Moving to Ethereum Classic (ETC) Mining May be Viable Option for Miners on Ethereum (ETH) Network: Report

The price of Ethereum Classic (ETC) surged 103% – compared to Bitcoin’s (BTC) increase of 13% – between March 13 and March 24, 2022, starting from $26 and “peaking at $48.50,” according to a report from Grayscale.

The team at Grayscale noted in the report that the “renewed interest in ETC was likely spurred by speculation that the Ethereum (ETH) merge to Proof of Stake later this year may cause miners to migrate their hashpower to the Ethereum Classic Network.”

As mentioned in a blog post, the merge to Proof of Stake “successfully occurred on a version of the Ethereum testnet on March 15th – a sign that the team may do the same on the Ethereum mainnet later this year.”

When the merge happens on mainnet, Ethereum miners will “no longer earn block rewards with their existing setups and will need to find somewhere to contribute their processing power.”

Given that the Ethereum Classic network has a long-term commitment to Proof of Work and “is a fork of Ethereum with very similar code, the ETC network may be a good candidate for receiving Ethereum’s hashpower.”

Miner activity can be “observed through changes in hashrate—the average computational power used to secure the network per second.”

As explained in the update, hashrate increases “when more miners begin mining on the network and decreases when they leave.”

Since the testnet merge announcement, ETC hash rate has “increased only slightly by approximately 1% from March 15 to March 22, indicating that there hasn’t been a large influx of miners to Ethereum Classic yet.”

But mining power will have “to relocate somewhere.” Since the transition from mining ETH to mining ETC “is likely to be a gradual process,” it may be premature “to conclude that miners will not be switching over.”

The report added:

“Beyond the potential hashrate migration from ETH merging to Proof of Stake, the Ethereum Classic network also has a 20% reduction in block rewards, estimated to occur on April 15th, 2022. Reducing the inflation rate of a protocol has historically been followed by positive price action as seen with Bitcoin Halvings. As a result, lower ETC inflation and ETH transitioning to Proof of Stake could lead to a couple of scenarios.”

The report also mentioned:

“While ETC has been plagued by 51% attacks in the past, increased hashrate means greater network security which may lead to more confidence in the network.”

As noted in the update, decentralized applications (dApps) built on the ETC network “are sparse at the moment, but increased network security could lead to more on-chain inflows.”

The report continued:

“Instead of shifting to mine ETC, ETH miners may instead choose other networks or alternative revenue sources unrelated to crypto for their hardware, such as video encoding.”

As mentioned in the update, “with more miners and a familiar development platform, ETC could draw in more external interest from developers that want to build apps in an accessible, familiar environment.

The report added that increased network security should also “give users the confidence to store their funds and transact on the Ethereum Classic network.”

The update from Grayscale concluded:

“Given the reduction in ETC inflation, the simplicity of transitioning ETH miners to ETC, and the narrowing profitability between mining ETH and ETC, moving to ETC mining may be a viable and attractive option for some miners currently on the Ethereum network.”

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