Somewhat buried in the big software makeover of Ethereum on Thursday is the Ethereum Improvement Proposal 3554 or a code update, called EIP-3554 for short. As we know, the end of Ethereum mining threatens to accelerate.
Since its inception, the Ethereum community has been talking about how to mint Ether, the token connected to the Ethereum blockchain. But to get people to change, you need a boost – and that boost is known as the difficulty bomb.
Tim Beiko, coordinator of the Ethereum protocol developer, said: “It’s like miners are artificially added to the network. This increases the level of difficulty and makes it more difficult for all other miners in the network to actually mine blocks. “
EIP-3554 will increase the explosion date of its difficulty bomb by 6 months to December. When it goes away, it makes Ethereum essentially undegradable.
Cryptocurrencies like Ethereum and Bitcoin regularly get errors due to the mining process on which new coins are generated. Both currently use the so-called “proof of work” mining model. In this model, the machine solves complex math equations to create new coins. This makes it impossible for the central government to arbitrarily create new coins – there is no equivalent for the central government to print new dollars – cryptocurrencies retain the value of those cryptocurrencies. I think it helps to do it.
However, this effort took considerable energy to run the computers used to do the calculations and has drawn criticism from outside parties for concerns about energy shortages and carbon emissions.
The Ethereum community has merged around the idea of moving from the proof of work to the “proof of stake”. This requires users to leverage existing Ethereum caches to validate transactions and create new tokens. This limits the amount of coins newly created, but does not require the power to run a large computer bank solving mathematical equations.
Beiko told CNBC that the original proposal required 1,500 ethers for these so-called validators and is now valued at about $ 4.2 million. To lower the barriers to entry, the new Proof of Stake proposal requires interested users to have $ 32, or about $ 90,000.
“It’s still not a trivial sum, but it’s a much more accessible system,” says Beiko.
Since December 2020, the Ethereum community has been testing proof of stake workflows on a chain called Beacon.
The Proof of Stake was originally planned for Ethereum, but the developers postponed the rollout because they saw a significant flaw in the previous implementation. According to Beiko, Beacon solves these problems.
“We knew there was a lot of engineering work to be done, such as the increase in centralization seen with other proof-of-stake systems,” he said. “This has been achieved with a beacon chain that has an order or two orders of magnitude more validators than other proof-of-stake networks.”
Migrating the entire Ethereum ecosystem to Beacon is an upgrade called “Ethereum 2.0” and the next step in that process. It’s important to get everyone involved in the movement where difficulty bombs matter.
This is not the first time in Ethereum history that a difficulty bomb has exploded.
It has happened multiple times, including 2017, 2019, and last year.
Difficulty When a bomb explodes, the system is flooded with artificial miners, increasing the mining difficulty. This means that new blocks appear more and more slowly in the network. “Really, really, very quickly, increasing the level of difficulty is of no use to new miners,” explained Beiko.
But every time it went away, the community would reset the clock to bring the difficulty down to a normal level.
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You don’t have to fire a bomb to provide evidence of stake removal, but closing the ramp for evidence of work removal will help get things started. Beiko calls it a more temporary measure.
According to Nic Carter, general partner of Castle Island Ventures and co-founder of CoinMetrics, the whole point of the difficulty bomb is essentially to force miners and node operators to update their software after a certain period of time. ..
In December, if the explosion date is not postponed, the bomb will explode, adding to another parabolic difficulty, as shown in the graphic above. But this time the developer never rewinds the clock.
It is the beginning of Ethereum’s Proof of Work “Ice Age”.
Not everyone is happy
There are many proponents of upgrading to Ethereum 2.0, but not all are happy with the change.
“Some miners are against it, but it is in their financial interest to fight back,” said Beiko.
Once the protocol has been fully switched to the proof-of-stake model, there will be no income from Ethereum mining.
At this point the miner has several options of what to do next.
There are many other chains that support GPU-based mining, so miners can choose to start mining other cryptocurrencies.
You can also stop the mining process altogether and sell the mining equipment. Beiko expects to see a lot.
“I’ve also seen how many Ethereum mining farms and mining pools have started staking,” he said.
“I’ve seen mining pools use profits to set up validators for Ethereum and also provide pooling services for users who may not have 32 Ethereum but want to validate their network. I saw it too. “So even if you don’t park $ 90,000 in ether, you can potentially get some skin in your mining game.