How to plan the layout of GPU mining in the transformation year of ETH and ETC? Listen to the insights of industry insiders.

2020/3/18

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By analyzing aspects such as network value, ecosystem, and computing power, one can understand the new landscape of GPU mining.

Original Title: "The Transformation Year of ETC and ETH, How to Position GPU Mining? Understanding with One Article"
Written by: f2pool

In 2020, the two major coins of the "Ethereum family," ETH and ETC, are each going through their own period of transformation. Ethereum's original chain, ETC, is about to undergo its second halving, while ETH plans to transition from PoW to PoS in the second half of the year, signaling a major adjustment in GPU computing power positioning.

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With Ethereum transitioning to PoS, where will mainstream GPU computing power go? Can the "same root" ETC take over the baton of computing power and lead the PoW camp? Amidst changes in computing power and prices, how should miners approach ETC and ETH mining?

Recently, FishPool's live broadcast invited Xuke, the head of ETC in the Asia-Pacific region, Zhang Songqing, co-founder of minerOS, and Kevin Zhou, head of the Aladdin Mining Research Institute, to analyze aspects such as network value, ecosystem, and computing power, engaging mining enthusiasts in discussing the changes in computing power and understanding the ETC ecosystem.

As the original chain of Ethereum, ETC's economic model is designed with reference to Bitcoin. Its reduction logic is similar to Bitcoin, but considering design requirements such as network functionality and security, ETC's reduction is not halving but reducing by 20% every 5 million blocks.

ETC's monetary policy is the result of protocol programming, not relying on human subjectivity. This monetary policy is mechanized and algorithmic, with a supply curve that has limits and tends towards saturation, leading to a decreasing inflation rate.

ETC's Asia Pacific region head, Xu Kang, compared ETC to BTC and pointed out the features of ETC. ETC has an average block time of 15 seconds, with over 72 million pre-mined Genesis blocks, including 1 EVM, 1 programming language, and 1 gas system.

One notable feature in block rewards is the existence of "uncle" rewards. When multiple valid blocks are generated simultaneously and broadcasted across the network, Bitcoin's rule is to discard the shorter chain of blocks, naming it an "orphan block" and providing no rewards. In ETC, due to a higher block generation frequency, the possibility of simultaneously generating multiple valid blocks is higher, and ETC's rule is to reward stable blocks simultaneously, known as "uncle blocks."

With each reduction, ETC enters a new "epoch," each lasting approximately 2.38 years. ETC entered "Epoch 2" at the end of 2017 and is about to enter "Epoch 3."

In "Epoch 1," a single block receives a reward of 5 ETC, an uncle block can receive a reward of 4.30375 ETC and an incentive of 0.15625 ETC, with a maximum of 2 uncle blocks packaged, thus receiving a maximum of 14.0625 ETC each time;

In "Epoch 2," a single block receives a reward of 4 ETC, an uncle block can receive 0.125 ETC and an equivalent ETC incentive, with a maximum of 2 uncle blocks packaged, thus receiving a maximum of 4.50 ETC each time;

Starting from "Epoch 3," all block rewards will decrease by 20%. Incentives, including uncle block rewards, will receive the same discount.

Kevin Zhou, head of Aladdin Mining Research Institute, believes that the market has already gone through the first wave of halving according to the "reduction script" and has entered the pre-halving correction phase.

Mainstream GPU mining coins like ETC will continue to follow the reduction script. Although the outbreak incentives and the final development of various projects may differ significantly from before, the trend of mainstream projects will still follow the script of pre-halving correction, rapid bottoming after halving, and then opening a long slow bull market, "replaying history."

Currently, we are at the tail of the halving market for ETC, at the head of the entire halving cycle.

Zhang Songqing, co-founder of MinerOS, pointed out the three key factors for miners' decisions: computing power, coin price, and revenue. He mentioned that for ETH and ETC, both using the Ethash algorithm, understanding the changes in their price, computing power, and revenue ratios can help grasp the critical moments of mining resource movement in the two networks.

Through data analysis, we can observe some characteristics:

The overall computing power and coin price of ETC are strongly correlated, with computing power and price rising and falling synchronously. From the end of 2019 (start of halving expectations) to the present, the coin price has increased fourfold, and computing power has doubled at its peak.

The variation in daily production between ETC and ETH also affects the coin price. Historically, each change in daily production has had some impact on the coin price. After ETH's daily production decreases, the ETH price drops first and then rises, while ETC follows the opposite pattern; when ETC's daily production decreases, the ETC price first drops and then rises, with ETH following the reverse.

The expectation of halving affects the comparison of computing power. From the end of 2019 to mid-January, the computing power gap shrank as the ETH/ETC price ratio decreased; later, as ETH prices rose, the computing power gap widened. Coins undergoing halving compared to other coins using the same algorithm create a reluctance to sell in the market. They may rise first and then fall, and after halving, due to reduced supply, the coin price gradually recovers.

Similar to "brick moving" on exchanges, miners can self-adjust during the price changes of mining coins using the same algorithm. With management systems like minerOS, the NiceHash computing power trading system, and the emergence of some mining pools, miners currently see similar short-term profits from mining ETH and ETC.

Compared to a 50% reduction, a 20% reduction poses less risk to miners in terms of short-term profit changes. According to Tokenview data on March 8, 2020, ETC's total market value was $869 million, significantly lower than ETH's $24.89 billion. With ETH's daily production value at $2.3 million and ETC's at $142,000, under unchanged market conditions, the estimated overall income impact on relevant miners due to ETC's 20% reduction is -1.1%.

