Though it’s been in the works for years, developers predict that a massive upgrade to the most-used blockchain is closer than ever to happening.
Ethereum will undergo major changes that will ultimately make crypto mining on the blockchain obsolete in an upgrade that is being called “the merge.” Though the timeline hasn’t been confirmed by Ethereum developers, many in the space expect the merge will happen this summer.
But some Ethereum developers and others in the overall crypto space are worried that not everyone knows about the massive overhaul, and some people could still be buying thousands of dollars worth of mining equipment to invest in a strategy that will soon be obsolete.
“I am more concerned about the people who don’t even know this is happening, and they buy this $3,000 miner, and three months later it stops working,” Ethereum developer Tim Beiko told Bloomberg.
“It would be a bad idea to start mining today.”
What is the Ethereum merge, and what does it mean for mining?
The Ethereum “merge” is an attempt to switch from a proof-of-work model to proof-of-stake.
Ethereum currently relies on what’s known as proof-of-work, in which miners must complete complex puzzles to validate financial transactions on the blockchain. This process requires a huge amount of computer power and is often criticized due to its environmental impact.
With the planned upgrade to proof-of-stake, users would be able to validate transactions according to how many coins they contribute, or “stake.” In return for staking more coins, users have a higher likelihood of being chosen to validate transactions on the network, and earn a reward, aka more coins.
Currently, Ethereum has both proof-of-work and proof-of-stake chains running in parallel. While both have validators, only the proof-of-work chain currently processes users’ transactions. Once the merge is complete, Ethereum is supposed to shift fully to the proof-of-stake chain, called the Beacon chain.
This would eliminate mining entirely.
So why are people still buying mining equipment for Ethereum?
The merge has been delayed in the past, which is why many might be doubtful that it will actually happen soon. Those doubts have led to people brushing it off and continuing to buy Ethereum mining equipment.
It typically costs thousands of dollars to buy equipment—including specific computers, graphics cards and other gear—to build an Ether mining rig. Miners spend so much on equipment as a long-term investment, hoping it’ll result in continued income.
That may have worked out well for them over the last few years, but a looming merge means there’s no guarantee that they will be able to continue to make money mining in the long-term. And because no one knows exactly when the merge will happen, developers like Bilko say that buying an Ether rig now could be an entirely wasted investment.
And some in the crypto space like Matt Hougon, CIO of Bitwise Asset Management, have previously told Coins2Day that there are serious risks involved with the merge, which means that mining could continue indefinitely. “ It’s a very high stakes technological upgrade, and there are risks it could be delayed or there could be issues in the implementation,” he said.
But, Ethereum developers are bullish that all will go as planned, making a full shift to proof-of-stake happen.
“There’s a lot of skepticism because Ethereum has promised proof of stake for five years,” Beiko said. “It’s hard to convince people that this time it’s for real.”