Ethereum is moving towards a proof-of-stake consensus; this doesn’t bud well for the future of ETH miners. Will these middlemen survive the pendulum swing?
The Ethereum blockchain’s reliance on a proof-of-work consensus has provided the enabling environment for ETH miners to thrive.
And it is such a lucrative setup as they invest in expensive ETH mining equipment solely for this task despite the high energy costs.
This year, Ethereum is putting its destiny into the ‘wallets’ of stakers as the blockchain moves away from the outdated PoW algorithm to the contemporary PoS. This upgrade will render ETH mining obsolete.
The question on everyone’s mind is: what happens to the Ethereum miners?
Ethereum miners were useful in a proof of work consensus, but the transition to a PoS arrangement means they’re going out of business.
Ethereum core devs have restated that ETH miners have outlived their usefulness, and they must have broken even before the migration to ETH 2.0 is complete.
Considering the role played by ETH miners in the operations of the decentralized blockchain, many believe they’re being treated unfairly. Yet, the PoW consensus isn’t sustainable – its energy expenditure is a bad rap.
As Ethereum winds down on its use of the PoW algorithm, ETH miners have a few options: join up the PoS consensus as stakers or move towards Ethereum Classic mining, a hard fork of the Ethereum blockchain, which is still dependent on the PoW arrangement.
A few ETH miners are planning to hold on to their ETH, pending when the price increases before selling off the cryptocurrency. Unsurprisingly, this isn’t a route many ETH miners are willing to take unless they have other cash inflows to manage their expenses during the waiting period. And it’s going to be a long wait if a massive increase in ETH price is desired.
The Ethereum network has started upturning the PoW status quo through a proposal – EIP 1559 – that has been voted on, which will become active in July.
Following this proposal, ETH miners will no longer luxuriate in transaction fees as the newly minted ETH is deemed sufficient for their input.
Among the ETH mining community, this is a turning point for them. Many are totally against the proposal as it reduces the miners’ take-home. Others have threatened to exit the scene once it goes into effect.
As ETH mining plummets following the PoW consensus eventual switch off, miners can either jump ship or join the bandwagon – there’s no middle ground.