Ethereum Miners Bet Millions on Delay of ‘London’ Update | Future of Money

Leading bitcoin mining companies and industry-oriented equipment manufacturers are increasing their investments in ether mining, despite the imminent shift of the network’s consensus mechanism to the proof-of-stake.

Bitcoin mining companies Hut 8 and Hive are increasing their capabilities to mine the world’s second largest cryptocurrency by market value. Meanwhile, equipment manufacturers such as Bitmain and Innosilicon are already set to launch new mining machines on the Ethereum network by the end of the year.

Such an investment may seem odd, as the Ethereum network’s consensus mechanism will migrate from proof-of-work (PoW) for the proof-of-stake (PoS) in five months, and the mining process after this change will not require machines as advanced as these. The growing demand can be attributed to expectations that the migration will be delayed, according to industry professionals.

“We were told that mining would end four years ago and we’re still here,” said Mark D’Aria, CEO of Bitpro, a US consulting firm focused on brokering and managing mining hardware on the Ethereum network. “It’s always been a ‘wait and see’ approach – things tend to take longer than everyone thinks.”

While the “London” update brings the network closer to Ethereum 2.0, significant advances across the blockchain’s six years also have a history of several delays.

For example, the “Constantinople” update – which was an important step on the way to Ethereum 2.0 – was originally scheduled to be released in early 2018. However, a bug in the code delayed implementation until February 2019, creating more layers for migration.

Freezing Mining with the “Ice Age”

The proposed Ethereum Network Improvement (EIP) 3554 introduced the Difficulty Bomb that adds artificial miners to increase the mining difficulty, making operations less profitable. This point was called the “Ice Age”. Network developers initially introduced the EIP in 2015, but ended up postponing it to December 2021.

As the price of ether rises, it could become more difficult to transition the network to proof of participation, said Ethan Vera, COO of Luxor in Seattle.

“We see ether rising into the $3000 range, the decentralized finance system (DeFi) is built on top of the grid and (NFTs) have taken off,” said Ethan Vera. “Even those who are optimistic about the transition from the Ethereum network to POS still want to take it slow to make sure things get done right and that there are no doubts, pitfalls or blind spots that developers might be missing.

In addition to technical challenges and asset security issues on the Ethereum network, potential resistance from the mining community could be another factor that would slow down the network’s migration to POS.

“One thing that hasn’t really been understood is how much resistance there will be to this migration,” said D’Aria. “To think they’re just going to flip a switch and turn off billions of miners’ dollars is crazy, it’s not going to happen.”