Minority mining pools threaten a protest against a controversial Ethereum upgrade

Eight Ethereum mining pools, accounting for around 30% of the network's hash power, have expressed their support for the action of the small mining pool Flexpool against the Ethereum Improvement Proposal (EIP) 1559.

The small pool - which only mined 10 out of 48 blocks in December - is now asking Ethereum miners to abandon ship from major mining pools that support the upgrade like Sparkpool (24% network hash power) and F2Pool (11 %).

EIP 1559

First proposed in April 2019 by Vitalik Buterin, the EIP 1559 overturns the traditional mining payment scheme by burning off most of the transaction fees typically assigned to miners in an effort to address the volatility of transaction fees and improve the painful blockchain user interface.

Although the update has not been officially accepted for the mainnet, the EIP has received strong support among developers and could be put into the Ethereum code base sometime after the Berlin hard fork, which is scheduled for February or March.

Commissions on the run

It is understandable why Ethereum miners (here the quotation) would like EIP 1559 never to be implemented, or at least delayed. Mining profitability is hitting three-year highs as the emergence of DeFi pushed transaction fees to record highs in 2020, according to data collected by BitInfoCharts.

Beyond that, Ethereum mining is an industrial-scale business. A simple change of protocol would force miners to use lesser-known Ethash coins, a potential waste of research and development money.

The response of the developers

Miners opposed to the Ethereum upgrade need at least 51% of the network hash power to undo the implementation of EIP 1559. In that case, an extremely unlikely scenario of a dominant anti-EIP 1559 mining cartel would be able to block miners who implemented the update.

Beiko, the unofficial project manager of EIP 1559, said it is unlikely to get to that point, particularly due to how early EIP 1559 is in its development. On the other hand, it is the miners who serve the Ethereum network and not the other way around.

The idea is that there will always be a mining market as long as it is profitable. But 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 tweet.

"Any censorship attack by miners against users' interests will almost certainly lead to major developers taking very aggressive action against miners," he explained in the tweet.

"The most likely retaliation developers could perform would be a run to launch Proof of Stake, which would completely remove all miners from Ethereum." “It is easy for [the miners] to signal that they are against change, and much more expensive for them to actually carry out things like cartel formation,” Beiko concluded.