PoW to PoS Switch: Easing Energy Consumption and More
The switch from Proof-of-Work to Proof-of-Stake is not only anticipated to ease worries about energy consumption, but will also have profound consequences for staking, mining, and ado
The world's second largest cryptocurrency, Ethereum, is set to ditch its energy-intensive proof-of-work consensus mechanism next week. This move could potentially decouple ETH's price from other cryptocurrencies, but staking yields is expected to catalyze institutional adoption, according to Chainalysis's latest report.
It may be a difficult road for the existing miners on the network, but it is still an essential part of the cryptocurrency ecosystem. They provide the security and stability that is necessary for the system to function properly.
Institutional Stakers on the Rise
The report from Chainalysis suggests that Ethereum staking could become a very attractive investment for institutional investors, due to the high potential yields of around 10-15% per year. This would make Ethereum a very appealing alternative to traditional bonds and other commodities.
Chainalysis has observed that the number of institutional ETH stakers with $1 million worth of the asset staked or more has been on a steady rise since January 2021. As of August this year, the figures have surpassed 1,000. This trend suggests that more and more institutions are confident in the long-term prospects of Ethereum and are willing to stake larger amounts of the asset. This is a positive development for the Ethereum network and ecosystem as it increases the amount of skin in the game for key stakeholders.
The blockchain analysis firm stated that if the number of institutional-sized stakers accelerates faster post the Merge, Ethereum’s staking would, in fact, emerge as a lucrative strategy for the institutional crowd. This could lead to more mainstream adoption of Ethereum and help solidify its position as a leading blockchain platform.
“It’ll be interesting to see if the number of institutional-sized stakers increases at a faster rate following The Merge, as this could suggest that institutional investors do indeed see Ethereum staking as a good yield-generating strategy. “
Blow to GPU Mining: New ASIC Chip Aims to Topple GPUs
The miners in the network are looking for ways to move away from Ethereum mining and explore alternative strategies. However, their first stop won't be Bitcoin. This is because most Ethereum miners use computer processors known as GPUs (graphical processing units) that have been rendered obsolete by the Bitcoin miners long ago.
Ethereum currently dominates GPU mining activity, accounting for 97% of all such activity. However, the remaining GPU-mineable cryptocurrencies have a combined market cap of just over $4 billion, which is not enough to support all GPU miners. As a result, many miners are forced to either choose Ethereum or another currency, or to switch to another mining method altogether.
The current situation with regards to the Ethereum blockchain is that many entities that were once productive may now have to rethink their business models to stay afloat. Chainalysis has highlighted several services built on the Ethereum blockchain that leverage distributed GPUs to executive specific tasks in a decentralized manner. In return, the GPU owners could receive Ether or ERC-20 token rewards. Looking to the future, it is my vision that the Ethereum blockchain will continue to grow in popularity and usage. More and more businesses and individuals will see the benefits of using the Ethereum blockchain and will begin to use it for a variety of tasks.
While crypto uses for GPUs have declined in recent months, there are still a number of non-crypto uses for GPUs that remain strong. These include processing for data centers, gaming computers, and other heavy-duty machines. Additionally, miners may also opt to sell their GPUs to companies engaged in those industries. This provides a stability for the GPU market that is not wholly reliant on the volatile world of cryptocurrencies.
The Ethereum network is about to undergo a major change that will have implications for stakers and miners. According to a recent report by Chainalysis, the Ethereum network is preparing to merge with another blockchain, which could lead to increased competition for resources.