Written by Dalmas Ngetich
Any day in crypto could turn into a theatre.
There are simply too many moving parts for a dull outing. Every so often, certain sections of the community get their fingers burnt.
At the moment, Ethereum miners seem to be in the battering corner. After years of making easy (quick) money, users and developers now want to close those taps.
Well, greed took over, and Ethereum became a casino where the highest bidder takes the crown.
Ethereum miners love high fees. The higher Gas fees rocket, the more money they make. Equate Ethereum miners to oil money!
The bad news is, Ethereum miners didn’t see EIP-1559 being actualized so soon.
For long, Ethereum’s open-source nature meant proposals had to be first rigorously checked and discussed before any proposal came to light.
After months of heated debates, network users unanimously decided it was time for EIP-1559 to go live. It will launch in London—around July, after Berlin, much to Ethereum miners' dismay.
Eventual activation completes the Metropolis Era, marking the end of what would prepare the foundation for Eth2 and removing miners out of the equation.
Even with EIP-1559, Ethereum users can’t take anything away from miners. To them, it is a merger between business and passion. Chipsets are scarce, government taxation, and gear damn expensive! Profitability isn’t guaranteed either. Those who weathered the crypto winter of 2018 can attest to this fact.
Perhaps 2020 and 2021 were their final years of bliss, the home stretch, and Ethereum handsomely rewarding them for sticking up through thick and thin.
The problem is, Ethereum miners don’t want to be weaned.
And for good reasons.
Ethereum is clearly overcompensating for network security and decentralization at the expense of users.
With both transaction fees and block rewards, ETH mining has been lucrative in the past few months.
According to TheBlock Research, Ethereum mining revenue reached $1.37 billion in February, growing a whopping 65.1 percent from January. The bad news for network users is that within that time, average transaction fees exploded 122 percent. On Feb 23, Ethereum transaction fees, Gas, spiked to $38 before falling to average around $18 in Mar.
From this, it is clear that Ethereum mining revenue features relatively high transaction fees to block subsidies ratio; a money printer for ETH miners, explaining their hard stance.
As expected, besides F2Pool, the largest Ethereum mining pool, others vehemently reject EIP-1559.
EIP-1559, over and above everything else, is for the good of the community in helping drive adoption by placing a lid on transaction fees.
In solidarity, opposers said they plan to redirect hash rate to EIP-1559 supporting pools, including Ethermine, for 51 hours on Apr 1—Fool’s Day, as a demonstration of benevolent force and for educational purposes.
There are risks that because of this attack against the majority, Ethereum will split in a 51 percent attack. This form of a majority attack is usually consequential, often causing transaction mutability which equals theft.
If this actually happens, and say Ethereum core developers risk it all, they will be blamed for the mess created, especially of working against miners—who, before the transition to Eth2, hold all the cards. The question is whether a majority of miners, even with a significant reduction of revenue, will weather the storm and hold on for the sake of the open-source, miner-reliant network.
Obviously, in the case of mass exodus, say 25 percent of Ethereum mining pools switch off, the Ethereum network will automatically re-adjust. This situation reduces mining difficulty in light of a lower hash rate meaning loyal mining pools and miners will earn 25 percent more profits, getting 125 percent more in transaction fees to accommodate the deserters.
Furthermore, coupled with a deflationary system (EIP-1559 proposes the introduction of BASE Fees which is burnt), the ETH/USD price could shoot above $2k. Accordingly, miners who stay onboard would make a killing despite the change in revenue style and realignment of incentives to favor network users who can pay mining tips.
Beyond EIP-1559 and loyal miners securing the network, Ethereum supporters are looking at Eth2 and the Beacon Chain. Eth2 is novel but is still in testing. Plans of adopting Proof-of-Stake for validators instead of miners is obviously a good thought.
Throwing in an untested Eth2 wild card that is still a long way from ready, however, could be a major risk for Ethereum. Bugs, splits, and unforeseen headwinds may create chaos. Then again, supporters should discount the complexity of distributed databases.
As a safety net, thorough testing is recommended, and all risks mapped out for mitigation. Besides, while not a security feature, Eth2 is not yet sharded. Eth 1.5, switching from Proof-of-Work to staking, was initially set for late this year, if not next year.
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This post is published for Cryptowriter in association with Voice.