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After the Ethereum Merge: What are the Ethereum miners doing and is mining still worthwhile?

 


What is the Ethereum Merge?

The Ethereum Merge is the complete conversion of the Proof-of-Work consensus mechanism to Proof-of-Stake in the Ethereum network. The beacon chain, on which Proof-of-Stake was first introduced, was connected to the Ethereum mainnet. As a result, the entire Ethereum network has been running on proof-of-stake since the merge.


The merge is probably the most important step when updating from Ethereum to Ethereum 2.0. With the introduction of Proof-of-Stake, the Ethereum network is much more efficient, cost-effective and sustainable. The Ethereum merge finally took place on September 15 without any problems.

What are the consequences of the Ethereum merge?

As a result of the Ethereum merger, the network will become much more efficient in the long term. The energy consumption in the Ethereum network drops by 99.9%. Furthermore, the transactions are getting faster and the network should become much more sustainable in the future. The Ethereum Merge is now bringing the entire network forward massively.


The Ethereum miners in particular see the merge a little more negatively. In the past, mining made extremely good money on the Ethereum network. As Bitcoin mining has become increasingly unprofitable in recent years, Ethereum mining has been more profitable, especially for smaller miners. 


What were the Ethereum miners doing before the merge?

Mining in the Ethereum network was very profitable for a long time . In exchange for providing computing power, miners received rewards in the form of ether tokens when they validated transactions. Ethereum mining was a very good alternative for many miners and brought in most of their livelihood.


With the Ethereum merge and the complete switch to proof-of-stake , the situation looks completely different. More and more miners had to leave the Ethereum network. Above all, a migration to Ethereum Classic was very popular in the weeks before the merge and also had the consequence that the Ethereum Classic course saw a short-term massive price increase a few weeks before the merge.


Ethereum

The changeover to the new consensus mechanism led to massive criticism from the miners, as they had great control over the validation of transactions through mining in the past and made good money with Ethereum mining. With the merger, these individuals have now lost massive influence and many streams of income.


With Proof-of-Stake, the people providing large amounts of tokens for staking have the best chance of validating transactions. In the rarest of cases, these are also the large Ethereum miners before the changeover. 


What is the future of Ethereum miners?

In the coming months and years, there should be a further migration of Ethereum miners. But other solutions are also being discussed in the mining industry. With the changeover to Ethereum, a huge source of income for the industry, but also for individual miners, will disappear. The miners have the following alternatives:


Migration to other networks

Selling material and switching to staking

Provision of computing power to other areas 

1. Churn to other networks

The most obvious solution is probably migrating to other networks. The miners can no longer mine on Ethereum, but on other networks . Probably the biggest beneficiary is Ethereum Classic. This network emerged from a hard fork of the Ethereum network and is an "old version" of the original Ethereum.


Ethereum Classic

Ethereum Classic continues to run on proof-of-work, making it the easiest alternative for Ethereum miners. The hash rate has increased massively with Ethereum Classic. Miners should also find a home in this network in the long term.


2. Selling material and switching to staking

A second alternative for Ethereum miners is to accept the new Ethereum conditions and switch to Proof-of-Stake. In order to achieve the same profits as mining, companies and individuals need massive amounts of ether tokens.


A sale of mining material could result in them being able to obtain the necessary capital to acquire Ether tokens and thus be among the winners in staking. Especially now in the bear market, buying ether tokens is particularly worthwhile given the low prices. 


3. Provision of computing power to other areas 

A third solution for Ethereum miners is to allocate computing power to other areas to keep profits relatively stable . A large mining company called Hut 8 has already said that these resources can be provided “in the fields of artificial intelligence, machine learning or VFX rendering”.


The miners who have already established themselves broadly in recent months and years and should therefore incur lower losses can benefit here. Ultimately, however, these solutions are more difficult to implement for smaller miners.


Is mining time over?

The little miner has had little to smile about in recent years. Bitcoin mining is getting harder and harder, and with every halving event, the rewards for every bitcoin mined are halved. Ethereum mining has been a good alternative in recent years. 


Bitcoin Mining

After the Ethereum Merge, Bitcoin and alternatives like Ethereum Classic are the only ways to make money from mining. However, the difficulty in the Bitcoin network is now so high that almost only large mining farms are profitable. Therefore, the time of mining for the small participants is coming to an end.


For most retail investors, staking now appears to be the best alternative that can generate returns for years to come. With the rising courses in the next few years, this is a promising source of income.

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