This Miner Insights piece was originally published in crypto mining publication MinerUpdate.

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A sharp drop in the hash rate output of Bitmain Antminer E3 mining rigs on the Ethereum Classic network highlights that the hardware is approaching obsolescence in early April. Research which is currently under peer-review suggests that more than a third of the Ethereum network hash rate is currently attributable to Antminer E3 hardware. As such, the Ethereum network possibly faces a sharp hash rate drop in early April.

Quick take;

The Antminer E3 is approaching obsolescence as a file required for mining Ethereum becomes larger than the memory capacity of the hardware.

An analysis of Ethereum nonces infers that Antminer E3 rigs may currently represent more than a third of Ethereum hash rate

Antminer E3 rigs ceasing to mine on the Ethereum will catalyze a downward adjustment in difficulty, paving the way for more GPU mining rigs to come online

Several reports have surfaced that the Bitmain Antminer E3 mining rig will become obsolete in early April as the memory capacity of the hardware reaches its limitations. The reports anticipate that the Antminer E3 model will become obsolete as its 4 GB memory capacity is not sufficient to maintain a growing file size which is required to mine on the Ethereum network.

ETHEREUM DAG SIZE INCREASES

Ethash, the mining algorithm the Ethereum network utilizes, requires that miners load a large file called a Directed Acyclic Graph (DAG). While the DAG initially was 1 GB, the size of the DAG grows by 8 MB every 30,000 blocks.

Each group of 30,000 blocks is known as a mining epoch and each epoch has a specific DAG size. The current DAG size for the Ethereum network is 3.51 GB.

Each epoch lasts roughly five days. Faster block times on Ethereum Classic resulted in the network being several epochs ahead of Ethereum.

Issues with the Antminer E3 were initially spotted when ETC miners noted a sharp drop off in the hash rate of their Antminer E3 rigs mining on the Ethereum Classic network. Ethereum Classic miners reported the hash rate output of Antminer E3 rigs dropping to ~30 MH/s from its advertised 180 MH/s.

However, the hash rate performance of the Antminer E3 on the Ethereum network remained unaffected. Gleb Shirshov of 2Miners.com notes that this phenomenon has been commonly observed with GPU mining rigs when they approach their maximum memory capacity.

As the DAG file size increases, GPUs with lower memory capacity initially reach their limitations on the Ethereum Classic network given that the network is several mining epochs ahead of Ethereum. The GPU rigs switch to Ethereum for the remainder of their life span due to the lower DAG size requirements.

The reduction in Antminer E3 hash rate output on the Ethereum Classic network was reported around February 21st. At that time, the Ethereum Classic mining epoch was 328 while the Ethereum mining epoch remained at 318.

Shirshov estimates that the Ethereum network will reach mining epoch 328 around the 8th of April. At this point, it is expected that the Antminer E3 will no longer be able to mine on the Ethereum network.

HOW MUCH ETHEREUM HASH RATE DOES THE BITMAIN ANTMINER E3 ACCOUNT FOR?

An emerging element of blockchain analysis is examining nonce value distributions to try and determine the prevalence of various mining hardware on a network. The nonce is a random number – ranging from zero to an upper bound – which miners hash with the block header during the proof-of-work process.

Differences in the software and firmware employed in nonce search strategies among various mining rig models can lead to anomalies in the nonce distribution. MinerUpdate previously examined the Bitcoin nonce value distribution in an attempt to assess whether the Bitmain’s Antminer S9 mining rig is approaching obsolescence.

Even more granular analysis is possible by exploring the distribution of bits within each nonce. In October 2019, CoinMetrics published research which highlighted anomalies in the bit distribution of Ethereum’s 64-bit nonce corresponding with the announcement and shipping of the Bitmain Antminer E3.

Each bit within the 64-bit nonce is either set to zero or one meaning that the light areas on the above scatter plot represent areas where the bit was more commonly set to zero. The dashed red line representing the announcement of the Antminer E3 while the solid red line represents shipment. These both highlight an anomaly at bit 41.

The research implies that an increase in bit 41 being set to zero is representative of the Antminer E3 coming online. CoinMetrics share another graph which highlights the average value of bit 41 over time.

Under usual conditions, the average value would be expected to be 0.5 as a roughly equal number of miners set it to zero or one. However, significant drops were observed in the average value of bit 41 in both Ethereum and Ethereum Classic as the Bitmain Antminer E3 was announced and shipped.

Such data can be used to assess the prevalence of Antminer E3 mining rigs on the Ethereum network. Kristy-Leigh Minehan shared an unpublished research paper with MinerUpdate that uses a statistical framework to make such inferences and assess how much of the current Ethereum hash rate is attributable to Antminer E3 hardware.

The research remains in peer-review so the results can only be considered rudimentary. The results of the analysis report that “there is an exceedingly high probability that more than a third of Ethereum blocks are currently being mined by Antminer E3 devices”.

The research is still under scrutiny by peer reviewers so the validity and reliability of the report remains questionable. Nonetheless, given the approximate 2x efficiency gains available to ASICs mining on the Ethereum network, the Ethereum network likely faces a sharp drop in hash rate as the Antminer E3 becomes obsolete.

HOW WILL THE ETHEREUM NETWORK BE IMPACTED?

Ethereum’s current hash rate is estimated to be roughly 180 TH/s. A third of the network dropping off implies the hash rate declining to 120 TH/s.

Ethereum’s hash rate has previously undergone a decrease of over 50% in a prolonged drop from August 2018 to May 2019. However, all Antminer E3 hardware simultaneously becoming redundant would spark a much quicker drop in Ethereum hash rate.

While some may be concerned about network security during a drop, the fast-responding difficulty adjustment algorithm of the Ethereum network is another dynamic which needs to be considered. ASICs dropping off the Ethereum network will catalyze downward adjustments in difficulty, making it more profitable for GPU miners.

There will be a lag in Ethereum’s mining difficulty adjusting downward but it may take only 30 minutes to adjust by some estimates. Given the profit-driven motives of miners, there should not be a long lag before we see a drop in difficulty being accompanied by more GPU miners coming online.