The Casper algorithm is an algorithm that Ethereum creator, Vitalik Buterin, has announced he will be applying to the ethereum Blockchain. This will in hand turn Ethereum from a Proof of Work (POW) to a Proof of Stake (POS) Crypto currency.
What does this mean for the Ethereum blockchain and platform?
In my non-professional opinion this is both good and bad for the platform. As Vitalik and other Ethereum developers work on the details of Casper the Ethereum platform itself keeps getting better with each iteration. However this means that once the algorithm is implemented, the original Ethereum’s mining will come to a complete halt. This can cause some major wakes in the crypto mining community and may even over to the NASDAQ stock market.
First let’s look at a brief overview of nvidia in the last year
Over the last year miners and crypto currency enthusiasts have turned to NVIDIA Corporation (NVDA) for their mining hardware. NVDA’s stock has gone from $107.79 to a price today of $236.55. A majority of this is due to Ethereum miners’ purchasing mass amounts of video cards or Graphic Processing Units (GPUs) for their expensive mining rigs.
Could NVDA stock take a hit when Ethereum becomes a POS coin instead of POW? It’s extremely possible. The miners whom were used to making $20 of Ethereum per day would have to move to a much smaller coin making $2-6 per day potentially extending out the ROI on those expensive mining PCs from 6-8 months to 1-2 years. Would it be worth buying those PCs anymore? I’ll let you be the judge of that.
Now what else does that mean for the current mining community? Those individuals or groups of people that have put in massive amounts of time and money building these expensive PCs or the individuals that are invested into cloud mining from one of these big sites like Hashflare and Genesis-Mining?
I’ve already covered the potential changes to the users that have purchased hardware specifically for mining Ethereum. The bottom line is they would have to start looking into new coins to mine such as Dash, Monero, or Ethereum Classic. Switching over one of these coins though may prove to be much less profitable. As I said instead of mining the $20 of Ethereum from one of these boxes you may have to switch to a coin that mines up $8 a day cutting your profits by 60% which doesn’t even include electricity costs. On top of that when every miner that has been mining Ethereum switches over to the new profitable coin the inevitable will happen. Mining difficulty on those new profitable coins will skyrocket which will bring the profitability down even further. The only way to counter the difficulty is if the new profitable coin to mine suddenly went extremely bullish and prices followed the mining difficulty.
An example being: If a miner switches to Monero mining and is making about .023 Monero per day (about $8 dollars) and then everyone follows them to Monero and that gets cut down to .013 Monero per day you profits would now be at $4ish and the only way to counter that is if Monero went up to be a $600+ coin. Possible? For sure.
Now to address cloud mining platforms such as Hashflare and Genesis-Mining. These guys are selling 1-2 year contracts and Genesis-Mining Ethereum contracts do not even start mining until April 30th of this year. Is it worth buying these contracts? In my personal opinion, NO its not.
Vitalik has said that sometime in 2018 Casper could be implemented. Like I said, that means sometime in 2018 Ethereum mining may go away completely. That 2 year contract that you just bought from Genesis Mining that doesn’t even start until April will go away by 2019 giving you 8 months to mine Ethereum. Will that even give you your ROI? I’m not sure, you can use this mining calculator to find out.
Either way those contracts will probably come to an end way before they actually expire. Maybe Hashflare and Genesis being fairly reputable companies will transfer the hash power over to a different coin, but they definitely don’t have to do that. Hopefully people that have invested into ETH mining are well aware of Casper and how not so friendly he could potentially be for them.
What am I going to do with this information? I’ll been scouting out for the profitable coin and I’m going to start mining that now. With Ethereum leaving the mining game it will make another coin more desirable to mine which will drive that price up. This means that I can potentially start mining a coin now and just hold onto it until after this whole situation blows over. I may not be extremely profitable in the short term, but over the long term I feel like this is the best move.
Please do your own research before investing in any sort of cryptocurrency or platform. I am not a financial advisor by any means. I just share information that I’ve found and give my non-professional opinion about said information.
Good Luck and Happy Cryptoing!