The Ethereum blockchain is ready to transition from its current proof-of-work (PoW), mining consensus, to proof-of-stake. After the successful integration of the Goerli testnet to the Beacon Chain, the Merge date has been set for September 15-16.
Miners are currently able to create new Ether ( Ethereum) by offering huge amounts of computing power. To validate blocks and earn staking rewards, validators (network participants) will need to pledge large amounts pre-existing ETH.
The three-phase transition process began Dec. 1, 2020 with the launch the Beacon Chain. The PoS transition began in Phase 0 when validators started staking ETH for their first time. Phase 0 did not have any impact on the Ethereum mainnet.
The terminal total difficulty has been set to 58750000000000000000000.
This means the ethereum PoW network now has a (roughly) fixed number of hashes left to mine.https://t.co/3um744WkxZ predicts the merge will happen around Sep 15, though the exact date depends on hashrate. pic.twitter.com/9YnloTWSi1
— vitalik.eth (@VitalikButerin)
August 12, 2022
Phase 1, which was the integration of Beacon Chain and the Ethereum mainnet, was originally scheduled for mid-2021. However, due to delays and unfinished work from the developer, it was moved to early 2022. With the Merge, Phase 1 will be completed in the third quarter 2022. This phase would remove PoW-based miners and render many PoW-based projects obsolete.
Phase 2 and the final phase would see the integration Ethereum WebAssembly (eWASM) and other key scalability features such as sharding. Vitalik Buterin, co-founder, believes that this would allow Ethereum to achieve processing speeds comparable with centralized payment processors.
There has been much discussion about the fate of the PoW-based chain following the transition to PoS in anticipation of the Merge. Although many central exchanges support the Merge, they have indicated that if PoW-based chain gaintraction from miners then exchanges will support the forked chain.
Consider the possibility of a hard fork that is successful
Chandler Guo, a prominent Bitcoin ( BTC] miner, was one of the first to present a case for PoW Ethereum chain after Merge. Guo tweeted a picture of Chinese miners saying that PoWETH is on the horizon.
ethpow will coming soon pic.twitter.com/v9eAbWO2BZ
— Chandler Guo (@ChandlerGuo)
July 27, 2022
Buterin denounced all those who support this forking, saying that it would only be a ploy to make easy money for miners without any benefit to humanity. Most importantly, it appears that most of the Decentralized Finance (DeFi) ecosystem does not intend to support Ethereum PoW. This is enough reason for Ethereum advocates take a conservative approach towards the Merge.
AscendEX CEO Shane Molidor believes there is a chance for forks. PoW miners have already expressed interest in AscendEX.
Some Ethereum miners might believe that it is in their best interests to fork the PoS Ethereum blockchain back to PoW to continue using their expensive mining hardware. If this happened, ETH holders could be given ‘PoW ETH” along with their original ETH holdings.
He said that even if there is no fork, it is possible that other PoW chains like “Ethereum Classic” and GPU-hungry apps such as Render Network will gain hash power thanks to ex-PoW Ethereum miners.
Swell Network CEO Daniel Dizon believes that there is very little chance of a successful fork. Cointelegraph was informed by Dizon that even miners can fork the PoW Chain and keep it alive there is little chance they will be as profitable as before the Merge.
“Ultimately, Ethereum’s value as a network extends beyond its consensus mechanism. It includes highly defendable characteristics such as its user base and developer activity, ecosystem infrastructure, capital flow, capital flow, and other.
He said that full PoS Ethereum has always had the support of the majority of the community, and society in general, due to improved environmental, social, and corporate governance outcomes after Merge. He also stated that major DeFi protocols would simply not recognize the “Ethereum PoW” variant of post-Merge Ethereum. This is another sticking point for the fork.
According to Messari, the Ethereum mining industry is valued at $19 billion. According to the report, mining alternative PoW coins is not economically viable for most Ethereum miners. The market capitalization for GPU-mineable coins is $4.1 billion (excluding ETH), or approximately 2% of ETH’s market cap. ETH accounts for 97% of GPU-mineable coins’ total daily miner revenues.
Staking is becoming a popular option for large mining companies.
Mining pools are not as affected by the transition to staking than individual miners. This is because they never had their own computing power and have never invested in outdated mining equipment. These businesses have the human capital to manage the pooling of resources and find new customers. They also have the ability to satisfy thousands of existing clients.
Ethermine, the largest Ether mining pool, announced in April that it had released a beta version Ethermine Staking. Ethermine and F2Pool share nearly half of the current Ether mining power (or computer power)
F2Pool (the second-largest Ether mining pool), announced that the PoW mining era was ending in the second week. It is not important whether the firm supports the Ethereum fork. It will be up to the miners community to decide.
Dizon believes that there will be a significant impact on mining pools. Many of them may turn to PoW chains but the majority will stay focused on the staking market. “We do observe that many mining pools are shifting their operations to Ethereum staking. This is expected to see exponential growth due to the Merge.”
Cointelegraph spoke with Will Szamosszegi who is the CEO and founder at Sazmining Bitcoin mining platform. Many Ethereum enthusiasts believe that the cost of an Ethereum fork outweighs the benefits.
“Etherminers will have to deal with the fact that their overhead costs may outweigh the potential revenue they can earn mining alternative Ethereum coins after the Merge.” Instead, they could invest in Web3 projects that their hardware and mining algorithms can support.
Ethereum Classic vs. forked Ethereum PoW
Antpool, a mining pool that is affiliated with Bitmain, announced it had invested $10,000,000 in the development of apps and software for Ethereum Classic. Moving ETH’s valuation to a PoS model, which will alter how ETH gains value from mining and staking, will allow investors to make passive income like interest in a fiat savings account.
Kent Halliburton is the chief operating officer at Sazmining. He told Cointelegraph that “Ethereum miners currently are split on what to do following the Merge. Some will continue to mine Ethereum Classic. This will continue to use a proof of work consensus mechanism after Ethereum’s Merge. Others are putting their resources into higher-level crypto projects.
Similar: ConsenSys exec says that ETH’s value will be affected by changes in economic design.
PoW miners have begun to search for alternative solutions with just under a month before the official Merge. Many people believe that there are very little chance of a forked chain, as there is no guarantee over its value after a successful fork. Others expect a surge in Ethereum Classic mining activity. The transition is unlikely to have any impact on Ether mining pools, since many of them are now focusing their attention on expanding the staking ecosystem.