There are rumors that Dogecoin may switch from proof-of-work to proof-of-stake (PoS).
Do I know if Dogecoin is moving to PoS?
Not.
Am I thinking of going to PoS? Probably not.
But I love the “what if” game.
As someone who works in the crypto mining industry, I do my best to gauge where the market and the mining industry are at, and how things are going. If Dogecoin makes a change to PoS or some other change in how new blocks are created, it will have huge ramifications for the mining industry.
Here is a look at some options and their effects.
Scrypt mining can be broken
I’m not going to debate whether Dogecoin will or should switch to PoS. While it is difficult to determine whether the new rumors about the potential to switch are true or not, they are enough for Bitmain to stop Litecoin (LTC) and Dogecoin (DOGE) mining manufacturers.
The bigger question in my mind is, What happens to miners if Dogecoin moves to PoS?
First of all, Scrypt mining will be broken. DOGE has more than 60% of its revenue with Scrypt mining. Take away, and every L3 +, every LT6 and every Mini Doge Pro, literally almost every non-L7 miner not connected to $ 0.04 per kilowatt-hour of electricity should be removed immediately.
Network difficulties will probably bounce around for a while, while miners with older rigs struggle with the decision to turn ASICS on or off. The top Scrypt miner, Bitmain’s Antminer L7, will cut its profits by almost 75%, reducing its profits to $4.83/day by $0.05/kWh.
What about miners who don’t have industrial electricity rates? At $0.10/kWh, the L7 9050M, which sold for around $9,000 a few weeks ago, will earn $0.72/day.
Yes!
A drastic change like this will cause those who have recently bought the L7 to not get a return on their investment, let alone a profit.
ASIC manufacturers will be forced to drop prices, further affecting their bottom line
The greatly reduced profits will surely cause the price of L7 to drop even faster than during the COVID-19-induced crypto crash. Price miners only with the desired ROI period, with a profit of $5 per day, miners will look for L7 that has a price tag between $1,825 (ROI 12 months) and $2,737.50 (ROI 18 months). This represents a minimum price reduction of almost 70%.
How fast will Bitmain react? Will they gradually reduce prices week after week, the same as what Goldshell has done with many of its miners over the past few months? The repetitive strategy leaves a sour taste in the customer’s mouth when they see the price of miners who just spend thousands of dollars to get cut over and over again.
Or will they go out and continue the new trend of the price of miners enough?
ASIC retailers will also bear the negative consequences associated with the PoS shift by Dogecoin. A lot of L7 miners are suppliers, and the retailers sitting there have to be marked down in large quantities. However, based on our history of high-priced customers, like charging $60,000 for a KD6 that costs barely more than $1,000 today, there’s bound to be a lot of crying.
Many home miners will flood eBay and similar platforms with Scrypt miners. It will be a race to the bottom as desperate miners try to recoup whatever value is left in the scrap metal that can now only be used as a door or display piece if someone is desperate.
Litecoin mining will be live. The L7s will stay on because they will still be somewhat profitable, and there really won’t be another option. There is no doubt that the market will see a new Scrypt miner that can challenge L7 in development anytime soon unless there is already a more efficient Scrypt miner in development. There are some rumors that Bitmain is working on a miner that will surpass L7.
That’s a lot of noise from the move to PoS, and we’re only looking at one aspect of the crypto ecosystem. There are many other questions and scenarios to consider.
What will happen to network security?
Did the outcome of the staking lead to DOGE finally being labeled a security?
Will Dogecoin be applauded for these changes, or will people run away from what is now the second largest PoW coin by market cap?
Now for my favorite what if. This option is unlikely, perhaps impossible, but there are various ways to do it.
What if Dogecoin did away with joint-mining with LTC and created its own mining algorithm?
Related: Dogecoin Foundation announces new funding for core developers
Innovation and competition are healthy for every industry
What if there is a GPU mining renaissance? After the Ethereum Merge event, there are many very cheap GPUs available in the market. That will get expensive very quickly. Mining purists will be excited when building their own mining rig while trying to figure out how many DOGE can stack. It will be really cool to see, but it will not last. The three big manufacturers – Bitmain, Goldshell and iBelink – will scramble to be the first to market with ASIC miners.
Ultimately, everyone has at least one ASIC miner on the market, and naturally, they will become more powerful and more efficient over time. Jumping and increasing the difficulty will be ridiculous, and as with Bitcoin (BTC), it will eventually no longer be profitable to mine DOGE with GPUs. But it might also open the door to a much-needed ASIC manufacturing market: competition.
What if, after the short-lived renaissance of GPU mining, the door is open for other manufacturers or manufacturers to enter the market? Currently, Bitmain, Goldshell and iBelink are the “big three,” and it is Bitmain that has a total stranglehold on the market. So, while there is a possibility that Bitmain will come out on top, what if someone can take the market and maintain that lead and become a reliable and trustworthy ASIC manufacturer?
What if the company decides to branch out to other miners and offer the same price? To be fair, we have to once again praise Bitmain for the price of the new launch of the industry-changing miner. Retailer markups are still an issue, but that’s another topic. Maybe these “new” competitors will live up to their all-important customer service mantra. If the customer can solve the reliability problem and the company makes a good product, it can happen. Admittedly, that’s a lot.
Alternatively, there is a money scenario for Dogecoin. The project can go directly to Bitmain, Goldshell and iBelink and say, “We created our own mining algorithm, and we will give it to you and you alone. How much money will you give us?”
What will Goldshell pay to bring life back to a company that has taken several body blows from the new altcoin miners released by Bitmain? Or will iBelink go all out to win the right to create a miner? IBelink just released the new BM-K3 Kadena miner that boasts 70 terahashes – almost 75% increase from the next closest model – and can’t celebrate because Bitmain is going to trump with the new KA3 that brings 166 THs. In the case of Dogecoin’s bid for ASIC manufacturers, how much will Bitmain pay to maintain market dominance?
No change can be good
What if DOGE chooses to just continue mining Scrypt?
The status quo is not exciting, but it seems to be the most likely outcome. Of course, there are some changes that will pass the vote, but Dogecoin will continue to be combined with LTC in the Scrypt algorithm.
Bitmain will likely continue to push its L7 inventory before launching a more efficient Scrypt miner later this year AND Goldshell will be launching the Mini Doge Pro 2 for home miners which will essentially be two Mini Doge Pros in one box. The upcoming halving of LTC, along with more efficient miners, will probably push some old models to die for good.
The crypto market will go up, and the crypto market will go down. There will be some other crypto scandals that no one saw coming that will look incredible in hindsight. The sun will rise, and the sun will set. Of course, most providers and especially retailers will continue to mark up miners and undervalue everything they can from regular customers.
It’s impossible to know what will happen with Dogecoin in the future, but crypto is one industry that could happen any day.
Regardless of whether Dogecoin switches to PoS, the crypto mining landscape is always changing rapidly, and Scrypt mining is no different.
Change will come.
The views, thoughts and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research when making decisions.