It should be noted that the miners in the Ropsten test network increased the amount of processing power significantly the day before. Because of this, the blockchain’s transition date to the Proof-of-Stake consensus algorithm may take place much earlier than June 8. Experts are betting on May 27-28.

Possible date of Ropstend test network upgrade to PoS

Differences between Bitcoin and Etherium. Decentralisation

Many cryptocurrencies come and go, rise and fall, but for many years now, Bitcoin (BTC) and Ethereum (ETH) have been the top two cryptocurrencies. These cryptocurrencies are constantly being compared to each other.

Features of Bitcoin

Bitcoin is the world’s first cryptocurrency, the father and mother of all other coins. Without BTC, there would be nothing else. Bitcoin is the “digital gold”, the most trusted coin, the foundation of the basics. It is distributed all over the world. Older versions of Bitcoin software work great with newer versions.

The Bitcoin network hasn’t undergone many updates recently, but Bitcoin doesn’t really need them. It is good as it is. Anyone can become a Bitcoin user in the world and run a full-fledged node of the network, or so-called Bitcoin node. All you need is a computer connected to the internet and 400 GB of free space on your hard drive.

Bitcoin miner

Of course, you can also download a lightweight wallet to your phone, but in that case it will use the wallet's developer node.

The Bitcoin network is used to transfer BTC coins, i.e. cryptocurrency between users. We recommend you to read our detailed guide, where we tell you what Bitcoin is from A to Z in simple words.

Features of Ethereum

Ethereum is a unique project that has evolved the idea of Bitcoin to become not only electronic money, but also a platform for creating a multitude of blockchain-based applications. On the Ethereum network, ETH coins themselves can be transferred to each other, which have value, but the network also allows programs or so-called smart contracts to be run within it.

Essentially, Ethereum can be compared to a botnet, which allows a program to run on all computers on the network. However, unlike a botnet, Ethereum programs have no connection to the external internet and cannot harm anyone. In recent years, unique DeFi-type things have emerged on the Etherium platform – in particular, decentralized exchanges, that is, trading platforms that operate according to a predetermined algorithm without human involvement or control.

The interface of the decentralised exchange Uniswap

Ethereum is constantly being updated: Electric Capital estimates that more than 4,000 developers are working on the project. One of the updates was the introduction of a smart contract for Ethereum stacking, where more than 10 per cent of all ETH coins are already in circulation. Another important update was the start of the ETH miners’ commission burn.

The project is evolving, and perhaps that's why users forgive Ethereum developers for not having an official clear wallet to work with the cryptocurrency. There are many wallets available, but all of them are developed by third-party developers.

Are cryptocurrencies decentralized or not?

Everybody heard that cryptocurrencies are decentralized, i.e. nobody controls them, there is no system to spoof, return and credit the transaction to another address, there is no way to delete the address, etc.


It should be noted that it is possible to block an address, but not completely. For example, the creator of the most popular USDT stabelcoin called Tether can prohibit certain addresses on the Ether network from interacting with it. As of today, the number of such addresses in the blacklist reaches 597. However, creating a new address and bypassing the restrictions is really no problem.


Number of Etherium addresses that cannot communicate with USDT from Tether

For example, if you’ve transferred cryptocurrency to someone else’s address, you have no mechanism to get it back. That said, if you keep the cryptocurrency in your personal wallet, you’re safe from sanctions and the IRS, or anyone else, has no access to your funds. Everything is only in your hands.

However, not everyone understands who provides this proverbial decentralisation.

Suppose if you install a Bitcoin wallet with a full copy of the blockchain on your computer and keep it online, would you help greater decentralisation? Yes and no – but no more than that. All the so-called nodes or nodes in the network whisper to each other and pass on information about new blocks. Your node also checks the validity or correctness of new blocks on the network. So your node will help to pass information between other nodes in the network faster, but to be honest, it can’t help much else.

Decentralisation is primarily the responsibility of the miners, that is, the nodes in the network that not only transmit and receive information, but also find new blocks. It is the miners who are responsible for filling blocks with new transactions. We wrote more about this in the article What is mining?

Decentralisation is an important advantage of Ethereum over Bitcoin and all other cryptocurrencies. Vitalik Buterin created a unique solution, and so far no one has managed to repeat his success. Why?

Vitalik Buterin, the creator of Etherium

The fact is that most cryptocurrencies require special equipment to mine. In case of Bitcoin and many other coins, the hardware developers came up with special ASIC devices – metal boxes with electronic circuit boards inside and noisy fans actively blowing air. They cannot be used at home, only in designated rooms.

There are no ASIC miners for Etherium mining. There are some devices that are called ASIC-mainers, but they are just video card chips integrated into a single housing. Such ASICs are no better than regular graphics cards: they have the same performance but are often even more expensive. Moreover a video card is a multifunctional product, you can mine, render objects in 3ds Max or play GTA5. ASIC for ETH can only mine, moreover its maintainability is close to zero.

