Where will Ethereum and Miner go in the big change of Ethereum 2.0?

Since the launch of the Ethereum mainnet in 2015, Ethereum has undergone several iterative updates, large and small, and currently Ethereum has gone through the first three of the four planning stages (Frontier, Homestead, Metropolis, Serenity) At this stage, Ethereum is about to usher in the final stage – Serenity, and will be converted from the POW workload consensus mechanism to the POS proof-of-stake consensus mechanism after the Ethereum beacon chain and the original chain are merged. For Ethereum, Ethereum carries hundreds of billions of dollars in rights and interests. For the core developers of Ethereum, the upgrade of Ethereum is a big problem. A little carelessness may cause irreparable losses to Ethereum. , so the upgrade of Ethereum 2.0 seems very slow.

Will the upgrade of Ethereum 2.0 really be good for Ethereum? Will the Ethereum 2.0 upgrade go smoothly? Is it appropriate to enter Ethereum Mining now?

Not necessarily, the upgrade of Ethereum 2.0 is not only a technical problem, many other factors will become uncertain factors in the upgrade of Ethereum 2.0.

This paper will discuss the following conclusions:

  • Compared with the POW proof-of-work mechanism, the POS proof-of-stake mechanism has a lower threshold for participating in Mining, which saves a lot of energy, but the income is relatively reduced. The POW mechanism Mining is currently not suitable for participation, and the POS mechanism Mining seems to be a good choice.
  • The change of the consensus mechanism has greatly affected the stakeholders in Ethereum. From the Miners and related industries under the POW proof-of-work mechanism to the Ethereum Foundation and large ETH holders, a large number of Miners have to find other ways, such as participating A large number of Miners are dissatisfied with other POW mechanism Mining, industrial transformation, participation in other Web3 protocols, and selling of Mining equipment.
  • Although the POS proof-of-stake mechanism exceeds the POW workload proof mechanism in terms of security, due to the existence of the joint pledge agreement, the centralization problem of Ethereum under the POS-based proof-of-stake mechanism will be more serious. Is the too centralized Ethereum really safe? ?
  • Ethereum looks more like “V God’s Ethereum” or “Ethereum Foundation’s Ethereum”. The number of Ethereum users who want to participate in governance is extremely high, and the scope of proposals is basically technical proposals. Narrow, the final decision-making power is in the hands of the core developers of Ethereum, and ultimately executed by Miner, and users can only express some ideas that no one cares about.
  • From the perspective of the Ethereum economic model and other market factors, the probability of a death spiral is very small, but there are still many potential unknown risks such as hard forks, Miners collective malicious selling, etc., which adds a lot of uncertainty to the upgrade of Ethereum factor.

1. How to participate in Ethereum Mining now? Where should POW Miner go in the future?

(1) The advantages and disadvantages of Mining under POS proof of stake and POW workload proof

POW Proof of Work Consensus Mechanism

To put it simply, Miners continuously enumerates a Nonce (random number) to strive for the right to book a block.

  • Pros: No need to buy ETH to start. Compared with the POS proof-of-stake mechanism, it is easier to implement. Purchase the equipment required for Mining to start building node Mining, and POW proof-of-work is a proven and tested consensus mechanism that has maintained the security and safety of Bitcoin and Ethereum for many years. Decentralized.
  • Disadvantage: Not environmentally friendly. It needs to consume a lot of resources every year, and as the computing power continues to increase, the mining revenue will decrease, and the pool’s computing power growth may lead to centralization and security risks. Under the POW mechanism, most of the revenue of Ethereum is earned by Miner. got it.
POS Proof of Stake Mechanism

To put it simply, the staker’s pledge weight is used to fight for the block’s bookkeeping right.

  • Advantages: more environmentally friendly. Miner does not need to buy a lot of hardware and consume energy investment, just need to hold enough ETH to participate, and it can effectively reduce the selling pressure of ETH, because Miner under the POW mechanism will pay the ETH income obtained by selling Mining to pay for Mining’s commitment The cost, and the POS mechanism can effectively increase the TPS (speed of processing transactions) of Ethereum and slow down the congestion of Ethereum.
  • Disadvantages: It is still in its infancy and has not been tested for long-term practical applications, so there may be great potential problems.
(2) Are POW mechanism Mining and POS mechanism Mining suitable for admission now?

