After the upgrade in London, why did the competition in the Ethereum mining market not decrease but increase?

Compared with Bitcoin mining, Ethernet Square mining operating costs and energy consumption are relatively low, but the mining profits has been higher than Bitcoin, which means that as long as the right to seize the opportunity for admission, it is possible to obtain a larger Profit space. Now, the mining companies in the first echelon are still investing hundreds of millions of funds to actively increase the Ethereum mining business. Obviously, they have fully prepared and responded to the changes in the future of Ethereum.

August is not young.

For the ever-evolving Ethereum, August may be the most concerned month in its development history.

On August 5th, the “London” upgrade was successfully completed. As the last full network upgrade before the full deployment of Ethereum 2.0, the importance of “London” is self-evident, especially the activation of the Ethereum improvement proposal EIP-1559, which not only eliminated The method by which users compete for block inclusion through the bidding system will fundamentally change the Ethereum transaction mechanism and the supply of ETH.

In fact, before the deployment of EIP-1559, the crypto community had been worried that the income of miners would be greatly reduced, and there were even voices of many miners resisting the upgrade of “London”, because after the upgrade, the Ethereum transaction pricing plan was adjusted to the “base fee” (base fee). fee) + Tips”, miners can only get part of the tip income paid by users.

However, what does the real situation look like? Will the miners resist the “London” upgrade or even choose to leave completely? In the future, Ethereum mining is still not a good business?

Fact: Miners do not reject Ethereum reform

Judging from the market reaction, the Ethereum miner community does not seem to panic as much as previously thought. Ethernodes data shows that more than 97% of the network nodes have already completed the “London” upgrade. The Geth node upgrade rate of the first largest client has reached 97%, and the second largest client Openethereum and the third largest client Erigon have both reached 100%. % Completed the upgrade-that is, the miner community does not reject the Ethereum reform.

After the upgrade in London, why did the competition in the Ethereum mining market not decrease but increase?

No wonder that even the co-founder of Ethereum , Vitalik Buterin , has become more ambitious after the successful launch of the “London” hard fork. He claimed that he is “absolutely” more confident in the merger of Ethereum and Ethereum 2.0. If everything goes well, Ethereum The full version 2.0 will be officially released in 2022.

The data will not lie. On August 7, two days after the completion of the “London” upgrade, the price of Ethereum broke through 3000 USDT, setting a new high since May, and has maintained an upward trend since then. At the time of writing, according to CoinGecko data, the price of Ethereum was US$3,292.71, a 30-day increase of 64.3%.

After the upgrade in London, why did the competition in the Ethereum mining market not decrease but increase?

In fact, the miner community has fully weighed the pros and cons. If Ethereum does not reform, serious congestion and high transaction fees will also hinder miners’ profit. After all, when the user experience and use are greatly affected and users leave the Ethereum block The “last straw” of the chain will undoubtedly be the miners themselves who will eventually devour the bitter fruit.

Observation: The top mining companies are still adding Ethereum mining

Ethereum 2.0 will not hinder the viability of miners. The upgraded ETH assets will be further enhanced. As the overall ecological environment of Ethereum gets better and the overall operation of the network has achieved a qualitative leap, it is important for miners (especially in scale). It is actually a boon for the larger Ethereum miners.

Various signs indicate that leading mining companies are still increasing their Ethereum mining business. On August 17, US stocks listed Bit Mining (NYSE: BTC M) released its second-quarter financial report. The financial report showed that the company is rapidly advancing its Ethereum mining business outside of mainland China. As of August 17, the company’s online mining machine has a theoretical computing power of 600GH/s, with a daily production of 13 Ether , worth about 43,000 U.S. dollars, and the company’s Ethereum mining business directly costs less than 10% of its revenue.

In fact, Bit Mining’s layout for the Ethereum mining business can be traced back to February 2021. Bit Mining announced on February 26 that it had signed an Ethereum mining machine purchase agreement to purchase 2,000 new Ethereum mining machines at a consideration of approximately RMB 195 million (approximately US$30.17 million). Since then, it has embarked on Ethereum mining. The road to mine, and the speed of advancement is constantly accelerating. On July 28, a week before the “London” upgrade, Bit Mining announced that it had 80 GH/S of Ethereum mining power online, which had risen to 600 GH/s after half a month, with a growth rate of 650%.

In addition, according to the company’s plan, it is expected that by the end of October this year, an Ethereum mining machine with a total computing power of 4,800GH/s will be launched. This shows that the company is very optimistic about the prospects of the Ethereum mining business.

In view of the growth potential of the company’s Ethereum mining business, we have made an income estimation: if the remaining computing power is deployed in October and the price of ETH does not fluctuate too much, it is expected that Bit Mining can produce more than 100 ETH per day. The value is approximately US$350,000. If BitMining completes the deployment of the Ethereum mining machine on schedule, it can produce about 3000 ETHs per month, worth about 10.5 million US dollars-that is to say, in the next 12 months, only the Ethereum mining business can annually Bit Mining generates $126 million in revenue.

