A code change Ethereum Improvement Proposal 3554, or EIP-3554 for short, is hidden in Ethereum’s major software overhaul. It has the potential to precipitate the demise of ethereum mining as we know it.
Since its inception, the ethereum community has talked about changing the method it mints ether, the asset associated with the ethereum blockchain. However, convincing them to adjust will necessitate a push — and that push will take the form of a difficulty bomb.
An ethereum mechanism makes mining considerably more difficult, said Tim Beiko, the protocol developers’ coordinator. It’s as if we’re artificially increasing the number of miners on the network, which raises the difficulty, making it more difficult for every other miner on the web to mine a block. EIP-3554 pushes the trouble bomb’s explosion date forward by six months to December. When it goes off, it effectively renders ethereum unmineable.
Proof of work
Cryptocurrencies like ethereum and bitcoin are frequently chastised for the mining process, creating a new currency. Both presently use a mining methodology known as proof-of-work. Machines solve complex math equations to generate new money. That makes it impossible for any centralized authority to manufacture new money at will – there is no equivalent of a central government to print new dollars.
This endeavour, however, necessitates a large amount of energy to power the computers needed to perform the computations. The ethereum community has gathered around the notion of transitioning from proof-of-work to proof-of-stake. That will still limit the number of new coins issued, but without the energy required to vast power banks of computers to solve arithmetic equations.
According to Beiko, the initial idea needed these so-called validators to have 1,500 ether, today worth almost $4.2 million. The proposed proof-of-stake plan would need interested users to have only 32, or roughly $90,000 in cryptocurrency. The next step is to migrate the entire ethereum ecosystem to Beacon, nicknamed ethereum 2.0. The difficulty bomb comes into play when it comes to getting everyone on board with the action.
The ice age
That isn’t the first time a complex bomb has exploded in Ethereum’s history. It has happened several times, notably in 2017, 2019, and last year. When a problematic bomb goes off, it floods the system with artificial miners, increasing the mining difficulty.
According to Nic Carter, Coin Metrics co-founder, the goal of the difficulty bomb is to force miners and node managers to upgrade their software after a certain amount of time has passed. Suppose the deadline for explosion isn’t moved out in December. In that case, the bomb will detonate, and you’ll experience another parabolic climb in difficulty, similar to the ones shown in the chart above. However, developers will not be turning back the clock this time. It will mark the commencement of Ethereum’s Ice Age proof-of-work.
About the change
While many people support the upgrading to Ethereum 2.0, not everyone is pleased with the change.
Sure, miners oppose it, but it is in their financial interest to fight it, Beiko explained. There will be no revenue from ethereum mining once the protocol has fully converted to a proof-of-stake basis.
Numerous other chains support GPU-based mining, so miners may begin mining different cryptocurrencies. They could also decide to discontinue mining activities and sell their mining equipment. Beiko anticipates a lot of this.