Valid Points: How Ethereum Miners Are Preparing for EIP 1559 and the Merge – CoinDesk

by crypto journalist

This week, I pull back the curtains on how miners are preparing for Ethereum’s forthcoming fee market change, EIP 1559. Also, I explain the hidden lesson behind the rare cases of Ethereum 2.0 validators with a balance of more than 64 ETH. For most of these validators, the high balance is not by choice.

The balances of Ethereum 2.0 validators range wildly from 30 ETH to 65 ETH. The main reason for the extreme disparity is not because some validators are more profitable than others or because some validators started earning rewards on the network earlier than others. Roughly 168 validators out of 178,000 simply deposited their minimum stake of 32 ETH twice, by accident. 

According to Stakefish’s head of strategy and operations, Jun Soo Kim, the user then “manually invoked” a second deposit of the same batch of transactions, causing each 32 ETH deposit to become a deposit of 64 ETH.  

Confirming this sentiment, Kim said Stakefish has been “in close contact with the user and … notified them that there can’t be anything done until withdrawals are enabled.” Kim added, “We will be closely monitoring the upgrade proposals [for Eth 2.0] that will help the user withdraw excess ETH from validators.” 

These double deposit incidents highlight the importance of taking extra precautions when setting up an Eth 2.0 validator and, in cases where a user is setting up multiple validators at once, they also highlight the benefits of running through the setup process on a test network before executing the steps on Ethereum mainnet. 

Normally, transaction fees are set by users and accepted in full by miners. Under EIP 1559, the base fee is set by the Ethereum protocol automatically and is removed or “burnt” by the network instead of being awarded to miners. The burning mechanism of EIP 1559 is one of the most controversial aspects of the London upgrade because of its potential to reduce miner revenue. 

“While we think [EIP 1559] will bring better predictability for transaction inclusion, we think that fee burning is a bad idea, considering many transactions requiring extended computing resources for smart contract execution … will no longer be compensated,” Slava Karpenko, the CTO of Ethereum mining pool 2Miners, told CoinDesk in an email. 

After a successful activation on Ethereum test network Ropsten this past week, EIP 1559 is scheduled for release on the Ethereum test network Goerli on Wednesday, June 30. Assuming all goes well on Goerli, Ethereum Foundation’s Tim Beiko estimated that protocol developers could pick a block number – and subsequently a date – for main network activation shortly thereafter. 

Any disgruntled miners who do not choose to upgrade their software to the latest version would effectively be mining a different Ethereum blockchain. For most miners, this would be the least-profitable option for them to take, according to Igor Stadnyk, the CEO of Ethereum mining pool Minerall. 

“What options do we have?” said Stadnyk in a phone interview with CoinDesk. “[If] we tell the world we are not happy with this proposal and we will run on non-updated software, we will run old Ethereum. This means one more Ethereum Classic will be created … It will be like a network split and then the question is, will other big market players support this network split? I don’t think so.”

Stadnyk and his team, like Lee and Karpenko, will be supporting the London upgrade come July. Stadnyk said he remains confident in the long-term success of Ethereum as a result of the network’s constant evolution and iterative development, which is why he is also now exploring options to continue participating in the network even when mining is no longer an option. 

Some time early next year, Ethereum is expected to transition fully to a proof-of-stake (PoS) protocol, meaning that validators instead of miners will take over the responsibilities of transaction validation and block production. This upgrade to PoS is nicknamed “the Merge.”

In next week’s Valid Points, I’ll uncover the reasons why Ethereum miners like Lee are not as supportive of Ethereum’s Merge upgrade as they are the London hard fork, and discuss the differing plans miners have to remain profitable in their operations post-Merge. 

This content was originally published here.

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