Last night, Stephen Wealthy, Your Friend Andy, and The Money Mom hosted a Twitter Space in which they dove into crypto mining, with a focus on getting started. This is one of those times where the exact right word or phrase escapes me because simply saying “I learned a lot” doesn’t begin to cover it. My biggest takeaway, though, was that Ethereum 2.0 is coming, and the ramifications will be felt across the world.
What is proof of work?
When using fiat currencies, there is a third party that injects trust into transactions, making sure that the party parting with money in fact has this money and the party receiving the money is who they say they are. With cryptocurrencies, there is no third party, and Proof of Work is one way (the original way) the network validates transactions. According to Investopedia, Proof of Work (PoW) is “a decentralized consensus mechanism that requires members of a network to expend effort solving an arbitrary mathematical puzzle to prevent anybody from gaming the system.” Cryptocurrency mining solves of these mathematical puzzles, which helps add validated transactions into the blockchain.
What is proof of stake?
According to Coinbase, the Ethereum network now processes different kinds of transactions related to decentralized finance (DeFi), like smart contracts and NFTs. Thus, PoW does not offer the scalability currently needed to process all currently available transactions. Proof of Stake blockchains contain a network of “validators” who contribute (stake) their own crypto in exchange for a chance of getting to validate new transaction, update the blockchain, and earn a reward. The winner is then chosen by the network using a number of factors to validate the transaction. This process is more efficient than PoW, and it means that Ethereum mining will soon be a thing of the past.
Our hosts spoke a lot about what to do once Ethereum 2.0, which will use Proof of Stake instead of Proof of Work, goes into effect. Apparently, the date – which I kid you not they call the “difficulty bomb” – is set for June 2022, but has been changed and moved before. Regardless of when the bomb occurs, though, Ethereum miners will be at a decision point.
Some miners will choose to sell their rigs. Stephen and Andy are not going to go this route. They are “miners for life.” They can become Ethereum 2.0 validators, which Stephen has already begun doing. They can find more projects that require PoW. They can even set up their system in such a way that they mine whichever coins are the most profitable in that moment, which I had never heard of, but makes a lot of sense. Stephen is considering mining Ravencoin or Helium. Andy already mines many different coins, but said he is going to help with Flux, a new project.
Why would you want to be a miner?
One thing that I wasn’t expecting to take away with me as I closed my computer after attending the Space last night was that mining is FUN. You can hear these hosts speak with such passion about being a part of the network, helping with the future of cryptocurrency – and the internet, even. You can tell that learning about the cryptocurrency space is a challenge worth rising to. I am so inspired by their passion.
If you’re interested in listening to the recording, it can be found here.