When will miners become redundant?
Kristina Novikova, the official representative of the Bitzlato P2P exchange in Russia, told socialbites.ca that the transition to the new model, called Ethereum 2.0 or Ether 2.0, will occur before the end of 2022.
“After all, you can’t always delay the launch, the waiting effect disappears, users leave the entity even before the process starts,” he said.
Vladislav Antonov, a financial analyst at BitRiver, told socialbites.ca that they actually plan to make the transition before the end of 2022, but so far miners have not been told exactly when that will happen.
“The developers have not officially set a specific date. And it should also be taken into account that [соучредитель Ethereum] Vitalik Buterin is in no rush to upgrade,” he added.
According to Oleg Petryashev, founder of the Technocrat company, such a large period of time to launch a new model is justified by the complexity of the process. “Such a major update is first implemented on five testnets and tested there, and that takes enough time,” he told socialbites.ca.
The expert added that even after the launch of Ethereum without miners on the mainnet, it will take time for this update to be written to all nodes.
He pointed out that this is an extremely rare transition in the history of blockchain and cryptocurrencies. “None of the well-known large networks has yet changed consensus algorithms (a system for supporting and coordinating the actions of all users and programs. – Ed.),” added Petryashev.
There are several networks currently moving to Proof-of-Stake (PoS), but these are little-known projects. As an example, the expert cited the Cardano blockchain created by Charles Hoskinson, one of the former programmers of the Ethereum team.
What is model change?
Ethereum, like Bitcoin, currently uses a consensus protocol called Proof-of-Work (PoW). This allows the nodes of the Ethereum network to agree on all the information recorded on the Ethereum blockchain and prevents some types of cyber attacks. Now the network must be migrated to Proof of Stake (PoS).
The main difference between PoS and PoW is that miners producing computing power are not needed to protect the PoS network. In the Proof-of-Stake algorithm, the performance of Ethereum will be ensured by the holders of the digital currency who receive a reward for their storage. This process is called staking and is a passive income method.
“Simply put, mining will become more difficult. It will be a gradual process, but in at least six months, the profitability of Ethereum mining will decrease by five times and the block generation time will increase by ten times,” said Kristina Novikova.
Mining phasing is accomplished using a special “Difficulty Bomb” code that has been in Ethereum since the beginning of the project. Enabling it instantly increases the complexity of cryptocurrency mining and ultimately makes this process impossible.
Bitzlato’s Novikova is confident that the complexity of Ethereum mining will lead to the fact that miners will stop producing this asset and their mass migration to other projects will begin. “The equipment will stop paying at the right time,” he added.
How will this affect the course?
Bitzlato’s Kristina Novikova believes that the price of Ethereum will not increase after the transition, but it may crash – the current market situation is to blame.
“External conditions for the entire crypto market are no longer the same for its growth against major trends. The recession is deepening, there are no factors for the growth of individual coins or the cryptocurrency market as a whole,” he added.
BitRiver’s Vladislav Antonov admitted that Ethereum can only rise in price in one case.
“During a bullish trend, the movement can accelerate upwards (the period when the vast majority of market quotes move upwards. – Ed.) After successful updates, otherwise, ether trades with everyone else,” the expert said.
According to him, there will be a transition from Proof-of-Work to Proof-of-Stake, which will not affect the price of ether. “It’s a long process and market participants are used to developer roughness,” Antonov assured.
Oleg Petryashev said that there are two negative factors that could lead to the collapse of ether in the near future.
First, the nearly three-year Ethereum staking period for the first major validators is coming to an end. “They may want to lock their returns. Before that, they could not sell these ethers as they were blocked as collateral, but now that will change,” said Petryashev.
The second factor relates to the bearish state of the cryptocurrency market as a whole, that is, the downward movement of the vast majority of offers. “This drop will affect ether because it is used as collateral in many networks and is currently being released in fairly large volumes,” the expert said.
However, he pointed out that in the long run, the transition will positively affect the Ethereum rate.
“In Proof-of-Work, the validator, the miner, performs a transaction and writes himself another ether as a reward for checking and creating new blocks. That doesn’t happen with Proof-of-Stake,” said Petryashev.
The expert explained that in this way, ether will stop growing with each new block, potentially depriving himself of the risks of sharp increases and decreases in the value of the cryptocurrency.
Source: Gazeta
