Switching from Ethereum to Ethereum 2.0 will introduce some profound changes for all users. There is some confusion as to what all of this means for the miners. Below, we will explain the plan of action and what miners can expect in the coming months.
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Ethereum 2.0 Is a Massive Upgrade
On social media and within the Ethereum community, everybody is talking about the Ethereum 2.0 upgrade. Furthermore, many people show an active interest in proof-of-stake participation. For the miners, there are no immediate changes. However, they will need to prepare for what will happen shortly.
Once proof-of-stake activates as the Ethereum 2.0 consensus mechanism, miners will no longer secure the network through traditional means. On paper, that makes mining Ethereum virtually useless, as there is no further need for securing the chain through proof-of-work. It will take a few months, if not years, for this transition to complete. Until then, it is paramount that miners contribute to securing the blockchain.
Staking Will Not Activate Soon
As we highlight in previous articles, the activation of proof-of-stake as a consensus mechanism will occur in different phases. Until phase 1.5 goes live on the network, miners remain able to contribute to securing the Ethereum network. Currently, there is no official release date for Ethereum 2.0 Phase 1.5. It can take a few months or up to two years.
Anyone looking to enter the Ethereum mining space right now, however, may want to rethink that approach. It takes a lot of time to recuperate mining hardware investments, let alone to make a profit. Once Ethereum switches to proof-of-stake, existing mining rigs will not serve a significant purpose anymore.
Transitioning From Mining To Ethereum 2.0 Staking
Once the Ethereum mining aspect comes to a halt, there is a chance to sell the hardware, buy more Ethereum with it, and switch to staking. Any miner currently stockpiling their ETH earnings is potentially already doing so. It takes 32 ETh to begin staking and operate as a validator node. Nothing prevents miners from creating multiple nodes either.
Switching from the mining aspect to becoming a staker may seem odd. At the same time, most miners engage in mining to earn money with their hardware. If one still has earnings from mining in ETH, putting those earnings to work is a logical option. The revenue coming in from staking can help offset any lingering costs of the mining process’s hardware. Users have many different opportunities to explore.
What To Do With Mining Hardware?
Until phase 1.5 goes live on the network, miners should keep their machines running. Doing so helps secure the blockchain but also makes miners some money. It remains possible to make money by mining Ethereum, assuming one has been doing this for a while now.
After the switch to proof-of-stake, however, things become different. One option to explore is mining other cryptocurrencies with currently owned hardware. Using a graphics card to mine crypto-assets is still feasible in 2020, although all miners need to adjust their expectations.
Another option is to sell the mining hardware. Graphics cards are always in demand. At the same time, taxing these cards to mine cryptocurrencies can shorten the card’s lifespan. No one can expect to sell their mining cards for top dollars, although many possible buyers will not mind this aspect too much if the card’s price is right.
What About ASICs?
Things are a bit different when mining Ethereum with ASIC (Application-specific Integrated Circuit) hardware. These machines are more powerful and expensive yet also yield much better returns than mining ETH with a graphics card. Buying an Ethereum ASIC today is ill-advised, as there is not enough time to recover the machine’s initial investment.
Furthermore, it is virtually impossible to resell an ASIC for Ethereum. Once Ethereum 2.0 activates proof-of-stake, these ASICs have no purpose. Some miners may think of redirecting the hardware to Ethereum Classic, albeit that may not be the best option. It is far less profitable to explore this option. Additionally, Ethereum Classic developers are introducing changes to the algorithm, potentially making ASICs useless soon.
For those who are already mining Ethereum, nothing will change shortly. The switch to proof-of-stake is still months away, if not longer. Until then, it is worthwhile to squeeze every ETH out of the mining hardware. Preparing for a switch to staking ETH is a valid option, as it creates a passive revenue stream.
For anyone who wants to start mining Ethereum, it is better not to do so at all. It will not prove worthwhile if one needs to recover the investment through mining earnings. Opting for proof-of-stake at this early stage is a better option.