Ethereums (CCC:ETH-USD) London Hard Fork is a new chapter for cryptocurrencies. The overhaul that starts with the fork and eventually turns into the Ethereum 2.0 network is one of the biggest upgrades we’ve ever seen on a blockchain network. It is also the second largest cryptocurrency in the world. But this upgrade could potentially be a disadvantage for other players in the crypto industry, such as: Beehive blockchain (NASDAQ:HVBT). Could the Ethereum 2.0 overhaul ruin HVBT stock?
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That is the question investors are asking. SeekingAlpha recently published an in-depth analysis of the impact of the Ethereum upgrade on the crypto mining industry. In particular, the Canadian Hive Blockchain was discussed. Hive makes up 5% of the entire Ethereum mining industry, making it one of the biggest beneficiaries of its proof-of-work algorithm.
Ethereum 2.0 makes mining facilities superfluous
One of the goals of the London Hard Fork was to catalyze the network’s transition from proof-of-work to proof-of-stake. Proof-of-Work uses crypto mining so individuals and businesses like Hive can run mining rigs. These rigs are often part of huge mining operations in warehouses and the like, including the Hive operation. This evidence has been heavily criticized for its unbridled energy consumption, one of the reasons for the switch.
The proof-of-stake, on the other hand, is a consensus mechanism. This causes the Ethereum ledger to confirm transactions and order them to be executed. This proofing algorithm requires negligible amounts of energy and is praised as a “greener” alternative to proof-of-work. The new evidence would make these existing mines redundant as the work performed by the mines would no longer be included in the transaction fees.
As SeekingAlpha points out, this transition will eliminate the need for establishments like Hive, much to the detriment of HVBT stocks. Therefore, these mining companies either have to switch to another cryptocurrency that still uses proof-of-work, or to a completely different process.
HVBT stock stays afloat with Hive’s long-term plan
Hive recognizes this problem and is addressing it. The company’s long-term plan is in place and mining will remain an attractive option for years to come, according to the company. The company says the full Ethereum 2.0 update, including the proof algorithm switch, is still a long way off. Ultimately, Hive predicts it will be two years “before Ethereum mining could become financially unattractive.”
After this period, the company plans to use its masses of high-performance graphics cards for other utilities. It calls its supply of graphics processing units (GPUs) “rugged, expandable technology” that it plans to repurpose for other high-performance computing products for at least the next five years. The company will also keep its Ethereum holdings from all of its mining, which it could use for additional revenue across the board under the new proof-of-stake model.
HVBT gains from government tax proposal
In the meantime, the US government is rewarding existing proof-of-work miners with changing the infrastructure proposal. According to the funding proposal, proof-of-work miners will not be taxed by the US government, while proof-of-stake miners will have to pay taxes; This is because the wording of the proposal requiring crypto brokers to report transactions in tax returns is only aimed at proof-of-stake miners.
The proposal is controversial. Ultimately, Ethereum is moving to the proof-of-stake because many are calling for a less energy-consuming network. The government’s proposal contradicts these wishes and rewards the more consumptive evidence while penalizing the greener option.
While Hive may be worried about the distant future, he’s fine for now. In fact, the offer news is boosting HVBT stock by over 4% over the course of the day.
On the day of release, Brenden Rearick had no positions (either directly or indirectly) in any of the securities referred to in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s posting guidelines.