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“Mining is the art of exploiting mineral deposits at a profit. An unprofitable mine is fit only for the sepulcher of a dead mule.”
So wrote mining engineer, T.A. Rickard, at the beginning of the last century. He wasn’t talking about blockchains, but a blockchain so unprofitable that all the miners have deserted it is just as sad a sight.
And it’s to avoid such a scenario that Ethereum, the world’s largest blockchain platform, with thousands of tokens and dapps running on it, has embarked on implementing a contentious update called ProgPow.
The upgrade would minimize the advantage enjoyed by so-called ASICs—chips optimized for faster mining and employed by large mining farms—and tilt the balance in favor of GPU miners. The idea is that they will find it profitable to continue mining while the blockchain evolves. But ProPoW has become a political hot potato, tossed around among Ethereum developers and the wider community.
Miners are a large part of that community but—to date—haven’t had much of a voice in the hullabaloo that’s surrounded ProgPoW since August 2018, when it was first proposed. They were asked to vote on the proposal and came out overwhelmingly in favor of it.
Yet, the promised update is being audited and it’s uncertain whether, in the end, it will be introduced.
Decrypt chatted with a mining expert, and a rig manufacturer, to find out how ProgPoW will impact the mining landscape, how miners can optimize for the update and what they think of future plans for the blockchain.
Today, Ethereum is one of the most popular coins to mine, according to BuriedOne, the name of a pseudo-anonymous miner and crypto-mining educator from the Netherlands. Ethereum, he says, has about 90 per cent of all GPU miners mining blocks on its network.
BuriedOne has designed and built more than 50 models of mining rig; he’s sold 10,000 rigs in the past two years and has been teaching GPU mining since 2016. He has strong links within both the mining farms and the crypto community.
He told us, via email, that the majority of miners only care about the profit from Ethereum mining, they have no loyalty to the blockchain itself, and this is a commonly held view.
The Ethereum blockchain currently achieves consensus through a system called proof-of-work (PoW), whereby miners validate the transactions, using their computing power. Buried One believes that, as soon as Ethereum introduces its new method of consensus known as proof-of-stake (PoS)—which will eventually dispose with mining altogether—the majority of miners will desert the blockchain and look for profit elsewhere.
“Nearly all the 96 per cent of miners that just voted for ProgPoW did so purely for profit,” says BuriedOne. “Despite there being a strong core of enthusiasts that mine to contribute, learn and enjoy some reward, they are hugely outnumbered by professional operations and speculators.”
An imbalanced ecosystem
BuriedOne believes that this is a situation that could have been prevented if interests in Ethereum had been more equitably distributed.
“I feel really sorry for [Ehereum cofounder] Vitalik Buterin and for Ethereum. It is a great concept and was ground-breaking, but it was abused too much. He didn’t expect people to be greedy, and to mine and sell coins as soon as they’d earned them, and then the ICO completely warped the distribution.”
The ICO model, says BuriedOne, meant that the equivalent of millions of dollars in Ether has gone to a few powerful individuals , some of who now own as much as 10 per cent each of Ethereum. “This makes Proof of Stake imbalanced because they will have the power and they will grow their wallet even faster than before—it’s the next gold rush, where Ethereum holders also ‘hold the cards.’”
Miners hold relatively few of these cards by comparison, so when Proof of Stake is introduced, BuriedOne believes that Ethereum will lose the vast majority of the miners that voted for ProgPoW—there simply won’t be enough profit to attract them. He suspects that only a handful of “loyal” GPU miners will remain to mine the Proof of Work mainchain, which will indefinitely run alongside the “beacon chain,” the core of the new network.
There’s also a real danger that some miners will carry on mining the old chain, and a new coin will emerge, much like the Ethereum Classic currency did when the Ethereum blockchain saw a contentious “hard fork” in 2016.
“If Ethereum moves to Proof of Stake, then there will be two coins in existence and Proof of Work will carry on in parallel,” says Buried One.
Ethereum doesn’t need another competitor and BuriedOne’s prediction is far from certain, but so is the future of mining on Ethereum.
The so-called “loyal miners” that choose to remain have a number of other options, once Ethereum embarks on the long and difficult journey toward Proof of Stake: they can switch to mining another GPU-friendly coin; they can put their GPUs to another use (and there are plenty of applications) or they can sell their GPUs and use the profits to become Proof of Stake validators, retaining their interest in the network.
But the scenario where miners are no longer necessary is—in reality—pretty far off. The official plan is that Proof of Stake will be introduced sometime in 2021. Ethereum developer, Greg Colvin told Decrypt that “when it ships, the mainchain will be needed indefinitely to stake the beacon chain. So future plans for Proof of Stake should not affect the plans of GPU miners, or of ASIC makers who think they can beat ProgPow. They have years of profits in front of them.”
Making the most of ProgPoW
The proponents of ProgPow believe that it will decrease the economic incentive to build ASICs optimized for Ethereum mining, while providing miners with some assurance of improved return on their mining capital rig investments.
So, assuming that ProgPoW goes ahead, how can miners best prepare for it? Pete Hill, Partnerships Director, for Cudo Miner, which specializes in software for CPU and GPU rigs, told Decrypt that miners will need to weigh their options carefully. “ProgPoW is memory-hungry and therefore better suited to the newer GPUs hitting the market,” he said.
“New NVIDIA cards with the more efficient Turing microarchitecture, and AMD’s new Radeon 7, are helping some miners gain a profitable edge.”
But, just as important to keeping miners on board, is that the Ethereum community gives them adequate incentive to continue to maintain the blockchain, and ProgPow is just one facet of this.
BuriedOne believes that a more equitable distribution of interests, as per Buterin’s original vision, would mean that Proof of Stake could maintain the status quo. It could be more effective in preventing an unfair advantage from new technologies joining the network, such as optical computing, while reducing the emphasis on Proof of Work and overuse of energy.
Even so, BuriedOne maintains that much GPU mining is controlled by a handful of large-scale operations which can direct its profitability, and the future for individual and smaller mining operations appears bleak. “The people that care about Ethereum are not being represented and the rest will disappear,” he warns.
Perhaps Ethereum’s grandees need to put on their hard hats as well as their thinking caps and spend some time down in the pit.