POW workload proof mechanism benefits

The first beneficiary under the Ethereum POW mechanism is Miners and the Mining equipment manufacturer behind Miner, which can produce 11.3 million ETH or 13.56 billion revenue per year (calculated at $1,200/ETH on June 16, 2022) , due to the continuous growth of computing power, the demand for mining equipment such as graphics cards has increased significantly, which indirectly benefits GPU chip companies NVIDIA and AMD, making the market value of these two manufacturers increase by 445 billion US dollars in 2021, but with the encryption market Entering the bear market, the price of Ethereum keeps falling. As of July 12, 2022, the computing power of the entire network is 904.59TH/S.

4vPRRgkDnCIJQ5Ctr3xwQ0i2RfPgf2ZoP49DLxkd.png

Data source: 2MINERS.COM

With the sluggish price of ETH, Mining’s income has also fluctuated greatly. From ATH of 0.282USD/day per 1M computing power to only 0.017USD/day per 1M computing power, the current GPU graphics card price is based on a 3060Ti at the market price 3800 yuan, computing power of 61M and 0.5 yuan per kilowatt-hour of electricity calculation, the static return period is nearly 800 days, which does not seem to be a good time to enter the market.

wVsHwS8gjyxquSrz27TkP4QxIJJnz96z89aS8Gu1.png

Data source: BitlnfoCharts

POS Proof of Stake Mechanism Benefits

After the implementation of the POS proof-of-stake mechanism, Miner does not need to spend a lot of money to purchase hardware to increase computing power to obtain more income, but instead to pledge more ETH to obtain higher income, Ethereum 2.0 has a pledge yield curve , as the amount of pledged ETH decreases, the rate of return will increase, and as the amount of pledged ETH increases, the rate of return will decrease. As of July 12, 2022, the rate of return for pledged ETH is about 4.2% annually.

BYG6ZjWb6WkOXzHPNCm1MFc8xgt9Tq5IiwwEPK0X.png

VN5TWkcFFhdVsvgohPUFxFCr6OReoKmysXrSMidp.png
Data source: ethereum.org

There are currently four POS pledge methods to choose from:

Separate pledge: 32 ETH and a professional computer are required.

Advantages: You can get full rewards, and you can control yourself completely;

Disadvantages: It is necessary to keep the power out of the network, otherwise there will be a relatively small inactivity penalty.

Service provider pledge: No equipment required, 32 ETH is required.

Advantages: No need to spend equipment cost, no need to maintain equipment;

Disadvantages: Unable to obtain full rewards, node fees need to be paid, and there is a certain trust risk.

Collective pledge: no equipment, any funds.

Advantages: low capital threshold, liquidity can be withdrawn at any time;

Disadvantages: Unable to obtain full rewards, third-party platform trust risk, smart contract execution risk.

Centralized exchange: no wallet, any funds.

Advantages: convenient and fast, low capital threshold;

Disadvantages: The exchange has certain risks, and the validators are too concentrated to threaten the network.

From the above comparison, it can be seen that for those who want to participate in Ethereum Mining, it seems to be an unwise choice to choose the Mining cost of participating in the POW mechanism and the return cycle is too long. Choosing the POS mechanism It seems to be the best choice to participate in Ethereum Mining, the cost depends on the price range of buying ETH, and the income is relatively stable and there is no energy consumption cost.

(3) Where will Miners go after changing the POS mechanism?

Due to the conversion of the POS mechanism, a large number of POW Mining nodes will not be able to participate in the mining of Ethereum, and the number of active nodes in Ethereum is expected to drop significantly, which will lead to the migration of a large number of POW Miner computing power to other POW mechanisms such as ETC. Token or other web3 protocols, but due to the huge computing power of Ethereum POW Miners, it is difficult to have an ecology that can carry huge computing power, and the migration of computing power will also reduce the mining revenue of the migrated ecology, which also leads to A large number of Miners need to sell their Mining equipment to make up for the cost. There will be a large number of second-hand graphics cards on the market, and the scene of hard-to-find cards may no longer exist.

At present, Ethereum Mining devices are mainly divided into two types: ASIC and GPU. ASICs (Application-Specific Integrated Circuits) are computer hardware designed for a specific purpose, and hashing algorithms for Ethereum are written in the Ethereum ASIC Mining device. Graphics card-based GPU Mining devices can solve complex PoW calculations and can also be used for more general-purpose applications.

