Why Ethereum Miners Are Making A Million Dollar Bet Against Proof-of-Stake

Even as Ethereum ETH/USD inches closer towards being a Proof-of-Stake (PoS) coin, miners and manufacturers have ramped up the production of Ether mining machines.

What Happened: According to a report from CoinDesk, mining companies like Hut 8 Mining HUTWF and HIVE Blockchain Technologies Ltd HVBT are actively increasing their Ethereum mining capacity.

Meanwhile, crypto mining manufacturers like Bitmain and Innosilicon are on track to release new Ethereum mining machines this year, all while knowing that Ethereum’s transition to a PoS network is just five months away, effectively making those machines redundant.

Why It Matters: “We were told mining was going to end four years ago and it is still going,” Mark D’Aria, chief executive officer of Bitpro, told CoinDesk.

“It has always been a wait-and-see approach – things tend to take longer than everyone expects.”  

Miners appear to be anticipating a delay in the actual transition to PoS, and when the time comes, D’Aria expects that miners won’t be so accepting of their new circumstances.

“One thing that has not been really appreciated is how much resistance there is going to be to that proof-of-stake migration,” D’Aria said. “To think that they are just going to flip a switch and turn off billions of dollars of miners, that’s crazy, that’s not going to happen.” 

Even after the London Hard Fork brought about a fair reduction in the fees paid out to miners, their revenues were unchanged as Ethereum’s price climbed higher.

Data from CoinMetrics revealed that daily miner revenue hit a two-month high of $49.8 million on August 10.

Ethan Vera, chief operating officer of Seattle-based mining company Luxor, believes that as Ether’s price rises, it will be more difficult for the network to transition to PoS.

If miners use the latest generation of ASICs to mine Ethereum, he estimates that their payback period on their investment could be just four months.

“The miners who betted against proof-of-stake two years ago made an absolute killing,” said Vera. “If you can bet against that, the return could be quite lucrative.”

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