Ethereum mining reshuffle: Nearly 40% of the network's computing power may evaporate in April

Preface: In the coming April, Ethereum will face a certainty of a sharp drop in computing power. This is because the DAG file continues to grow, causing the popular ASIC mining machines on the market to be unable to operate. According to estimates, nearly 40% of Ethereum's computing power may evaporate. What impact will this have? In this regard, Eric Conner, founder of Ethhub, wrote an article to analyze it.

Related reading: Babbitt original丨Ethereum miners’ life and death situation: 4G graphics card mining machines may be wiped out in the fourth quarter! (Important supplementary note: Before December 2020, the capacity of Ethereum DAG will not reach 4GB. The reason why the E3 mining machine was bricked in advance is the limitation of the memory controller.)

(Photo from: tuchong.com)

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At Ethereum block 9,840,000 (around April 9), the popular Antminer E3 ASIC miners stopped working due to the increase in the size of the Ethereum DAG file. According to a recent study conducted by Kristy-Leigh Minehan, it is estimated that nearly 40% of Ethereum's hash rate may come from E3 miners. As for the exact number, it may change a bit, and we won't know until the event actually happens, but for the purpose of this article, let's stick with the topic.

what happens?

Before analyzing the impact of a decrease in hashrate, there are some important things to understand, and I recommend taking a look at the Ethereum mining page on EthHub. The most important thing is that Ethereum has a difficulty measurement that determines how difficult it will be to mine a block on the network. As hashrate values ​​rise and fall, this adjustment is made and attempts to keep block times within a certain range.

With a 40% drop in hashrate, mining difficulty will drop to get block times back to the 13 seconds we are used to. This will take a while, and while I’m not sure exactly how long the adjustment will take, let’s take 30 minutes as an estimate.

However, as ASIC miners exit the Ethereum network, previously unprofitable GPU miners will enter the network to replace them. It is difficult to estimate how much of the lost hashrate will be filled, but it should be a good amount.

To summarize the possible scenarios:

1. The total computing power of Ethereum network dropped sharply from 181.8 TH/s to 109.08 TH/s;

2. The difficulty starts to decrease;

3. More GPU miners are coming online;

4. The difficulty started to rise again;

5. Block time is back to about 13 seconds;

I think it’s important to note that this could all happen in essentially an instant. There is nothing stopping GPU miners from joining the network at block 9,840,000.

Is the Ethereum network at risk?

Question 1: What will happen if the computing power drops suddenly?

One problem with a sudden drop in hashrate is that a malicious actor could enter this window (30 minutes?) and attack the network before the difficulty has adjusted sufficiently. The most likely way for this to happen is by renting hashrate.

I don’t know a lot about renting hashpower, but there is a handy website that shows us the current cost of launching a 51% attack on any network.

The current cost of attacking the Ethereum network for 24 hours is about $110,000. If we assume the worst case scenario: a 40% drop in computing power, no more GPU miners entering the network, and 1 hour of adjustment, then the cost of attacking within this 1 hour will drop to $66,000.

In comparison, the cost of attacking the network in early 2019 when the network's computing power was reduced would have been approximately $80,000.

It is important to note that the above cost calculations assume that you can obtain sufficient computing power. However, the actual situation is that the computing power that can be rented on nicehash currently only accounts for about 4% of the total network computing power.

Question 2: Will other ASIC miners fill the gap?

Another question I see is, after the E3 miners become bricks, will there be better and more efficient ASIC miners?

To me, this presents a risk that is difficult to quantify and understand.

Has this happened before?

Ethereum has also experienced a sharp drop in computing power in the past, although the drop did not occur in a short period of time.

What should we do?

The above content is just a collection of different arguments I have seen. What follows is my opinion.

1. This hashrate crash is irrelevant to me, in fact, I find slow and continuous hashrate drops more concerning. The reason is that it gives malicious actors more time (like weeks) to coordinate an attack. The window for this event was very short, and although it was known, I don't know what would have motivated someone to do it at that moment. In fact, with the hashrate dropping and rewards being cut over the past 18 months, the attack is easier to achieve. Even in the worst case scenario, where no other miners join the network immediately, we are only talking about a $12,000 difference compared to the beginning of 2019. To me, if someone wants to 51% attack Ethereum, it doesn't really make much difference whether this event happens or not.

2. I don’t know where this hashrate is coming from, one of the reasons we don’t see 51% attacks is game theory. Is there any point in burning your investment (ETH) to attack the blockchain for 1 hour? So far, the answer seems to be no. We also just went through the long ProgPoW debate, where one side kept saying that GPU miners would not attack the Ethereum blockchain. Since most hashrate is not rentable and ASIC miners are stripped off the network, where does this attack hashrate come from?

3. Some people are concerned that better ASIC miners will be built and used. I don't see how this is specifically related to the DAG problem. If ASIC miners could build better chips, they would have already, there is no reason for them to wait until the DAG problem to launch them. I'm not saying that better ASIC miners can't happen, I just don't think it's related to this specific issue. I have made it clear in the past that I don't care where Ethereum's hashrate comes from. This issue just revisits the ProgPoW debate, not the impending hashrate decline.

All in all, this seems like it would be a scenario where the existing mechanisms work and the mining market will do the rest.

Nevertheless, I welcome more analysis of the issues mentioned above.