The Future of Ethereum: Understanding ETH 2.0 and GPU Mining Changes
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ETH 2.0 is on the horizon…
Ethereum stands as the second-largest cryptocurrency by market cap, following Bitcoin. An upgrade known as "the merge" is currently underway.
The Merge
The anticipated Ethereum merge has been developing for some time, and it feels imminent. This transition will shift Ethereum from a proof-of-work model to a complete proof-of-stake network.
> When ready, the Ethereum Mainnet will integrate with the Beacon Chain, functioning as its own shard utilizing proof-of-stake instead of proof-of-work.
What Does This Imply?
Initially, Ethereum was mineable, much like Bitcoin, where computers and specialized rigs could validate transactions and earn ETH rewards. Over time, however, the Ethereum community sought to move away from the mining-dependent proof-of-work consensus mechanism.
According to Ethereum’s website:
> This upgrade signifies the official transition to proof-of-stake consensus. It eliminates the necessity for energy-intensive mining, securing the network instead with staked Ether, a significant move toward achieving Ethereum’s vision of enhanced scalability, security, and sustainability.
Current Status
At the time of this writing, Ethereum is in the midst of merging Eth1 with Eth2, and the community has started to downplay the differences between these terms. More from Ethereum’s website:
> The term ‘Eth2’ is being phased out in preparation for The Merge.
> After merging ‘Eth1’ and ‘Eth2’ into a unified chain, there will no longer be two separate Ethereum networks; only Ethereum will exist.
To reduce confusion, the community has updated the terminology:
> ‘Eth1’ is now referred to as the ‘execution layer,’ responsible for transactions and execution.
> ‘Eth2’ is now termed the ‘consensus layer,’ which manages proof-of-stake consensus.
The key takeaway is that once the merge concludes, there will be a single form of Ethereum, simply called “Ethereum.” Its native proof-of-stake cryptocurrency will remain “Ether” or “ETH.”
When Will the Merge Occur?
The merge has experienced several “delays.” The Ethereum community prefers not to label it as such, but we are still awaiting a definitive timeline for its completion.
In early April 2022, Ethereum developer Tim Beiko confirmed that the merge would not occur in June 2022, as previously anticipated.
~Q3/Q4 2022
Ethereum's website is targeting a timeframe between Q3 and Q4 of 2022. It’s advisable to keep checking for the most up-to-date timing.
Is This Realistic?
Is the Q3/Q4 2022 timeline feasible? There have been previous tentative dates that Ethereum has not met. In my view, it remains a matter of wait and see regarding the merge. Although the completion is still pending, you can begin staking ETH at platforms like Coinbase. However, the exact timing for fully utilizing staked ETH and realizing rewards remains unclear.
Ethereum Mining
Once the merge is finalized, Ethereum will no longer be mineable. This means that all miners, including myself, will need to redirect their hashing power to other cryptocurrencies. There is significant investment in Ethereum mining, and both large and small miners will undoubtedly seek alternative coins post-merge.
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I Built an Ethereum Mining Rig in 2020 for Under $1,000
How to mine Ethereum. medium.com
Despite the upcoming merge, Ethereum continues to be one of the most profitable cryptocurrencies for GPU miners. Given that Ethereum remains the preferred coin for GPU mining, the landscape will shift significantly after the merge.
GPU Mining Post-Merge
What will GPU mining look like following the merge? This question is on the minds of miners and holders of other minable cryptocurrencies. The short answer is that the future of mining is uncertain, and it may take some time for miners to establish a definitive strategy.
One Possible Outcome:
GPU miners may begin experimenting with mining the next most lucrative coin on their list. This will depend on the graphics cards they have, but a general strategy might include mining coins like Ravencoin, Ethereum Classic, Flux, or any other coin that proves to be the most profitable for their equipment.
However, this strategy could lead to unpredictable consequences. Not all miners will converge on the same coin, and if one particular coin attracts a larger number of miners, it may quickly become less profitable. Additionally, the reaction of the network to a sudden influx of miners is unpredictable.
The post-merge GPU mining landscape will be a dynamic experiment as miners search for the best strategies, potentially leading to a cascading effect as they chase profitability in various cryptocurrencies for weeks, months, or even years after the merge.
My Mining Strategy
I have mined Ethereum, Ethereum Classic, and Ravencoin. For smaller miners like myself, it’s prudent to explore alternative cryptocurrencies ahead of the merge. Planning ahead is essential to minimize potential downtime for your GPUs. Beyond Ethereum, the most profitable options for my GPUs have been Ravencoin and Ethereum Classic. However, as more miners shift to other coins, profitability will fluctuate, especially as we approach and follow the merge.
Sebs FinTech created an informative video discussing GPU mining profitability after the merge. He emphasizes similar points and notes that coin prices will significantly influence GPU mining. Prices always factor into the decision of which coin to mine, but as long as a coin remains profitable for your setup, it may be worth mining rather than purchasing. Return on investment considerations also play a role. If your GPU or mining rig is already paid off, you might explore less profitable coins.
Numerous possibilities exist post-merge, many of which remain uncertain at this stage. If you’re a miner, check what other coins your mining pool supports, consider switching to a different pool for new options, and start researching viable cryptocurrencies for your specific GPUs. Websites like whattomine.com can provide valuable insights.
Conclusion
Ethereum is undergoing an upgrade, whether one approves or not. While the exact timing of the merge is still unknown, Ethereum is currently aiming for Q3 or Q4 2022. If you’re waiting for the merge, keep an eye on Ethereum’s website for the latest developments.
For GPU miners, Ethereum will be unmineable once the merge concludes. Therefore, it’s crucial to identify other cryptocurrencies to mine. For smaller miners, the profitability of your GPUs and hardware will largely dictate which coins are viable. For larger mining operations, a competitive transition period is expected as farms explore multiple coins and adapt to market changes.
> Thanks for reading! > I am not an investment or financial advisor. This is not financial advice. All opinions expressed are my own. If you want more content like this, sign up for my weekly email.