Ethereum - Road to Proof-of-Stake
How much it costs to be a miner?
Cost of mining equipment - approx. $21k per miner (Innosilicon A10 pro+
750MH - the most cost efficient miner out there currently).
musings:
You would need at least 5 of them to make some money ever; so that's $100+k cost just for mine.
What rewards miners make now?
2 ETH per block + User's Fee + MEV (maximal-extractable value)
What is MEV?
As a miner you could potentially front-run / arb transactions to make extra
money. Majority miners out-source this to "automated bots" that do a form of
"auction" to bid against other bots to find + complete a "arb-able" transaction
Why is London hard-fork important?
This will include EIP-1559 update. This update will lead to less rewards being given to miners by way of destroying user fees
Why is it called hard-fork?
The upgrades are not backward compatible - so everyone must move forward
Can miners oppose the fork?
Any opposing miners will incur same costs as the those who merge with London; so no real incentive for miners to mutiny, however, they could decide to create another alt-coin; this occurred in past already (ETC forked off from ETH).
musings:
Will be a disaster as all tokens will be worthless at the
genesis of this "alt-coin" thus..
What this means for miners?
Less rewards so more efforts will be made on MEV efforts by miners. This is already being fought out in public by miners competing against each other.
How does this link with Proof-of-Stake?
This update will also set in place a baseline mindset (mining incentives etc) for future once ETH moves from Proof-of-Work (POW) to Proof-of-Stake (POS). POS "beacon" chain (ETH2) is already live for a while. POW (ETH) network will co-exist with POS (ETH2) for some time; so opportunity to make money via mining will exist but slowly the emphasis will shift over to POS.
musings:
Noise is being made that ETH chain should merge to
ETH2 asap; with potentially the "Shanghai hard-fork" being potential candidate time - but this currently means EOY 2021
What will POS world be like?
Miner's hardware investment will become zero (or close to worthless as those
ASIC miners are specific per type of crypto). New investments required to setup yourself as a validator. 32 ETH (that's your stake) required per validator + 1 ETH for any fees. Also, need to ensure your validator is up/working at all times (approx. 60%+ up-time) as well as ensuring validating software is kept up-to-date at all times. Moreover, will have to pay penalties if validator is not up/working 60% of time - this penalty gets severe given a few other criteria.
musings:
POW: it's like being an owner of a football (soccer) club. You always must have the best players to have higher chance of winning so your cost keeps going up
POS: more like owning real estate; pay to refurbish now and then but if it's good location it will keep rewarding you and you will hope to win more than lose due to refurbishing / tax
Interesting Reads / Listens:
Joe Weisenthal