How will ETH's transition to PoS affect the GPU mining landscape, and what choices do ETH miners have regarding computing power? Currently, half of the GPU mining market's total computing power is in ETH. With ETH 2.0 transitioning to PoS consensus, miners will have to choose between ETC or other projects. How will this affect the computing power and what changes will occur in ETC's computing power, becoming a focal point for miners.

Currently, there is still a significant gap between ETC's market value and ETH's, and the ability to "attract" enough computing power from ETH depends on market performance. While prices are challenging to predict, we can try to anticipate future trends based on the current situation, value, and potential for development.

Xu Kang, while analyzing the reasons for the rise in ETC during the halving market, mentioned that supply and demand are just one aspect. In addition to the fixed monetary policy and issuance limit making ETC tokens a "hard asset," institutional recognition, progress in technology interoperability with Ethereum, and progress in technology interoperability with Ethereum are all driving value increase.

Zhang Songqing mentioned that according to CoinMarketCap, ETC is currently ranked 18th in the cryptocurrency market, second only to ETH in terms of market value among GPU mining coins. After ETH transitions to PoS, GPU miners are likely to switch to ETC. ETC's current market value is far from sufficient to attract ETH's computing power, but compared to other currencies, ETC has a higher chance of attracting computing power.

Kevin Zhou of Aladdin Mining Research Institute believes that stable and continuous project operation and development have a significant impact on the market value of GPU mining coins in the long term. As there is fierce competition in the public chain ecosystem, only by using technology to implement applications on public chains can one seize the future. The value of ETC also depends on the growth of computing power to promote network security improvements, and the re-aggregation of computing power that was previously separated will undoubtedly promote new developments in the community and development.

ETC's mining revenue has long dominated A-card mining coins. Computing power ensures the network's security and demonstrates the coin's value, thereby promoting price increases. With the push from prices, computing power will automatically flow to coins with higher prices, indicating a complementary relationship between computing power and price growth.

"Hodling" is considered one of the coping strategies. Kevin Zhou of Aladdin Mining Research Institute believes that the combination of "ETC halving + ETH2.0" is a "bearish" scenario for GPU miners. After the project's output decreases, under unchanged prices, the revenue for equivalent computing power will decrease. Although the transition to ETH PoS will take time, GPU miners will eventually be unable to mine ETH with mining machines and must consider switching computing power to other projects.

"ETH is transitioning to PoS, can mining machines still mine, and for how long?" Many miners have raised questions about how to deploy computing power with the ETH PoS upgrade. According to official ETH media reports, the ETH transition to PoS is expected to start this year, with no specific date confirmed yet. After PoS is implemented, it will take a long time, possibly two years or more, to complete this major project. PoW and PoS blockchains will coexist for a period to complete the transition. After ETH's PoS chain is launched, miners can still mine with mining machines and earn profits. The transition from PoW to PoS is relatively slow, giving miners enough time to adjust and deploy.

In this regard, GPU miners need to make good use of their current computing resources, mine more and stockpile ETH and other halving tokens. Because 1) after ETH transitions to PoS, only by holding more ETH to participate in network consensus can one earn more tokens; 2) if other halving tokens are fully absorbed by the market based on daily production, after the halving, the market will demand the same value of tokens to enter, driving up token prices.

Although the entire cryptocurrency market has been impacted in the short term, network value growth, mining hardware iteration, remain essential factors driving coin price increases in the long run. We can look forward to DeFi ecosystems, interoperability, and more new narrative topics.

The compatibility between ETC and ETH will lead to more discussions and progress, serving as a breakthrough in ETC's ecosystem development. Xu Kang stated that through the Atlantis, Agharta, and the upcoming Phoenix hard fork upgrades, ETC and ETH will be fully compatible. DApps on ETH can be easily duplicated or transferred to ETC at almost zero cost. Even DApps on ETH and applications on ETC can seamlessly connect and communicate, achieving true interoperability.

Soon, there will be a variety of DApps on ETC, including lending, exchanges, stablecoins, and other DeFi ecosystems. After ETH transitions to PoS, ETC can serve as the data availability layer for ETH2.0, responsible for security confirmation work. This integration will be more conducive to the integration of the two communities, achieving mutual prosperity.

The topic of ASIC mining machines using the Ethash algorithm will be significant. Zhang Songqing pointed out that this year, the DAG files for ETH and ETC will exceed 4GB, rendering 4GB graphics cards unable to mine. Relative to the halving topic, the impact of GPU mining machine iteration may be more significant.

Xu Kang analyzed that not long ago, the Antminer E3 stopped mining ETH and ETC, with the primary reason being the 4GB DAG limit. Additionally, Ethash is significantly different from Bitcoin mining algorithms, making it challenging for major Bitcoin mining companies to adapt. Apart from the E3, other announced Ethash mining machines like Innosilicon's A10, among others, are also eager to try. It is believed that many Ethash ASIC mining machines will surface this year.

This year, new narrative topics will emerge with the development of network protocols and changes in the market, including financial derivatives, DeFi network security, which will bring more discussions to the industry alongside the halving topic.

This article is reposted with permission from ChainNews, Source: ChainNews (ID: chainnewscom)

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