According to the forward P/S (market-to-sales ratio) valuation method, if the common 10 times P/S is given, the value of Bit Mining’s Ethereum mining business may reach 1.26 billion US dollars; if it is 15 times P/S It is estimated that the valuation of this business may reach a staggering 1.89 billion US dollars.

In addition, since each on-chain transaction after the upgrade of “London” will burn a certain amount of ETH, it means that Ethereum has officially entered the deflationary era. Therefore, the price of ETH is likely to continue to rise. Therefore, the revenue and profitability of Bit Mining will be large before the end of the year. The probability will exceed market expectations. Obviously, the attractive “money scene” may be the real reason why the leading mining companies choose to add to the Ethereum mining business.

Competition: Coinbase and other giants are also raising Ethereum

In fact, Coinbase (NASDAQ: COIN), another U.S.-listed crypto company recently, is also paying attention to Ethereum. According to the company’s co-founder and CEO Brian Armstrong, it will purchase more than $500 million in cryptocurrency on the company’s balance sheet. , Which includes Ethereum.

Perhaps due to the attention of more institutions, competition in the Ethereum mining market has intensified. In addition to Bit Mining, Canadian mining company Hive (CVE: HIVE) recently announced the acquisition of a 50 MW data center, aiming to increase the mining power of its Ethereum to 5,500 GH/s; Hut 8 (NASDAQ: HUT) In May of this year, it also purchased an Ethereum mining machine worth 30 million US dollars in advance. It is expected that its Ethereum mining power can be increased by 1600 GH/s after the completion of the delivery and deployment at the end of August.

As the industry knows that Ethereum will switch to a proof-of-stake mechanism, competition in the mining market continues to increase, which is unexpected and reasonable. After all, the upgrade time of Ethereum 2.0 is too long, and the new ASIC mining machine will greatly shorten the return cycle. For example, as mentioned above, the energy consumption of Bit Mining is less than 1MH/1W. This week may be less than 4 months. As long as the price of ETH is stable, the return on investment will be very attractive. In this case, it is not surprising that more and more miners are pouring into the Ethereum network.

Risk: Is the potential impact of Ethereum 2.0 on miners really big?

The first thing to say is that the full transition of Ethereum to 2.0 will be a long process.

The beacon chain launched in December 2020 is just the first step taken by Ethereum 2.0 “Phase 0” (as shown in the red box in the Ethereum 2.0 development roadmap below). After the upgrade of “London”, it will enter the “Phase 0″ Phase 1” (initially expected to be completed in 2021, but is almost certainly delayed until 2022), and the complete upgrade of ETH 1.0  ETH 2.0 may take 5-10 years.

After the upgrade in London, why did the competition in the Ethereum mining market not decrease but increase?

For miners, at least for quite some time, there is no need to worry too much about the Ethereum 2.0 upgrade. From the Ethereum 2.0 development roadmap planned and designed by the co-founder of Ethereum, Vitalik Buterin, it can be seen that even if it is based on the proof of stake consensus mechanism When Ethereum 2.0 is online, the original chain will still exist for a long time, and there is likely to be a transition period of “simultaneous operation of both chains”, and this “London” upgrade happens to give Ethereum miners an effective buffer.

As the Ethereum miner community analyzed: if the Ethereum 2.0 upgrade is successful, miners are more likely to keep ETH instead of immediately selling. As the market sell-off decreases, the price of ETH is bound to rise, and miners can not only increase the price Recover costs, and you can continue to get more benefits by staking ETH in your hands; if the Ethereum 2.0 upgrade fails, miners can still continue mining on the original chain without being affected. From this perspective, Bit It is undoubtedly forward-looking for the mining industry to continue to deepen the Ethereum mining business, because the safety mat of Ethereum mining is still high, and considerable returns can still be obtained in the medium and long term. Take 10,000 steps back, even if the upgrade of Ethereum 2.0 causes large-scale miners to be “unprofitable”, the ASIC mining machine recently purchased by Bit Mining can quickly switch to ETC, and the mining cost is only three points of the traditional graphics card mining machine. One, so you can still ensure that profitability is not affected.

The “interesting” thing is that Ethereum miners did not turn to other chains in order to obtain more extractable value. From the perspective of miners’ extractable value source (MEV) indicators, the value obtained by Ethereum miners through handling fees accounts for about 11.7% of the total value obtained, and the proportion of miners’ acquisition has remained relatively stable, always below 12%. It can be seen that even if the mining fee drops, as the price of ETH will increase due to deflation in the long run, miners should still be able to make a profit.


Concluding remarks

Compared with Bitcoin mining, the operating cost and energy consumption of Ethereum mining are relatively low, but the mining profit has always been higher than that of Bitcoin. Profit space. Now, the mining companies in the first echelon are still investing hundreds of millions of funds to actively increase the Ethereum mining business. Obviously, they have fully prepared and responded to the changes in the future of Ethereum.

Author: Carbon 14

Edit: Black Earth


Posted by:CoinYuppie,Reprinted with attribution to:
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