The founders of the second largest blockchain are facing a whole new set of challenges.
Key Details
- The founders of Ethereum are facing enormous technical and financial challenges in the future as they work to continue upgrading the blockchain.
- As we reported Thursday, the second largest blockchain Ethereum successfully integrated its new proof-of-stake consensus mechanism in an effort to curb energy usage by 99.95%.
- Four subsequent upgrades are planned—The Surge, The Verge, The Purge, and The Splurge— that are designed to make Ethereum scalable, faster, cheaper, and easier to use. These implementations, like The Merge, will all happen in real time as the chain is in active use.
- An unintentional consequence of Ethereum’s Merge has been that the profitability of mining has radically decreased to the point where it is no longer profitable.
- The value of individual blocks has dropped 97.1% to 98.4% in some chains like Ethereum Classic and RVN, making them unprofitable and driving off miners.
Why it’s important
As the celebration over the Merge begins to calm down, existential questions about the future of the blockchain are beginning to emerge.
“And we finalized! Happy merge all. This is a big moment for the Ethereum ecosystem. Everyone who helped make the merge happen should feel very proud today,” said co-founder Vitalik Buterin.
“The Merge was the first step toward a series of upgrades on Ethereum to solve the scalability trilemma. After some point, the theory suggests that a blockchain has to compromise on one of its three key aspects—scalability, decentralization, and security. And that a blockchain cannot have all three at the same time,” says Bloomberg.
The upgrade has been necessary, as the blockchain isn’t able to handle large amounts of transactions at once.
“Scalability has been a problem for the Ethereum blockchain since its inception, with the blockchain designed to handle only about 30 transactions per second. Although this was initially sufficient, the explosive growth of blockchains in recent years has rendered it insufficient,” says CryptoNews.
The problem
In the short term though, Ethereum mining has taken a plunge. Since miners are no longer needed to support the blockchain, the value of mining radically decreased in value.
Crypto enthusiasts took to Twitter to note the direction of the miners, with a large percentage of miners estimated to have packed up and moved to other blockchains overnight.
“Graphics processing units (GPU) mining is dead less than 24 hours after the Merge, tweeted Ben Gagnon, chief mining officer at bitcoin miner Bitfarms (BITF). The three largest GPU chains have very low profits, and the only coins showing profit have no market cap or liquidity,” says Yahoo Finance.
“As suspected, too many ETH miners switched over to ETC… In total it looks like about 20-30% of ETH miners have found a temporary new home amongst other blockchains, the rest are shut down,” says Luxor Technology COO Ethan Vera.