The upcoming Ethereum (ETH) fork has prompted much excitement in the crypto world. However, with all the hype, one might be tempted to overlook those who contributed mightily to Ethereum’s success. These people are the Ethereum miners. According to a blog post by the Ethereum Foundation, the update will be finished between September 10 and September 20. A recent JP Morgan research paper mentions that as Ethereum flips the switch to PoS, all Ethereum miners will be out of work. They may need to find new ways to make money using cryptocurrency expertise. What happens to them next might significantly impact the future of Ethereum and Ethereum Classic.
- Miners will be obsolete once Ethereum has transitioned from proof of work to proof of stake.
- These miners will become validators on the new Ethereum blockchain in the best-case scenario.
- However, these miners have alternative options, which significantly affect what happens next with Ethereum.
What is mining, and who are Ethereum miners?
Mining, pioneered by Bitcoin, is the process of validating transactions and racing to solve complex arithmetic problems in exchange for the ability to record transactions on the blockchain. Winning miners earn a specific quantity of freshly minted coins in exchange for devoting time and resources. In a proof of stake system, a node is chosen to add the most current batch of transactions to the blockchain and collect rewards in exchange.
Ethereum, like Bitcoin, currently creates and distributes new money through energy-intensive mining. Thousands of individuals worldwide, known as miners, use millions of dollars in hardware to solve computational tasks and earn ETH, the network’s native coin.
As we all know, the Ethereum network has been using Proof-of-Work (PoW) for its mining process for quite some time. The present version of Ethereum has a proof-of-work consensus method that necessitates mining, which is accomplished using mining rigs, which are effectively linked graphics processing units. Ethereum miners utilize these mining rigs to generate new Ethereum blocks for the network.
However, Ethereum will switch to Proof-of-Stake (PoS) as we approach the merge. The transition might seem daunting, mainly because it involves key- miners. Miners will have three options:
- They can give up mining.
- They may sell their mining machines and join the new proof-of-stake Ethereum network as validators.
- They can shift all mining activities to Ethereum Classic, which will continue to be a proof-of-work blockchain.
- They have the option of modifying their mining rigs to mine relatively obscure coins that are pure proof of work.
According to JP Morgan, Ether (ETH) mining is popular because of its profitability, and a chance to mine other cryptocurrencies might result in a loss of earnings shortly. Furthermore, the rapid migration of significant mining pools to a rival coin might pressure margins for incumbents, according to the paper. Moreover, beyond Ethereum Classic, ether miners utilizing ASIC (application-specific integrated circuits) equipment have limited options.
As per the paper, Ethereum Classic (ETC) miners may benefit the most from the changeover. This is because there will most likely be a flood of used mining rigs accessible from ETH miners who have elected to become validators on Ethereum 2.0.
There are indications that the switch to Ethereum Classic is already underway, with a substantial boost in hash rate since mid-July, according to the bank. According to JPMorgan, some investors see Ethereum Classic as a “hedge against any potential interruptions in the Ethereum network during the change from PoW to PoS.”
The Ethereum Merge fuses the current execution layer (the Mainnet) with the new proof-of-stake consensus layer, the Beacon Chain. Instead of energy-intensive mining, the new network protects itself using staked ETH. It attempts to bring Ethereum’s concept of a scalable, secure, and long-term blockchain solution to fruition.