The Future of Mining and Dapp Use: Risks and Choices

There are always technical risks involved, and miners and dapp users may have some difficult choices to make in the future.

As Ethereum prepares to undergo its historic "Merge" upgrade, the largest American cryptocurrency exchange has provided some insight into the risks associated with the upgrade. The upgrade, which is set to take place on January 1st, 2020, will see Ethereum move from a proof-of-work to a proof-of-stake consensus algorithm.

While the proposed merge of the Ethereum and Ethereum Classic blockchain networks may come with some risks, it could also provide a major boost to both communities. If successful, the move could increase the value and utility of both networks, while also making it easier for developers to create applications that work across both chains.

The Risks of Merging: What You Need to Know

While the potential risks associated with the Ethereum 2.0 upgrade are certainly significant, it is important to remember that this upgrade is also immensely complex and represents a major milestone for the cryptocurrency community. With proper planning and execution, the Ethereum 2.0 upgrade can be a success, and help take the Ethereum network to the next level.

The proposed merge between Ethereum and Ethereum Classic would change Ethereum's consensus mechanism from proof of work (POW) to proof of stake (POS). While proponents of both mechanisms generally agree that POS is more complex than POW, they also believe that POS provides more security and scalability benefits. If the merge is successful, it could have major implications for the future of Ethereum and the cryptocurrency industry as a whole.

The risk of Ethereum's multiple client implementations is compounded by the fact that the merge requires two clients to run: the consensus layer (beacon chain) and execution layer (Ethereum mainnet).

I believe that the network's latest shadow fork test went off without a hitch, and that there is little reason to worry about the potential for problems with the fork. Extensive testing has shown that the fork is unlikely to cause any major issues, and I believe that it will be a positive step forward for the network. Thanks for reading!

On the operational front, Rodriguez said that node and validator participation going down for the Bellatrix hard fork was an operational risk. This happens when participants don’t have the latest updates and configurations installed.  Looking forward, Rodriguez said that the team is focused on continuing to improve the stability and performance of the network. They are also working on expanding the ecosystem of applications that run on the platform.

While there is always some risk associated with major software updates, it appears that the Ethereum team is taking every precaution to ensure a smooth transition for all users. With constant communication and a strict timeline, it is clear that they are committed to providing a safe and secure platform for everyone.

Miners: What to Do?

Ethereum miners after the merge will have it tough. They will be rendered obsolete and uneconomical without POW, and the difficulty bomb will make sure that mining on the existing POW Ethereum chain becomes unfeasible over time.

It is clear that POW chains are not invulnerable to 51% attacks. However, simply moving to another POW chain – such as Bitcoin – may not be reasonably possible.

“Most Ethereum miners use GPUs whereas Bitcoin uses ASICs, more powerful processors geared towards Bitcoin mining,” explained Rodriguez. “GPUs are too weak to profitably mine Bitcoin.”

As the Ethereum community prepares for the upcoming merge of the Ethereum blockchain, some miners are planning to launch a new fork called ETHPOW. However, many major Ethereum services and infrastructure providers have already confirmed that they won’t service this fork. This could mean trouble for the ETHPOW fork, as it may not have the necessary support to survive. Only time will tell whether this fork will be successful or not.

Many Ethereum users are borrowing ETH from protocols like AAVE to amass as much ETH as possible before the fork. Theoretically, this will mean they gain ETH on both the POS and POW Ethereum chains. However, this could also create some economic complications at the DeFi and dapp layer of Ethereum.

The community's vote to pause ETH borrowing is a sensible measure to take in light of the current liquidity trouble that AAVE is facing. By halting borrowing, the community can help to ensure that there is enough ETH available to process borrower liquidations and avoid insolvency.

The merge between Coinbase and Binance is a big deal for the cryptocurrency industry. Sure, there are always risks associated with any business merger, but the risks seem to be minimal in this case.