Ethereum is the most decentralized currency. So far

Ethereum, unlike Bitcoin, is only mined on video cards. No asics have ever been developed, given the security of the mining algorithm.

You can buy a video card anywhere, so there are ETH miners all over the world. Some people mine with one video card, some with two, some have a hangar of video cards – it doesn’t change the point. Everyone can participate in the mining process. The entry threshold is minimal. If you have a computer at home for an extra $200-300 you can already start mining.

How many video cards are mining Ethereum? It is not very difficult to estimate. With a current network hash rate of 1.06 PH/s and an average hash rate per video card of 40 MH/s, you can calculate that over 25 million video cards are mining Ethereum worldwide. Yes, there are other cryptocurrencies that mine with video cards, but even the most popular pursuers of Ethereum do not have more than a million video cards. Feel the difference!

Graph of the Etherium network hash rate

Bitcoin mining is only possible in prepared rooms, i.e. factories, industrial areas and so on. The price of one modern ASIC device for mining is several thousand dollars. Among other things, mining requires cheap electricity. It’s hard to reliably estimate how many Bitcoin miners there are in what countries, but it’s clear that the leaders are the USA, Russia, Kazakhstan and China, despite the official ban on mining. Bitcoin mining is not available to the common man. There are workarounds, but even then you mine ETH, you just get paid in BTC.

Etherium is much more decentralised than Bitcoin, meaning that it is Ethereum that "belongs to the people". And that is shocking.

The developers of Ethereum want to exactly “centralise” the coin. Put control in the hands of wealthy Ethereum users – those who have a lot of ETH coins. Accordingly, a handful of rich people will determine the consensus of the network. The argument that it is disadvantageous for them to do something to the detriment of the coin, as they have a significant investment in it, breaks down by the fact that they can collectively influence the operation of the network for the sake of increasing profits.

Ethereum Stacking. What will change with the move to POS?

What is the difference between Proof-of-Work (POW) and Proof-of-Stake (POS) we have discussed many times – for example in the article What happens when Ethereum moves to Proof of Stake (PoS).

Description of the merger on the Ethereum website

In simple terms, POW is mining and POS is staking. Mining is when you use your processing power and get rewarded, while staking is when you freeze a certain amount of coins in your account and keep your wallet online, getting rewarded.

The interface of the Lido platform, which also allows you to stake ETH

To become a full validator of the Ethereum network after switching to POS, you need to freeze 32 ETH, which is 65 thousand at the current exchange rate of the cryptocurrency. Where does abandoning mining and switching to stacking lead to? Here are the key points.

Lack of decentralisation

You and I have said that Ethereum is now the coolest cryptocurrency in terms of decentralization. There is nothing cooler than that. VCs are used all over the world. The entry threshold is quite low, only $200-300. However, after switching to POS, the entry threshold grows hundreds of times, because you have to freeze the equivalent of 65 thousand dollars to start getting the reward – and that’s without taking into account the cost of the computer and server rental where your node-validator will work.

Cryptocurrency miner

Ethereum will lose its status as the most decentralised currency in the world if it moves to POS. It will become a mediocre coin, not unlike many others in terms of network security.

Colossal risks of stackers

Some people will say: “What are you thinking about 32 ETH? You can unite in pools, many exchangers will launch their validators and so on”.

Yes, of course you can pool, you can put money into an exchange, but don’t forget the important rule of cryptocurrency: not your private key is not your money. You can pool with 31 other people and give 1 ETH each to some service that will run one validator.

But where is the guarantee that the service won’t cheat? Where is the guarantee that the service won’t get hacked and your money won’t get stolen? With exchanges the situation is even sadder? Almost every one of them was broken, and if not broken, sooner or later it will happen. Don’t forget also that exchanges change KYC rules often. At some point, you won’t pass it – and your money will burn.

Cryptocurrency hacker

Or maybe you just happen to be a resident of the wrong country, and the exchange will block your account. Sometimes exchanges block users' accounts altogether, without explaining the reason, hiding behind the fact that you are engaged in "questionable activity".

Even if you saved up 32 ETH and managed to start your own node-validator, it does not mean that you found the desired “Money” button, and now the money will start flowing like golden antelope. There are a large number of errors that your validator may make. You will be charged for these errors, including inactivity. Read more in this article How penalties and rewards work on the Proof of Stake based Etherium network. Detailed guide.

Imagine for a moment that you have validator working, everything is good, and suddenly you get attacked with DDOS, you get penalties, lose money and don’t know what to do. What if someone has launched a virus that has caught your validator, causing it to send incorrect data to the network. The basic penalty for such a violation is 0.25 ETH or the equivalent of $500. What do you think?

