What impact will the upcoming Ethereum 2.0 have on miners?

Author: Xiao Zhang talks about blockchain

Ethereum 2.0 is expected to have a genesis block tomorrow, which will become a milestone event in the history of blockchain. While paying attention to it, we also need to see the story behind it.

This is a matter that some people are happy about and some are worried about. Ethereum's transition to PoS means that the income of PoW miners will gradually decrease until they can no longer earn any income.

Today, the number of staked Ethereum 2.0 addresses has exceeded 850,000. Before the Genesis Block appeared, there was an event called "4G graphics cards stopped mining", so there became a hot topic of "how long can Ethereum be mined?" Although mining on the PoW chain continues as usual, how should miners plan their plans?

First of all, we need to know that the official launch of Ethereum 2.0 must reach at least stage 1.5, which may take up to two years of waiting, and it will take even longer to fully switch to PoS after the launch. It is too worrying now.

However, there is still no clear answer to this question. Eth1 is the PoW chain that miners have always participated in, and Eth2 is Ethereum 2.0 with PoS consensus. After Eth1 and Eth2 merge, Eth1's PoW mining will stop, and the entire Ethereum network will complete the consensus upgrade.

As you have heard frequently, Eth2 is divided into Phase 0 (beacon chain, a PoS main chain), Phase 1 (data sharding, 64 shard chains), and Phase 2 (transaction processing sharding). The expected time for the merger of the two chains is Phase 1.5. Eth2 has been confirmed to arrive tomorrow, when it will enter Phase 0 of the main network, but due to the development process, any economic activities of Ethereum will still run on Eth1, and the underlying consensus is still completely determined by PoW mining.

Image source: Feixiaohao

The complete change from ETH1 to ETH2 requires completing the blockchain witness mechanism, changing the current Ethereum virtual machine, and converting the data structure from hexadecimal to binary. This is equivalent to changing from a consensus bottom layer to one of the shards closer to the user layer. The workload involved is by no means as simple as we think.

The interests and positions of all parties involved in this, in addition to the consideration of the mining income of miners, the more practical question is whether the Eth2 code can safely undertake the existing DeFi projects with a locked value of more than 13 billion US dollars? The transition of wallets, exchanges, stablecoins and many infrastructures will take more time.

Until all this happens, Ethereum still needs PoW mining to support the smooth operation of this system.

Image source: Feixiaohao

Among them, gas fees are the most important. EIP1559, proposed by Vitalik as early as 2018, aims to make the gas fee market more predictable and reduce network congestion by setting the same basic rate for transactions and burning gas fees. We know that the DeFi craze has significantly increased the proportion of handling fees in miners' income several times, and this situation of miners "making money without doing anything" is rare in many years of Ethereum mining. ETH2 may significantly reduce the gas fees of miners, but mining income is the main source of income.

Image source: Feixiaohao

In general, we see that although Ethereum 2.0 Phase 0 will be launched, the atmosphere of continuing to mine and hoard coins is still high. Whether it is the improvement of Eth1 or the changes of Eth2, every step taken by the "big ecosystem" of Ethereum is still the main issue that people are concerned about.

People in the secondary market are just hoarding coins, knowing that ETH2 will drive up the price of coins, but how many people are really willing to become miners and earn profits by contributing their own efforts? From the penalty mechanism of Ethereum 2.0 staking, we can see that it wants to change the vision of the current blockchain world, but whether it will be realized in the end depends on the future.