There will be another delay for Ethereum mining’s “difficulty bomb” and switch to a proof-of-stake (POS) network, developers say. The decision could affect miners’ economic decisions in the near future, such as how much to invest in equipment and how much hashing power to devote to ETH.
Increased Difficulty Means Leaner Times for ETH Miners
There will likely be a squeeze on Ethereum blocks and block rewards from now until a new update arrives in late September.
Reports from an Ethereum developers’ conference call last week said the long-proposed POS implementation, called “Casper”, will still not be ready soon. Originally planned for late 2017, the roadmap could push Casper back to the end of 2018 or later.
Moving to POS has long been part of Ethereum’s roadmap, though the exact timing is unknown. It would fundamentally change the network, removing all ETH mining activity as it currently exists.
Ethereum currently mines using proof-of-work (POW) like Bitcoin, where powerful machines race to solve a complex math problem and receive block rewards. Ethereum blocks are mined roughly every 12 seconds (depending on difficulty) and the block reward is 5 ETH.
The rapid rise in ETH value from around $8 USD at the start of 2017 to around $400 in June has seen a rush to mine the token. It has also created a worldwide shortage of GPU cards. Under a POS model, Ethereum would require no GPUs at all.
The Ethereum ‘Difficulty Bomb’
The “difficulty bomb” is code inserted into Ethereum that increases POW mining difficulty exponentially in preparation for POS introduction. The period where it gets too difficult to mine at all is called the “Ice Age” — and it’s already beginning.
The current problem is the difficulty bomb is already built into Ethereum’s code (as of March 2016) — but Casper’s POS won’t be ready for it. Developers are now proposing to delay the difficulty increase, and instead reduce block rewards from 5 ETH to three.
The increased difficulty and/or reduced rewards are designed to incentivize miners to accept a hard fork, and possibly increase the ETH price.
That delay will have to come in the next software update, called “Metropolis Byzantium”, due late September or early October 2017. The rising difficulty means Ethereum blocks are coming out every 40+ seconds instead of 12-15, and miners could even end up paying more in electricity bills than they make mining.
That could see miners switch to other POW currencies they can still mine with GPUs, such as Zcash.
Proof of Stake vs Work
Proof-of-stake algorithms, which drive some cryptocurrency networks, allocate new tokens based on the size of existing holdings (stakes). POS is designed to consume far less electricity and computing power than proof-of-work (POW) networks like Bitcoin.
Ethereum miners already use more electricity than a small country, according to one report.
POW is sometimes criticized for being energy-hungry and wasteful, while others say POS “makes the rich richer” by rewarding existing large holders. However, POS consumes far less energy and allows those with lower-powered computers to join in — though with far lower rewards.
Are you an Ethereum miner? What’s your opinion on the latest update? Let us know.
Images via Pixabay, Ethereum