Rumor: Dogecoin to Move to Proof of Stake; What happens to the miners?
After news of Twitter’s possible acceptance of digital currencies recently gave hope to Dogecoin investors, now with increasing rumors of this memecoin’s transition to a proof-of-stake model, many of its miners are worried about their future, similar to what Ethereum miners experienced.
Justin Kramer, Bitcoin and altcoin miner at a note Over at Cointelegraph, we investigate rumors that Dogecoin wants to move from proof-of-work to proof-of-stake. You can read the translation of this note below.
Am I aware that Dogecoin is changing to Proof of Stake? no Do you think it will move towards proof of stake? Probably not. However, I love playing the “what if” game.
As someone who works in the cryptocurrency mining industry, I will do my best to see where the market and the industry is going and what it will eventually become. If Dogecoin moves to proof-of-stake or makes another change in how new blocks are created, it will have huge implications for the mining industry.
In the following, we take a look at some of these consequences and their effects.
Possible end of script-based mining
I’m not going to discuss whether or not Dogecoin’s mechanism will change to Proof of Stake. While it is still difficult to determine whether the recent rumors about a possible Dogecoin migration are true or false, it seems that they were apparently convincing enough for Bitmain to stop production of Litecoin and Dogecoin mining machines.
However, there’s a bigger question in my mind: What will happen to miners if Dogecoin moves to proof-of-stake?
First of all, script based coin mining will be destroyed. Dogecoin accounts for more than 60% of script-based coin mining revenue. By removing it, none of the Antminer L3+, Goldshell LT6, Mini Dodge Pro, and virtually all miners will be profitable, except for the Antminer L7, whose electricity cost is not $0.04/kWh. .
While miners with older rigs are busy deciding whether to keep their ASICs on or off, the network difficulty will likely fluctuate for some time. The profitability of the best script-based mining machine, Bitmain’s Antminer L7, will decrease by nearly 75%; Revenue drops to about $4.83 per day at a cost of $0.05 per kWh of electricity.
What will happen to miners who do not have industrial electricity? At a price of $0.1 per kWh, the L7 9050M miner’s income will be $0.72 per day; A device that was sold for around $9,000 a few weeks ago.
As a result, after such a drastic change, those who just bought an L7 device are unlikely to get their money back; What if they make a profit?
Mandatory reduction in the price of IC devices
The drastic drop in mining profitability will lead to the price of L7 falling even lower than when the cryptocurrency market collapsed due to the Corona pandemic. Miners are priced solely based on their expected return on investment. Earning $5 a day, miners will tag the L7 rig with a price tag of $1,825 for a 12-month ROI and $2,737.5 for an 18-month ROI. This price tag shows a reduction of at least 70% of the price of this device compared to the current price.
How fast will Bitmain react? Will they drop prices gradually and week by week, similar to what Goldshell has done with many of its miners over the past few months? This strategy has repeatedly created a negative attitude in the minds of customers; Because they saw that the price of the device that they spent thousands of dollars on has dropped.
Or will Bitmain’s devices be released and continue its recent trend of fair pricing for miners?
ASIC sellers will suffer the most after Dogecoin changes to Proof of Stake. Many miners using L7 rigs are self-suppliers, so they should immediately auction their rigs at a significant discount. However, given their recent history of selling high, such as fetching $60,000 for a KD6 miner that’s barely worth more than $1,000 today, it’s unlikely that many people will be upset about their loss.
Many home miners will sell many script miners on ebay and other similar platforms. As desperate miners try to compete with each other to capitalize on a large fraction of devices that will no longer be worth anything, prices on the market are driven lower and lower.
However, Litecoin mining will continue. L7 devices will stay on because they’re still somewhat profitable and there’s really no other choice besides that. It is possible that the market will see a new script-based miner that can challenge L7 soon, or that there is already a more efficient script miner that is currently being developed. There are some rumors that Bitmain is working on a mining rig that can outperform L7.