The problem with Ethereum ASIC Mining equipment is that it can only be used for Mining with ETH and cannot be used for Mining with other algorithms. Ethereum Classic (ETC) is the only POW project that can use Ethereum ASIC Mining because Ethereum Classic’s POW algorithm It is compatible with Ethereum. At present, the mining income of ETC is already lower than that of ETH under the same conditions. The computing power per 1M is only 0.0116 USD/day, and the static return period reaches more than 1000 days. If a large number of Miners flock to ETC, it will cause computing power. If the surge revenue declines, then the mining profits of ETC will become unprofitable, and the ASIC mining equipment may be worthless.

D70yIyTz2296gRajSgWyt4JsqynFAVe66qjwupLN.png
For GPU Mining devices, there are several options after the Ethereum merger.

Mining other POW mechanism Tokens

According to Messari’s research, the total value of other minable tokens other than Ethereum in the POW Token project that can be mined by other GPU Mining devices is only 3% of the total mineable profit, and the huge computing power of Ethereum cannot be used in other POW Tokens. To be absorbed, this is only an option for a few people.

sOagQKH4Og7oCX46wYO2z93q6eO8N8iUVFzapNZ8.png
Data source: Messari

Transform and expand business

For a large-scale Miner innovative Mining company, it may be a good choice to expand new business scope. Hut 8 is one of the largest digital asset miners in North America focusing on innovation, optimistic about Bitcoin, blockchain, Web3.0 And bridge the emerging and traditional high-performance computing world, and invest heavily in high-performance GPU graphics card Mining equipment, which allows them to use GPU graphics cards for other high-performance computing power businesses.

January 31, 2022 Hut 8 announced the completion of the acquisition of the TeraGo data center business, through which Hut 8 changed their business structure, creating the first hybrid data center model, while serving traditional high-performance computing (Web2 ) and Web3 and the emerging digital asset computing department, after the merger of Ethereum, the transformed traditional high-performance computing power business and Web3 computing power services related to Web3 infrastructure will be big Miner’s new revenue source opportunities, but it is obvious that This choice requires Miners to have top-level resources and a large scale, and it is not a path that ordinary Miners can choose.

GOextWbGUxKA2L7YUryym4Xeox6ozt9tieuQxt6Y.png

Provide computing power for Web3 protocol

Miner can turn GPU computing power to provide computing power for a few web3 protocols such as: Render Network, Livepeer Network, Akash Network, etc.

Render Network is a high-performance distributed rendering network based on GPU. Users can consume RNDR’s GPU computing power to render images at a faster speed and at a lower cost. At the same time, Miner can also provide its own GPU to provide rendering computing power for Render Network. Take incentives.

Livepeer Network is a decentralized video transcoding network built on the Ethereum blockchain. Livepeer provides a backend video transcoding and distribution infrastructure on which developers can build applications. Miner can provide GPU computing power in A node runs on the Livepeer network that earns block incentives by charging fees for video transcoding.

Akash Network is the world’s first decentralized open source cloud platform that accelerates deployment, scale, efficiency and cost-effectiveness for high-growth industries such as blockchain and machine learning/artificial intelligence. Akash Network is known as the “Airbnb of cloud computing”, providing Fast, efficient and low-cost application deployment solutions. Developers leveraging the Akash platform can access cloud computing at three times the cost of centralized providers such as Amazon Web Services, Google Cloud and Microsoft Azure. Akash Network leverages containerization and open source technologies to leverage 85% of the underutilized cloud computing power of 8.4 million global data centers, enabling anyone to buy and sell cloud computing, and Miner can use GPU Mining devices to provide Akash Network Cloud computing power to earn block incentives.

Sell ​​Mining equipment for ETH and stake POS or hold cash for other purposes

Miner uses the funds obtained from the sale of Mining equipment in exchange for ETH for pledge to become a POS validator node to obtain block incentives or to obtain additional income in the form of MEV (Miner extractable value), which requires the validator to pledge at least 32 ETH, block incentives The rate of return will change with the amount of ETH pledged and network activities. Miners who have less than 32 ETH or are unwilling to take the risk of node operation can obtain income through joint pledge or service provider pledge. It is said that even if the POS pledge income is not as high as POW, it is a long-term sustainable profit option.

