When Ethereum mining will end

Advantages and disadvantages of Ethereum moving from PoW to PoS

Proof-of-Stake is likely to lead to significant changes in ETH supply in the short term. Once the merger occurs, the level of issuance will depend on the amount of active bets. Etherium issuance is expected to decline by about 90% from the current annual supply (from 4.3% to 0.03-0.04% of total issuance). The second deterrent to deflation is the implementation of EIP-1559, which is responsible for burning all transaction fees, reducing coin issuance.

At the ETHGlobal hackathon, etherium developers invited decentralized applications to try a test network on PoS between April 16 and May 16, 2022. Node operators, software developers and infrastructure providers are currently testing the Kiln Testnet Merge. The creator community behind Kiln Testnet Merge says the transition to the core network is scheduled for June 2022. Since the rewards for the transaction confirmation process will no longer be in the hands of the most powerful miners, a fairer consensus environment will emerge. There are currently over 300k validators on the test network, 37% of which are individuals.

Benefits

EIP-1559 reduces the profit margins of miners. Efirium will become more scarce and hence there will be an increase in its price over time.

Disadvantages

There are several ambiguous issues to be resolved by the mining community:

• The Merge will not reduce gas fees on the Ethereum blockchain, as it is only linked to the consensus mechanism that protects the network. This is a stage to move to a future sharding update (at which point the gas fee will become lowered).
• In fact, a new token will be issued – ETH2. However, the Ethereum Foundation is dropping the terms Eth1 and Eth2. Subsequently, it will be possible to exchange the ETH1 token for ETH2. The conversion is only one way. This can be confusing. Ether mining on the video card will stop when most of the already mined ETH is transferred to layer 2 (ETH2). However, it will be possible to make transactions with both layer 1 and layer 2 tokens.
• The scammers tricked users by offering to exchange their ETH for fake ETH2 tokens. The attackers insisted that it was necessary to transfer valid coins before launching the new network.
• Some staking platforms provide ETH cryptocurrency with the ETH2 ticker (hosted by Beacon Chain). And users don’t realize what this asset is. In fact, they don’t actually receive the ETH2 token. There is no such altcoin. It simply represents a user’s share in a pool of a particular liquidity provider.

Bottom line

Since the network’s inception, the development community has made many attempts to reduce inflation. The first steps involved reducing the reward for mining the blockchain. Later, in 2021, the creators proposed to burn coins, and thanks to this, the inflation rate in the network was reduced to 4%. Stage 0 (merge) in theory should be the beginning of the end of GPU mining of etherium. Testing the new layer will help eliminate the bugs associated with running the network without mining. When the full transition from PoW to PoS happens, the demand for graphics cards from miners will decrease. However, nodes will still be generating blocks and releasing new ETH to the market for a long time. Therefore, the transition to Ethereum 2.0 will not be an obstacle for mining the second most capitalized cryptocurrency.

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