Will miners switch to Ethereum Classic? Why ETC price increased by 50%

The long-awaited transition of the Ethereum network to the Proof-of-Stake (PoS) consensus algorithm is scheduled for September of this year. The exchange rate of ETH reacted to the news with growth, but at the same time, an even bigger jump in price showed Ethereum Classic - a copy of the original ETH, which works on the Proof-of-Work (PoW) algorithm and will not switch to PoS. Some analysts attribute the interest in ETC to the transition of miners to a more profitable network.

Ethereum supporters and the crypto community as a whole have been waiting a long time for developers to complete the network's transition from PoW to PoS. In the meantime, two of the three test networks have already been switched to the new transaction validation algorithm. Starting on December 1, 2020, early Ethereum 2.0 investors can lock coins into a contract on a test network called Beacon with the prospect of becoming the validator of the main blockchain when the upgrade is complete. At the time of publication, more than 13 million ETH are in staking.

In our article, we tell you how many early Ethereum 2.0 investors have locked coins into staking and why most of them are suffering losses.

When the final Ethereum network upgrade, called The Merge, finally takes effect, miners with equipment to mine coins on the Ethash algorithm will be forced to switch to other PoW blockchains in order to continue earning. Ethereum Classic (ETC) looks like a possible candidate. The coin is consistently in the top 30 in terms of market capitalization, and its developers have no plans to implement staking.

When news of Merge's planned release date emerged, Ethereum Classic's price on exchanges showed a 50% increase. According to Binance, as of July 19 at 13:30 UTC, ETC is trading at $26,09, having gained 13,27% in a day. Market analysts attribute the jump in the price of the asset to growing interest from miners.

“ETC has already added a lot in price, despite the bearish sentiment on the crypto market,” said Roman Nekrasov, co-founder of ENCRY Foundation, “This clearly shows that some participants of the mining sector, as well as traders, believe that a significant share of computing power previously occupied by ETH mining will switch to ETC.”

There was no quick switch by miners to the Ethereum Classic blockchain. According to Coinwarz, the network's hashrate is at 19,18 TH/s as of July 19. There were no sharp jumps in computing power in ETC, and it's still a long way to the values of April this year, when the network's hashrate exceeded 24 TH/s. For comparison, on June 4 the ETH hashrate reached the all-time highs of 1320 TH/s, and at the moment of publication is 985,7 TH/s.

Ethereum Classic hashrate

Source: Coinwarz.com

According to Tehnobit CEO Alexandr Peresichan, the abandonment of classic PoW-mining even after Ethereum switches to PoS will not be quick, and miners will be given some time to quietly switch to other blockchains. “Since there are not many alternatives, ETC is quite a contender. But there is a nuance here that if at least 10% of all miners switch to ETC, the yield will collapse due to a multiple increase in difficulty, and here you need to understand that ETC should rise in price by more than 10 times to provide the cost of producing blocks,” the expert said.

Miners began selecting candidates to replace ETH long before even approximate dates of Merge upgrade were announced. Some of them are already switching their equipment capacity to other PoW-coins, expecting that cryptocurrency price will go up when most of miners start mining them. However, the profit from their mining today, if at all, is not comparable to what ETH makes when it runs on the PoW algorithm.

“The sudden current growth of ETC may indicate that miners are still looking at this network as a replacement for ETH. I don't think that Ethereum Classic will become irrelevant in the nearest future,” Alexandr Peresichan says, adding that in the long run ETC has all chances to stay in the top coins ranking. At the same time, in his opinion, the price of ETC will follow the general trend of the cryptocurrency market regardless of the arrival of new miners.

The jump in the price of ETC may indicate a confirmation of the mood of investors who see the cryptocurrency as a real contender for the attention of miners. As Roman Nekrasov notes, the flow of migrating miners is mainly directed to ETC, because miners need little upgrades for switching to Ethereum Classic, that is, switching from ETH to ETC is fast and easy. Also, the transition of a significant number of miners should help improve the security of the ETC blockchain, which has repeatedly suffered from the “51% attack.”

“As far as long-term investments are concerned, ETC is a dark horse. On the one hand, the team of developers supporting the project have a good reputation, they really develop the project, make improvements. ETC doesn't look like a scam, it survived the 2018-2019 crypto winter,” Nekrasov analyzes. “On the other hand, the development strategy and positioning of the blockchain in the market is not quite clear.” According to the expert, the project clearly lacks a convincing marketing roadmap. “In the short term, for 4-6 months, ETC is a worthwhile investment. Whether it makes sense to hold the coin longer is hard to say,” the ENCRY Foundation co-founder notes.

Ethereum Classic appeared in 2016 as a result of a disagreement with the Ethereum Foundation's decision to hardfork the network for rolling back the blockchain until The DAO project was hacked in order to compensate the affected users. Participants of the Ethereum community united around the cryptocurrency and the “original” blockchain, who rejected the main network's hardfork for ideological reasons. Ethereum Classic has a capitalization of $3,36 billion as of July 19, the coin is traded on all leading crypto exchanges and is part of portfolios of large funds such as Grayscale Investments.

Ethereum's transition to PoS is scheduled to take place between September 19 and September 25, but no exact date has yet been announced. Major crypto projects running on PoS include Solana, Avalanche or Cosmos, but none of them can compare to Ethereum in terms of popularity among investors and developers.