All of this is not applicable to mining. These problems don’t exist there. You get rewarded and you don’t risk anything. Your video cards won’t be taken away if they don’t work well. And to start mining you need to invest 200-300 dollars, not 65 thousand. Most of the time mining is done through a mining pool, and if something happens with the pool you can change one pool for another in a second. In the case of stacking, you cannot do that, especially if you use some kind of stacking service. Servers of that service can get burnt out, they can get arrested, coins can disappear or get blocked at any time.

Also don’t forget, that ETH rate is constantly going up and down in huge range, but you are getting miserable 5-7% interest rate for doing the stacking. That said, the risks are enormous.

Chart of the Etherium exchange rate from 2015

Also, you can’t withdraw your money from stacking yet. And when you will be able to – there’s no telling. How much will 1 ETH be worth that day? $400? $1,000? No one knows.

ETH miners’ profitability after switching to POS

The profitability of the miners will drop. Or rather, there won’t be any Etherium miners at all. Only stackers will remain. If you compare the profitability of a staker and a miner, the stakers have ten times less profitability. We discussed this in more detail in our article How much more profitable is PoW mining of Etherium than steaking on the Eth 2.0 PoS network?

This means that ordinary users will actually no longer be able to earn. They will lose their income.

The reliability of POS is in question

The Ethereum cryptocurrency has been around for seven years – since July 30, 2015. All that time, the network has been running on the POW algorithm, which means that it was the mining that secured the network. As we said before, it is a reliable and proven solution. The Ethereum network has not been attacked in years, because an attack – such as a 51 percent attack – requires more processing power in the form of video cards than anyone else in the world.

A 51 per cent attack on blockchain

The move to the POS algorithm and stacking raises a lot of questions for the developers of the coin. How well have they worked their code, have they really been able to secure the cryptocurrency network against nasty mishaps? The first wake-up call came on 25 May, when the Ethereum POS network underwent a 7-block reorganisation. In other words, the blockchain split into two branches, resulting in one of them having to be cancelled. Such problems in Ethereum mining have not occurred for several years.

Is there a need for a POS for Ethereum? What is driving the developers?

Ethereum developers claim that POS is necessary for green purposes. Mining the cryptocurrency uses a lot of equipment, which in turn consumes megawatts of electricity. However, switching to POS would take away the decentralisation of Ethereum.

In addition, only very rich people will now be able to earn income from Ethereum-stacking, while mere mortals will not be able to get there.

Cryptocurrency investors

On top of that, the number of fraudulent services, offering stacking in exchange, will grow many times over. Defrauded people will lose money. All this will create a powerful anti-advertising effect on cryptocurrencies, with an effect that could be much bigger than the fall of LUNA and UST.

More importantly, there are plenty of cryptocurrencies with stacking, but name one successful project? Etherium in its time replicated the success of Bitcoin, taking the best of it and adding new breakthrough ideas. It was a mining coin. So why now has Ethereum decided to take a not-so-successful idea? After all, Bitcoin and Ethereum are firmly in the top two of the cryptocurrency capitalisation rankings.

Risks of POS

We know that POS has been delayed for at least four years, which means the developers themselves are not sure of their success? Could such a system really replace a well-performing one?

There are plenty of coins on the cryptocurrency market with various validators, masterminds and stacking. But it is Etherium with its mining that is the second most popular coin after Bitcoin.

Right now, more than 10 per cent of all ETH coins are blocked on the Ethereum Stacking Smart Contract. What will happen when that 10 per cent of all Ethereum coins can be withdrawn, because that’s over 12 million ETH or $24 billion. If you have deposited 32 ETH now, they are blocked and the date to unblock them is unknown. Imagine the moment when those 10 coins hit the market? What will happen to the exchange rate? Even if not all users will sell this ETH, but only half of them. These are bids to sell ETH for billions of dollars.

Cryptocurrency investor with Ledger hardware wallet

Why would people be stealing ETH when the profit will be about 5 percent per annum? They might as well buy real estate and rent it out. According to our calculations, that’s how much renting out a flat in Europe can bring. Except that the price of the flat doesn’t go up from 4800 to 1800 dollars in a couple of months. There is no such risk.

Hence the conclusion, only dirty money that wants to launder will go into steaking? Otherwise, why invest in such an unprofitable and also risky asset?

If someone put illegally obtained ETH together with you into the same steaking pool, what then? Of course, state authorities can start an investigation, stop the service, or even shut it down. You could lose your coins without being able to change anything.

Also, can you imagine your feelings, when you send 32 ETH at $4800 for 1 ETH, and it became worth $1500 a month later? It’s not really clear who might be interested in that.

Cryptocurrency collapse