Since Ethereum POW carries a huge amount of computing power, other ecosystems can hardly carry such a huge computing power, so not every POW Miner can find a profitable solution to transfer computing power, so a large number of Miners may choose to sell Mining equipment to cover the cost of input.

two. What are the potential risks facing the Ethereum 2.0 upgrade?

(1) Ethereum with “oligopoly governance”?

Ethereum, as one of the largest public chain ecosystems in Web3, governance has always been an aspect that people pay more attention to. The people who participate in governance in Ethereum are mainly divided into two groups.

Users: End users who hold ETH and use Ethereum applications, trading platforms, developers building applications on top of Ethereum.

Miner: An individual or business entity that runs server nodes to verify transactions and secure the network (and thus ETH).

Ethereum Core Developers: Developers and researchers who contribute to node software and participate in various technical forums.

Any one of the participating groups can submit a proposal called Ethereum Improvement Proposal (EIP) on Github, but it is not difficult to make a proposal. , it will go through a life cycle of technical review, research and discussion.

  • Draft – When properly formatted, the EIP editor will merge the EIP into the EIP repository
  • ReviewEIP – The author marks the EIP as ready and requests peer review.
  • Last Call – EIP that has gone through its initial iteration and is ready for broad audience scrutiny.
  • Accepted – A core EIP has been in Last Call for at least two weeks, and the developer has addressed any requested technical changes.
  • Final – EIPs that the core developers have decided to implement into various clients (Geth, Nethermind, etc.) and release in a future hard fork, or EIPs that have already been released in a hard fork.
It can be seen from the proposal process that the efficiency of implementing a proposal is very low, and the core developers of Ethereum occupy absolute decision-making power, which reflects some problems in the governance of Ethereum.

The governance mechanism tends to be oligarchic: Ethereum currently reaches consensus through the off-chain community, and proposals must be approved by the community, but the proposal process is generally proposed by core developers for discussion, and many node operators decide whether to implement it or not. ETH holders only have the right to express their opinions off-chain and have no actual voting rights. Compared with on-chain governance, the democratic foundation has certain deficiencies, and the personal influence of Buterin is too strong. One person has a decisive influence on the entire Ethereum community.

The governance structure is too narrow: At present, most of the EIP proposals are proposed by core developers and foundations, and the content mainly includes technology upgrades and vacancies. With the gradual maturity of Ethereum, issues such as compliance, secondary market, decentralized financial ecology or user experience need to be discussed in the proposal, not just at the technical level, but also at the technical level that developers are good at In this field, the threshold for ordinary participants to participate in governance is too high.

From the perspective of governance framework, the governance of Ethereum is completely dependent on the core developers of Ethereum and Miner. It seems that participation in governance is a very high threshold for ordinary users. At present, the upgrade proposal of Ethereum 2.0 does not mention any changes according to the governance structure. After the upgrade of Ethereum 2.0, Ethereum may still maintain this centralized governance structure. Under this governance structure, if Ethereum If there is a contradiction within the Fang Foundation or there are serious problems in the influence and credibility of V God, Ethereum may enter a state of governance chaos, which is a relatively big risk for the overall ecology of Ethereum. The Fang Foundation and Buterin may need to consider how to optimize the governance structure.

(2) After the upgrade of Ethereum 2.0, the improvement of security can also be reflected in the evil cost of POW and POS.

The cost of doing evil under the POW mechanism

The POW proof-of-work mechanism is simply to determine the block right by computing power. The security comes from the dispersion of computing power. In theory, if you master more than 50% of the computing power, you will have the absolute right to obtain bookkeeping. The advantage is that blocks can be generated faster, and they also have the right to tamper with blockchain data. If you want to do evil under the POW mechanism, the conditions that need to be met are that you can launch a “51% attack” to tamper with the data of the blockchain with more than 50% of the total computing power of the entire network. Then, if you want to launch a “51% attack”, you first need to have stronger computing power than other Miners, which requires a lot of money to buy equipment and pay a lot of electricity bills. Secondly, the computing power distribution of the entire network is completely transparent on the blockchain network, and everyone can see the computing power distribution of the head. When someone tries to buy a large number of Mining equipment to increase the computing power until it exceeds 51% , other Miners will notice, and other Miners will also add computing power to compete in order to prevent the computing power from being too concentrated, which makes it expensive and extremely difficult to increase the computing power to more than 51%. And from an economic point of view, the cost of launching a “51% attack” is too high and the profit is too small, and it is not as good as honest mining. Whether it is worth launching a “51% attack” is also a question. The cost of doing evil under the POS mechanism

