Crypto Mining Companies are Hedging Against Ethereum’s Proof-of-Stake Blockchain Switch
Why Mining Companies are Staking Against Ethereum’s Proof-of-Stake switch?
Ethereum had made headlines earlier this year when they expressed their desire to switch to Proof-Of-Stake consensus algorithm. However, it has been reported that a few mining companies are betting against this move.
Several mining companies have invested millions in creating specialized mining chips for ethereum, machinery that will only function as long as the network pays out new cryptocurrency to those who dedicate computing hardware to the effort.
One such company is Linzhi, which is currently developing a new Ethereum ASIC which promises to be more efficient and powerful than any previous chip. The CEO of Linzhi, Chen Min, is not overly concerned with Ethereum switching algorithms, in fact, seems to think it is a bad idea.
Linzhi's ASIC warrants to overhaul earlier ethereum ASIC designs, highlighting high improvements to energy efficiency and computing power. But, the mining chip will only function on ethereum if the blockchain keeps its current code-base.
She has quoted:
“The cost to get to first silicon and sample machines is roughly $4 million. Additionally, we have our ongoing cost of operations, salaries, office, which are all modest, lean and efficient.”
Linzhi isn't alone in this position. Mining giant Bitmain released its ethereum miner, the Antminer E3, back in March, while Innosocilion announced three ethereum miners in July.
Is Proof-of-Work Better?
Supporting Chen's opinion is the idea that proof-of-work is simply a better system for managing the distribution of cryptocurrency rewards. In this way, Chen described a possible proof-of-stake switch as “not a smart thing.”
“There are so many people, so many users, developers and hardware invested in that coin. If they ignore the work that has been done and switch to proof-of-stake, maybe later they can also ignore your stake and switch to proof-of-some other ideas,” she said.
Problems Facing ASIC Mining in Ethereum
The engineers behind ProgPoW – a project that would change the code to only allow GPU miners as an alternative to ASICs were in attendance. Though still in the proposal stage, if executed, ProgPoW would effectively disable ASICs from mining on ethereum – and momentum is building toward the implementation.
Chen, nevertheless, maintained that such ideas are nothing more than premature reactions, ones that don't actually provide solutions to some of the concerns about how ether rewards are distributed in the community at large.
“ProgPoW is being pushed by large farms that have not disclosed their real intentions. The fear of Bitmain is driving the [ethereum] community into the arms of some very powerful well-funded farms that they don't even know about.” Chen said.
The drive for ProgPoW is representative of what has been termed crypto's “war on miners,” in which several cryptocurrencies have moved to remove ASIC hardware manufacturers from their respective networks.
However, according to Chen, much of the conversation about removing ASICs from ethereum lacks an awareness of the kind of advantages specialized hardware can bring to a cryptocurrency project.
Chen insisted that in the event of ProgPoW or proof-of-stake, they will switch to mining ethereum classic, a rival ethereum platform that split away from the blockchain in 2016, and that has been more friendly to ASIC hardware.
“We would like to reduce the power consumed to secure [ethereum], but if they want to stick with wasteful GPUs run by two companies and powerful secret farming concerns, then we will just press on with [ethereum classic].”