There are rumors that Dogecoin could switch from proof-of-work to proof-of-stake (PoS).
Do I know if Dogecoin is switching to PoS?
Do I think it’s going to PoS? Probably not.
But I love the “what if” game.
As a person who works in the crypto mining industry, I do my best to gauge where the market and mining industry are going, along with how that could play out. If Dogecoin makes a change to PoS or some other change to how new blocks are created, it would have massive ramifications for the mining industry.
Here’s a look at a few options and their effects.
Scrypt mining could be devastated
I’m not going to debate whether or not Dogecoin will or should switch to PoS. While it’s hard to determine if the recent rumors about the potential for a switch are true or not, they were enough to have Bitmain supposedly pause Litecoin (LTC) and Dogecoin (DOGE) miner manufacturing.
The larger question in my mind is, What happens to miners if Dogecoin switches to PoS?
First, Scrypt mining would be devastated. DOGE accounts for over 60% of the revenue with Scrypt mining. Take it 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 electricity — would need to be unplugged immediately.
Network difficulty would likely bounce all over the place for some time, while miners with older equipment struggle with the decision to keep their ASICSs on or turn them off. The apex Scrypt miner, Bitmain’s Antminer L7, would see its profitability reduced by nearly 75%, reducing profits to a whopping $4.83/day at $0.05/kWh.
What about the miners that don’t have an industrial electric rate? At $0.10/kWh, the L7 9050M, which sold for around $9,000 a few weeks ago, would earn you $0.72/day.
A drastic change like this would result in those who had recently purchased an L7 being very unlikely to ever recover their investment, let alone generate any profits.
ASIC manufacturers would be forced to drop prices, further impacting their bottom line
The vastly reduced profitability would inevitably lead to the price of the L7 dropping quicker than it did…