The POS equity proof mechanism is simply to increase the probability weight of obtaining the block right according to the amount of pledged ETH, and the security comes from the decentralization of pledge. Under the POS proof-of-stake mechanism, in order to launch an attack, more than 51% of the total pledged ETH needs to be pledged, and the attack cost is much higher than that of the POW mechanism. And the POS mechanism has a slashing mechanism. If the verifier commits evil, the pledged ETH of the evildoer will be confiscated. In the POW mechanism, the Mining equipment purchased for evildoing has at least residual value, while in the POS mechanism, once it is confiscated, it is Huge irreparable loss. And the necessity of launching an attack under the POS mechanism is also controversial (what kind of income is worth the risk of losing all the principal), and the POS mechanism is superior to the POW mechanism in terms of security.

(3) Although the security has been improved, Ethereum 2.0 may face more serious centralization problems

The centralization problem under the POW mechanism before the Ethereum 2.0 upgrade

As the ecology of Ethereum becomes larger and larger, more and more people use it, and the growth of computing power remains high. Under the POW proof-of-work mechanism, Miners with low computing power can obtain block incentives after participating in Mining. The probability of mining is very small, so the small Miner joins the Pool (Pool is a pool of computing power that gathers large and small Miners) is a mainstream choice. Pools that concentrate a lot of computing power, the probability of Mining to the block is greatly improved, and then the obtained The rewards are distributed to Miners according to a certain distribution method, but with the continuous expansion of the Pool, the current Ethereum computing power has begun to show a trend of centralization, and a large amount of computing power is concentrated in several Pools in the head. According to the Ethereum block According to the data of the chain browser Etherscan, the top three pools accounted for Ethermine (28.2340%), F2Pool Old (13.2992%), and Hiveon Pool (10.4076%). The excessive concentration of computing power seriously threatens the overall security of Ethereum. , This is the most worrying situation for the Ethereum Foundation. The top three pools have combined computing power of more than 51%. If the top three pools jointly launch a “51% attack”, it is completely achievable. For the Ethereum Foundation, the rapid growth of the Miner group has enabled the Miner Alliance to threaten the security of the entire Ethereum network, which is something that Buterin and the Ethereum Foundation are afraid of and cannot tolerate.

36kmMDkvnpTT4PCyYAuFRjDFRH2mYz5TBgyic6Rv.png

from etherscan

Centralization problems faced by POS mechanism after Ethereum 2.0 upgrade

Since the POS mechanism is based on the amount of pledged ETH to determine the weight of the block right, this means that the centralization problem of Ethereum has changed from the over-concentration of computing power to the over-concentration of pledged ETH. Absolute advantage, at the same time, the existence of the POS pledge protocol is also a more serious problem of centralization. With the existence of liquid pledge agreements like Lido and other joint pledge service providers, many Miners who are dissatisfied with 32ETH or do not want to bear the risk of node operation will choose to participate This joint pledge will lead to excessive concentration of ETH on a certain protocol or service provider.

The current pledge distribution map of Ethereum shows: Lido protocol has pledged 31.72% of the total pledge amount, and Coinbase, which ranks second, also has 14.52% of the total pledge amount. The centralization is already very obvious, and from the characteristics of POS From the above, it may lead to a situation where the rich are getting richer and richer. The chips of the big investors will continue to increase, making the chips of the retail investors insignificant. Moreover, the Ethereum Foundation holds a large amount of ETH and has an absolute chip advantage. The Ethereum 2.0 upgrade The centralization problem will become more and more serious in the future. But at the same time, the security of the POS mechanism is much higher than that of the POW mechanism in terms of the cost of doing evil at the mathematical level. The combination of higher security and more centralization seems to be contradictory. Fang 2.0 has been a hot spot of long-term controversy.

cDaMHYMV6MAgf5eL2SBBqpQQLpRJaRYbK990IZPV.png

Data from beaconcha.in

(4) After the upgrade of Ethereum 2.0, will there be a serial stampede death spiral in Ethereum when extreme market conditions occur?

