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Ethereum 2.0 to Make Mining Ether Unprofitable w/ Static Transaction Fees

Ethereum developers are presently working to launch “EIP-1559”, otherwise known as Ethereum Improvement Proposal #1559 or Ether 2.0 to reduce the Ether transaction fees, but there’s more to it than just that. It pretty much gets rid of the transaction fees by implementing a static model. Many mining communities are rallying to block this update, but that is unlikely to change the outcome.

Ether Transaction Fee at Present

Ethereum Average Transaction Fee

At present, Ethereum works similarly to Bitcoin and other popular cryptocurrencies. A fixed block size is implemented which is used to specify the maximum number of transactions that can be processed in one block. This is where the miners come in. To include their respective transactions in this limited block size, users send their blockchain transactions to miners with a transaction fee. Miners then choose the transactions with the highest bids (transaction fees) and include them in the new block. These bids or transactions are basically the money miners get for mining Ether or any other cryptocurrency.

Ether Mining and Transaction Fee After EIP-1559/Ether 2.0

With the introduction of Ethereum 2.0 or EIP-1559, all transaction fees are going to be static without any bidding. However, the block sizes will still vary, most likely on the higher side. Many critics of Ether 2.0 argue that increasing the block size will make the transactions less secure, even if it does improve the bandwidth of the blockchain significantly.

Smaller block sizes are generally considered more secure as they result in fewer transactions per second which in turn makes it easier to run a node. At present, you can trade scalability for improved security…at a higher transaction fee. With Ether 2.0, that will no longer be the case, it’s essentially a dirty fix to the bandwidth limitation.

And then there’s the concern of the transaction fees to the miners. Since there is no bidding and the transaction fees are static, miners will essentially be paid little to nothing for devoting their machines to mining Ether.

Source

Although miners have objected to this update, there isn’t much they can do. Most of the large mining pools are controlled by the Ethereum Foundation. These include Spark Pool and Ethermine which contribute to nearly 50% of the total Ethereum network. Even though these mining pools include numerous individual miners, they don’t take part in making any of the decisions.

There’s no clear date as to when Ether 2.0 will be launched, but the first phase is started to land sometime in 2021. Ethereum Developers expect it to land anytime now. “Everything is pretty much finalized” — they say, but one thing is missing: Mining Community Support.

Via: Flexpool

Areej

Computer Engineering dropout (3 years), writer, journalist, and amateur poet. I started Techquila while in college to address my hardware passion. Although largely successful, it suffered from many internal weaknesses. Left and now working on Hardware Times, a site purely dedicated to.Processor architectures and in-depth benchmarks. That's what we do here at Hardware Times!
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