing, A crazy revenue for those who started mining ETH early. Now the miners have a chance to discover new and promising projects. 

We will be witnessing a buzz of new network discovery by the miners and adopters. Certainly an exciting opportunity for altcoins to gain adoption.


Pros & Cons of mining new altcoins:

Pros

  • Low mining difficulty: Those who start early will always have first mover advantage and they can mine a large number of coins in process as the network will have lower difficulty and lesser energy intensive
  • Mine multiple coins: with new projects miners will be sailing in uncharted waters it will be prudent to mine multiple coins from different projects to increase their chance of finding hidden gems.

Cons

  • How would you know if you are mining shitcoin?: We have observed that even the most promising projects at times turn into shit due N number of reasons. The biggest challenges for miners will be finding those new gems.
  • The Opportunity Cost: Since BTC & ETH are the top coins and their price appreciation is expected to grow rapidly. Hodling ETH or BTC might give you better earnings, which means that you might be losing out on a lot of gains while looking for hidden gems or Ethereum Classic in that matter.


Conclusion

Mining ETH has been the most lucrative coin for mining operators for a long time. Even without the Gas Fee the revenue from mining ETH is one of the highest in the industry.
Proof of Stake will be live next year but before that ETH will continue breaking new all time highs some expecting it to reach $7000 by the end of 2021. Till that time mining operators can benefit a lot from mining ETH and they should make the most of it. Meanwhile keep a good looking for your crypto Gem.