What is a death spiral?

Will Ethereum 2.0’s changes to the consensus mechanism risk a potential death spiral for Ethereum? Before delving into this answer, it is important to understand what a death spiral is: Simply put, it is a vicious cycle that leads to a series of stampede reactions leading to a crash.

Just like when LUNA crashed, the mechanism of LUNA is that 1 USD LUNA can mint 1 USD UST. The smart contract stipulates that it cannot be tampered with. The stable currency value of UST is maintained through arbitrage. When Terra has liquidity problems, UST is decoupled. A large number of people bought UST minted LUNA for arbitrage at a price below $1, and more and more LUNA were minted, but the liquidity of the stablecoin on the Terra chain was rapidly dried up due to a large number of people selling LUNA, and a large number of people began to use trans. The transfer of assets on the chain bridge caused congestion on the chain, making it impossible for people to equalize the price difference through arbitrage, panic began to spread, and the death spiral officially began. , LUNA started hyperinflation, LUNA was sold off a lot, because UST has been decoupling, UST holders continue to mint LUNA, LUNA continues to inflate, as long as UST does not return to $1, LUNA will continue to be minted, but liquidity is exhausted and UST cannot return to 1 The price of USD and LUNA could not stop the slump until the Terra blockchain stopped producing blocks. The death spiral of LUNA was caused by the flaws in the design of the economic model and liquidity problems coupled with the stampede of panic.

Will there be a death spiral in ETH2.0?

From the perspective of the Ethereum economic model, ETH under the POW mechanism is mined by computing power, and the consumption of ETH is achieved by paying GAS fees to complete on-chain operations. After POS, the acquisition of ETH becomes an incentive to pledge ETH. Compared with the POW mechanism, the inflation of the POS mechanism is lower, from about 4.3% of the POW to about 0.22%. After the performance of the Ethereum is enhanced and the cost is reduced, the demand for the Ethereum will rise and it will also stimulate the burning amount. In terms of the economic model mechanism, there is no destruction and casting mechanism that is bound to any other Token like LUNA, and there is no design flaw that leads to a death spiral in Ethereum.

When Ethereum fluctuates violently, will the people who pledged ETH take out the pledged ETH and sell it, will it lead to a death spiral of ETH? From the perspective of the pledge mechanism, before the “Shanghai upgrade” of Ethereum, all pledgers cannot withdraw the pledged ETH; after the “Shanghai upgrade” of Ethereum, the withdrawal function is opened, and the pledger will be free to withdraw the pledged ETH. So when Ethereum fluctuates violently, will the pledgers take out their pledges and sell them?

From the perspective of investor psychology, when the market fluctuates violently, it is usually retail investors who panic and sell meat, while large investors usually buy at lows and sell at highs, so even if Ethereum fluctuates violently, take out the pledge and A sell-off condition will occur, but it will not lead to a so-called death spiral.

First of all, the income of Ethereum pledge will fluctuate with the fluctuation of the total pledge amount. For the firm holders of the pledged Ethereum, the reduction of the pledge amount will actually increase their rate of return, so even if the Ethereum fluctuates violently, For Ethereum, there is only a short-term selling pressure, which is not enough to cause a continuous stampede, and for the firm holders of Ethereum, it is good for them to be able to buy cheap chips at a low price, and the amount of pledge The increase in yields caused by the decrease in BTC will attract more staking, which may just be a constant shuffling process for Ethereum rather than a death spiral.

So under what circumstances will everyone sell Ethereum and cause the death spiral of Ethereum to continue to fall? I think it may only be a very serious problem in Ethereum that causes the entire ecosystem to collapse. This possibility seems to be minimal at present.

(5) Since the probability of death spiral is very small, will Ethereum 2.0 have a hard fork due to the disagreement with Miners?

Before discussing whether there will be a hard fork in Ethereum 2.0, let me explain what a hard fork and a soft fork are and what is the difference between the two.

When there is a serious disagreement in the blockchain, it may cause a fork. In addition to the disagreement, the addition and upgrade of some protocols may also need to be realized through a fork.

Hard fork: A hard fork is defined as a permanent divergence in the blockchain. After the release of the new consensus rules, some nodes that have not been upgraded cannot verify the blocks produced by the upgraded nodes. Usually a hard fork occurs. After a fork occurs, two blockchains with the same ledger before a certain block are created.

