Threat of Ethereum Minor Excavation Pools to Block Update

Ethereum miners have formed a cartel of all kinds to block the implementation of a now-controversial proposal – one they say is unfairly breaking into its bottom line.

Eight Ethereum mining mines totaling approximately 30% of the network’s hash power have put their support behind Flexpool’s stance in the small mine pit against the Ethereum Enhancement Proposal (EIP) 1559.

The small mine – which only mined 10 blocks among 48 miners in December – is now calling on Ethereum miners to jump ship from large mining pits supporting the update like Sparkpool (24% network hash power) and F2Pool (11%).

“Don’t be a slave to your mine. List pits that support the bearing of their miners so they can inflate price [ETH] for wealthy speculators, ”Flexpool’s blog post reads.

Since the blog post was published on Jan. 14, about 400 miners have joined Flexpool, CEO Alexander Sadovskyi told CoinDesk in a Telegram message.

EIP 1559

First offered in April 2019 by Vitalik Buterin, EIP 1559 flips the traditional mining payment plan on its head burning most of the transaction fees typically given to miners in an attempt to address transaction fee volatility and improve the blockchain’s deplorable user interface. (Here is a brief description by Ethereum developer Tim Beiko).

One blockchain analyst went so far as to call EIP 1559 “the biggest change to any blockchain upon release.”

And while the update has not been officially accepted for mainnet, the EIP has received strong support among developers and could be fork into Ethereum codebase sometime after the Berlin hard fork. That hard fork is roughly queued for February or March.

Running away fees

It’s understandable why Ethereum miners would want EIP 1559 never to be implemented, or at least delayed.

Miners have been a big winner due to increased activity on the chain driven by the emergence of decentralized finance (DeFi). Indeed, mining profitability peaks at nearly three years as congestion on the chain pushes transaction fees to record highs in 2020, according to data collected by BitInfoCharts.

Not only this, but Ethereum’s mining business is an industrial scale.

Companies like Linzhi from China have started rolling out new ASIC Ethereum miners developed over the past few years. A simple protocol change would force miners toward lesser-known Ethash coins – a potential waste of R&D money. Not to mention other Ethash coins are “really unprofitable,” Sadovskyi said on Telegram.

Paired with ether (ETH) breaking its all-time high on Tuesday, it’s easy to see why miners are fighting tooth and nail to keep the printing press running as it is.

Larger Ethereum mining pools respond

Only time will tell whether larger mining pits are responding to the Flexpool-induced collusion campaign. The three largest mines – BitFly, F2Pool and Sparkpool – are either anti-EIP 1559 or neutral, according to CoinDesk inquiries.

BitFly has long been against the proposal. He restated his stance in a tweet saying the EIP could “jeopardize Ethereum’s future.”

F2Pool Director Da Liang told CoinDesk in a Telegram message that he is “neutral at the moment and not ready to officially announce anything,” regardless earlier tweets by F2Pool co-founder Chun Wang citing the 1559 pro-EIP stance.

It also seems as though SparkPool’s dominant Ethereum mining pool is walking back its previous stance on the EIP. In June, SparkPool CEO Xin Xu told CoinDesk that a “better fee model design” was needed and that the pool had been “supportive of EIP 1559 for a long time.”

That may not be the case as SparkPool Telegram admin “CZ” stated that no SparkPool employee had given a public stance on the subject. He added: “Obviously a mining pool (sic) always opposes 1559.” Pool’s official Twitter chat too promotion article against the EIP on January 20.

SparkPool has not yet responded to requests for comment.

Which way, Ethereum man?

Ethereum Nonconforming miners need at least 51% of the network’s hash power to operate EIP 1559.

Here – in the highly unlikely scenario – a dominant anti-EIP 1559 mining cartel would be able to censor blocks that use the features of EIP 1559. Any blocks that comply with the new rule set with EIP 1559 would be prevented be processed.

Beiko, the unofficial project manager of EIP 1559, told CoinDesk that it was unlikely to get to that point, especially given how early EIP 1559 is in its development.

“It’s worth noting how ‘early’ 1559 is in the deployment process,” Beiko told CoinDesk in an email. “Yes, it’s been worked on for a while (mainly because of how little change it involved and how much R&D there was to do), but it’s still not scheduled for any mainnet upgrade.”

Beiko added that the EIP could be waived for several reasons going forward including consensus issues among Ethereum Core Developers.

“I’m obviously biased here, where I think shipping is probably the best way forward, but ultimately it’s not my call. The best that the people who work on 1559 can do is to present a compelling case for it to the community, ”said Beiko.

Sadovskyi told CoinDesk that he expects Ethereum developers to make some concessions to miners given the public backlash is fomenting in the mining community. He said it was unlikely that Ethereum developers would completely disregard miners as “Ethereum devs are concerned about their reputation.”

“The response from the eth dev team, a non-miner community, has been very dismissive, often hostile,” Charles Spears, VP of Strategy at Ethereum mining company American BitPower, told CoinDesk in a Telegram message.

“There is a narrative that miners make a ton of money and yes, times are great at the moment. But GPU miners took it on the chin for a couple of years there, and we feel they don’t notice, ”he said.

Developers respond

Miners, on the other hand, serve the Ethereum network and not the other way around. The thought goes that there will always be a mining market as long as it is profitable. Furthermore, Ethereum mining has always had an uncertain shelf life as the Eth 2.0 test-share (PoS) consensus mechanism pulls it all together.

A recent lesson in devolved governance also points to where this battle might go: Programmatic Proof of Work (ProgPoW).

That unsuccessful campaign was a multi-year attempt to update Ethereum’s mining algorithm from Ethash to the newer ProgPoW. It failed to reach consensus among developers many times, despite the best efforts of many in the mining businesses. He left large portions of the Ethereum ecosystem in opposition which could be fueling feelings around EIP 1559.

So, what power do miners have? Not much, unless they want to attack the Ethereum network itself, Ethereum developer Micah Zoltu wrote in a January 20 blogpost.

“Any censorship attack by miners against consumer interest will almost certainly result in the core developers taking very aggressive action against miners,” he explained in the blogpost. “The most likely revenge that the core devs could achieve would be to rush to launch a Stake Test, which would remove all miners / mining completely from Ethereum.”

So maybe we’re getting Eth 2.0 a little faster than expected?

Probably not, says Beiko, as pursuing conflicts against the update would incur large costs for mining parties.

“It’s easy to [miners] to indicate that they are against the change, and that it is far more expensive for them to pursue things like forming cartels, ”