Ethereum miners have been waiting for this day to come. The day they are referring to is the system-wide Constantinople upgrade.
It has proved almost impossible to deal with in advance. “We did not make any short-term adjustments in advance. We’re just taking it one step at a time” Wang Zelin (pseudonym). The step Wang is taking is stocking up on power supplies in readiness for a flood season that could see electricity prices spike.
What Exactly is Wang Preparing for?
It is the looming deadline of the Constantinople upgrade that is forcing him to be more prepared.
On January 16th, Ethereum will carry out its eighth major system upgrade – Constantinople. While the upgrade is expected to significantly improve the performance of Ethereum, the reward for miners will face a 33% decrease, moving from 3 ETH to 2 ETH per block. The core developers decided to adopt this upgrade in August 2018, but there is substantial opposition from miners.
Those mines equipped with tens of thousands of machines are not the ones worrying, but the upgrade has caused a lot of concern for smaller-scale miners. The Constantinople upgrade was originally scheduled for October 2018, but problems in testing (too few miners running the beta client) forced a delay in final release. Miners like Wang Zelin believe the upgrade won’t necessarily have a huge impact, and so he continues to prepare.
The Great Shuffle Comes
Chen Lei is head of the blockchain club at Peking University and is less optimistic about the survival of miners after the upgrade. Chen explains that in spite of the flood season in the southwest of China bringing lower energy costs (thanks for reliance on hydroelectric power), all it will do is lull people into a false sense of security. In the long term, mining is going to get more difficult and unit profits will continue to decline, he explains.
Looking at the bigger picture, even previously optimistic Wang Zelin showed concerns. “If the currency’s price does not improve much, the upgrade will kill some miners.”
“A percentage of miners will be affected. ETH is the largest currency for video card mining, and much of the mining operations are concentrated on graphics cards. After production rewards go down, machines that work inefficiently with a big power consumption rate will push some out of the game altogether. Remember what happened when the price plummeted last time.”continues Chen Lei
The “last time” Chen is referring to is the November 2018 drop where Ethereum fell to below $150 and bottomed out several times, leaving many miners unable to make ends meet. Qiu Xiaodong, an account manager at the Spark Pool (Xinghuo 星火矿池) mining pool, reminded us that overall computing power on the network dropped by some 160T at the time, nearly half the value! Based on calculations, it’s predicted that some 760,000 graphics cards left the Ethereum network.
Aren’t Small Miners Going to Survive?
People in the industry are hypothesizing that the only way for these smaller miners to get on will be to switch to smaller currencies, but that would only be a band-aid fix, and wouldn’t even work for all those affected by the upgrade. It comes to the final conclusion that in the face of this “deportation order” from Ethereum, selling graphics cards and older equipment off might be the best course of action for those miners to take.
Overall what do we see? It’s clear that the age of mining in the Ethereum with graphics card mining machines is coming to an end as the system upgrades and moves on. As for what happens to people during the transition period it’s difficult to say. Chen Lei believes the market will hold options and answers for them.