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On November 24, OKLink data from OKLink showed that the balance of the Ethereum 2.0 deposit contract address reached 524,288 ETH, meeting the minimum requirements for starting the Ethereum 2.0 genesis block.
This means that Ethereum 2.0 will be officially launched on December 1.
Ethernet Square early in the design, planned at a certain point in time in the future is no longer used workload proof (Proof of Work) to determine which blocks by the miners can be submitted to the main chain, and instead adopt proven equity (Proof of Stake) , Ethereum 2.0 will introduce part of the proof of stake as a consensus mechanism.
So, what are the advantages of proof of equity compared with proof of work? After the launch of ETH2.0, what changes will miner investors face?
Disadvantages of PoW (Proof of Work)
1. Heavy asset investment
Like BTC, ETH1.0 uses the consensus mechanism of proof of work. The essence of proof of work is to compete for money. Whoever can buy more mining machines to contribute more computing power to the network will get more rewards.
Because a large number of mining machines are required and consume a lot of electric power, the investment cost is relatively high. Electricity is one of the main expenditures of these projects, and when the price of the currency drops and the electricity bills of the miners exceed their income, they can only choose to shut down.
For miner investors, idle assets mean that the payback period is extended and losses are lost.
2. Low network security
In the proof-of-work model, as long as the computing power exceeds 51%, an attack can be launched against the network. Popular cryptocurrencies, such as Bitcoin, Ethereum, Litecoin (LTC/USD) and Monero (XMR/USD), are relatively safe due to their large computing power. However, small currencies that have a long interval between block explosions and a small network-wide computing power are at risk of such attacks.
Advantages of PoS (Proof of Stake)
1. Small investment in heavy assets
Proof of equity is very similar to the process of stock raising, that is, the more Ether you have in this virtual world, the higher the probability of successful submission after packaging, and the more rewards you will receive. This means that investors can reduce the investment of heavy assets and invest more money in PoS assets.
2. Improved network security
Only when the amount of Ether you own exceeds 51% of the entire network can you attack the network, which greatly increases the difficulty of the attack and enhances the security of the network. PoW and PoS have their pros and cons, but when those mined currencies are mined, they may have to switch to the proof-of-stake mode. Therefore, maybe one day all PoW will gradually be converted to PoS.
The upgrade of Ethereum is not only related to the development of code and network design, but also closely related to a group of investors.
So for miners, what are the dilemmas and opportunities when ETH2.0 changes from PoW to PoS , and how to participate?
Dilemma and opportunities for miners
1. Dilemma: The reward algorithm changes, and Ethereum may no longer need miners.
In the ETH1.0 version, the Ethereum network relies on computing power to create new blocks, and miners receive Ethereum rewards by contributing computing power.
The proof of stake relies on validators (virtual miners) and deposits of Ether to construct new blocks. That is to say, when PoW is fully transitioned to PoS, Ethereum no longer needs miners. So how should GPU miners deal with their miners? Either sell it or mine other coins.
2. Opportunity: no need to compete for computing power, cost drops, and new opportunities are born
For validators (virtual miners) who are ready to enter the market, the reward algorithm of proof of equity means lower input costs. They no longer need to buy mining machines, so they can invest more money in PoS.
For validators, changes in the reward mechanism will change their investment methods;
For the entire network, the decrease in cost will encourage more nodes to participate in the maintenance of the blockchain, and strengthen the decentralization of the blockchain.
The increase of verifiers can accelerate the speed of transaction confirmation on the blockchain, improve the efficiency of transactions and verification, and also increase the speed of verifiers’ money.
3. How do miners participate?
By pledge 32 ETH, you can become the validator of Ethereum 2.0.
When the entire network reaches 520,000 ETH pledges, the annualized return can reach 21.6%, and when the entire network reaches 10 million ETH, the annualized return can be maintained at about 5%.
And during this period, you can still enjoy the bonus of ETH price increase. Of course, the validator also has to bear the risks of not withdrawing ETH after 2 years of lock-in and changes in the return rate.
Although ETH2.0 has certain advantages in the early stage, for miners, due to the large investment in the early stage, this upgrade of ETH may still cause some losses to them. Embracing changes and changing investment thinking in a timely manner may be their top priority .