The most typical case is the hard fork from Ethereum – Ethereum Classic: The DAO is a crowdfunding project initiated by the blockchain company Slock.it. On April 30, 2016, The DAO project Start crowdfunding, the project Token DAO, the crowdfunding time is 28 days. The DAO project raised a total of more than 12 million Ethereum, accounting for almost 14% of the amount of Ethereum at that time, which was worth more than 150 million US dollars at that time, and more than 11,000 people participated in the crowdfunding. However, The DAO’s code had a major loophole that allowed attackers to steal ETH from decentralized organizations, so the hackers launched an attack and maliciously stole about $50 million worth of ETH, which was a big deal for Ethereum at the time. It was a big blow, so after a series of intense discussions in the community, Vitalik Buterin, the founder of Ethereum, decided to initiate a hard fork rollback to recover the losses suffered by Ethereum, but some people adhere to the principle that the blockchain cannot be tampered with and refuse to upgrade , causing Ethereum to split into Ethereum Classic and now Ethereum.

Soft forks: Soft forks are softer than hard forks. When new consensus rules are released, nodes that have not been upgraded will produce illegal blocks because they do not know the new consensus rules, resulting in temporary forks, new and old. Nodes coexist. However, it will not affect the stability and effectiveness of the entire system. The old node can be compatible with the new node, but the new node cannot be compatible with the old node. The two will coexist on the chain until the synchronization upgrade is completed. Soft forks will not cause two The case of blockchain.

kxQkOdcaarlgVYJ2WQf8VyHNrgrY7WmNrbCpjLmX.png
Will there be a hard fork in Ethereum 2.0? I think the answer is that there is a possibility of a hard fork. Although the Ethereum upgrade proposal is mainly proposed and decided by the Ethereum core developers, the execution level has to be executed by Miner, because the upgrade of Ethereum 2.0 completely damaged Miners The interests of Miners have aroused strong dissatisfaction with Miners. Most Miners can only choose to sell Mining equipment and find other places after the merger. Therefore, Ethereum is likely to face resistance from Miners. Miners unite to sell in revenge or launch a hard fork. events are still possible.

Summarize

Compared with the POW proof-of-work mechanism, the POS proof-of-stake mechanism has lower benefits, but it is more environmentally friendly, relatively centralized, has less inflation, and has higher security and higher TPS. Although the ideal POS proof-of-stake mechanism will make the ecology of Ethereum more sustainable, because it has not passed the test of time and is immature, it will be full of unknowns after it is truly implemented.

The POS proof-of-stake mechanism allows the biggest beneficiaries to be transferred from the Miner group and the biggest beneficiaries to the Ethereum Foundation and POS pledgers, etc. This has caused dissatisfaction among stakeholders headed by Miner. Power can be migrated to other ecosystems, but most Miners may only choose to sell Mining equipment in exchange for ETH pledge to become nodes or other uses, which is a loss of interests for most Miners, which makes it possible to upgrade Ethereum 2.0. There will be some retaliatory behaviors such as collective selling, hard forks, etc.

If we discuss the changes of Ethereum 2.0 from several other perspectives, in terms of governance structure, the decision-making power of Ethereum is basically in the hands of the Ethereum Foundation and core developers, and the personal influence of Buterin is too large, and the scope of governance proposals Too narrow, which has led to Ethereum’s governance oligarchy. In terms of potential risks, the probability of Ethereum’s death spiral is very small, but the more threatening risk actually comes from the increasingly obvious trend of centralization, especially after the implementation of the POS proof-of-stake mechanism, the form of collective pledge makes things like A pledge protocol such as Lido will pledge ETH very centrally, resulting in serious centralization, but from the characteristics of Ethereum 2.0, we can see that Ethereum 2.0 has higher security than POW proof of work and a very high cost of doing evil. But when the two characteristics of high security and a more centralized trend are combined, the two seem to be contradictory, and this is also a point that has been debated for a long time.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/where-will-ethereum-and-miner-go-in-the-big-change-of-ethereum-2-0/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

Like (0)
Donate Buy me a coffee Buy me a coffee
Previous 2022-07-14 10:52
Next 2022-07-14 10:57

Related articles