Dogecoin’s move to Proof of Stake will cause a lot of disruption to the industry, and we’ve only explored one aspect of the cryptocurrency ecosystem. There are many other questions and scenarios to consider.
What will happen to network security?
Will the profits from the investment cause Dogecoin to finally be labeled as a security?
Is Dogecoin being praised for this change, or are people fleeing the second largest proof-of-work coin by market cap?
Right now, it’s fascinating to me to imagine what will happen next. What I am going to say next is unlikely and maybe even impossible. But there is a possibility of different things happening.
What if Dogecoin abandons combined mining with Litecoin and creates its own mining algorithm?
The flow of innovation and competition is beneficial to any industry
What if there is a shift towards mining with GPUs? After the update of the Ethereum platform, the price of GPUs in the market has come down a lot. In this situation, while the miners are satisfied with building their mining rigs and calculating the amount of Dogecoin they can earn; The price of GPUs will increase rapidly. This will be really interesting, but it won’t last long; Because the big three manufacturers, Goldshell, Bitmain and iBelink, are trying to be the first ones to bring their own ASIC mining machine to the market.
Eventually, each of these companies will have at least one ICIC miner on the market, which will naturally become more powerful and efficient over time. The difficulty of the network will simply increase, and just like Bitcoin, eventually mining Dogecoin with a GPU will no longer be profitable. However, this could open the door to something that the ASIC market desperately needs: competition.
What if the short-term evolution of mining with GPUs opens the door for other manufacturers to enter the market? Currently, Bitmain, which dominates the market, along with Goldshell and iBlink are the three biggest players in the industry. While Bitmain will likely maintain its position, what if a company could be the first to bring a better mining rig to market and establish itself as a credible and reliable ISIC producer?
What if that company decided to continue to expand its mining rigs and sell them at fair prices? To be fair, we have to applaud Bitmain again for its recent pricing on the industry-changing mining rig. Price hikes by distributors are still a problem, which will be another discussion. Perhaps this new competitor is sticking to the mantra that customer service really matters. If customers can overcome reliability concerns and the company makes a good product, that’s likely to happen, which will certainly raise more questions.
On the other hand, Dogecoin could have a possible plan to earn more profit. The project can directly say to Bitmain, Goldshell, and iBlink: “We create our own mining algorithm and give it to you exclusively. How much will you pay us?”
How much will Goldshell pay to revive a company that just suffered a loss after launching new Bitmain altcoin mining rigs? Or is iBlink trying their best to get the exclusive right to build miners? iBlink has just released the new Kadena BM-K3 miner with 70 designs of processing power; A device with about 75% more power than its closest competitor in the market. However, he can’t be happy, because Bitmain is about to launch the KA3 with 166 bits of processing power that can surpass the iBlink device. How much will Bitmain pay Dogecoin to maintain its market dominance?
No change can be good
What if Dogecoin wants to continue with script-based mining?
This may not be the most exciting option, but it is probably the most likely outcome. Sure, we may see changes made by community voting, but most likely Dogecoin will continue to mine in combination with Litecoin in the script algorithm.
Bitmain will likely continue to offer the existing L7 miner before introducing a more efficient miner script later this year, and Goldshell will release the MiniDog Pro 2 for home miners, which is essentially 2 MiniDogs in one box. The next Litecoin halving will likely phase out many of the older models, along with the launch of more efficient miners.
The digital currency market will continue its up and down cycles. We’re likely to see more scandals in the industry that will seem incredibly obvious after they happen. The industry will continue on its path, although most suppliers and especially resellers will continue to raise the price of devices and try to drive the average customer out of the market.
It’s impossible to know exactly what will happen to Dogecoin in the future, but cryptocurrency is one of the few industries where anything can happen any day.
Whether or not Dogecoin changes its consensus mechanism to proof-of-stake, the cryptocurrency mining landscape has always changed rapidly, and Scrypt mining is no exception.
After all, change is always coming.