Somewhat buried in ethereum’s big software makeover that rolled out Thursday is a code update known as Ethereum Improvement Proposal 3554, or EIP-3554 for short. It threatens to hasten the end of ethereum mining as we know it.
Since its launch, the ethereum community has talked about overhauling the way that it mints ether, which is the token associated with the ethereum blockchain. But getting people to make the change is going to require a push – and that push is something known as a difficulty bomb.
“It’s a mechanism in ethereum that makes it exponentially harder to mine,” said Tim Beiko, the coordinator for ethereum’s protocol developers. “It’s like we’re artificially adding miners on the network, which raises the difficulty, making it harder for every other miner that’s on the network to actually mine a block.”
EIP-3554 moves up the detonation date of that difficulty bomb by six months to December. Once it goes off, it will essentially make ethereum unmineable.
Ethereum 2.0
Cryptocurrencies like ethereum and bitcoin regularly receive flack for the process of mining, which is how new coins are generated. Both currently use a so-called “proof-of-work” mining model, where machines solve complex math equations to create new coins. This makes it impossible for any centralized body to create new coins arbitrarily – there’s no equivalent of a central government to print new dollars – which crypto enthusiasts believe helps preserve the value of these cryptocurrencies.
However, this effort requires significant energy to power the computers used to perform the calculations, which has drawn criticism from outsiders concerned about energy shortages and carbon emissions.
The ethereum community has coalesced around the idea of migrating from proof-of-work to “proof-of-stake,” which requires users to leverage their existing cache of ether as a means to verify transactions and mint new tokens. This will still limit the amount of new coin created, but without requiring the energy used to run massive banks of computers to solve math equations.
Beiko tells CNBC the original proposal required these so-called validators to have 1,500 ether, a stake now worth around $4.2 million. To lower the barrier to entry, the new proof-of-stake proposal would only require interested users to have 32, or about $90,000.
“It’s still not a trivial sum, but it’s a much more accessible system,” said Beiko.
Since December 2020, the ethereum community has been testing out the proof-of-stake workflow on a chain called Beacon.
Though proof-of-stake has been the plan for ethereum since the outset, developers have pushed back the rollout, because they had seen serious flaws in previous implementations. Beacon solves these problems, according to Beiko.
“We knew that there would be a lot of technical work to address things like the increased centralization that we see in other proof-of stake-systems,” he said. “We’ve achieved that with the Beacon chain, where there’s one or two orders of magnitude more validators…than any other proof-of-stake networks.”
Migrating the entire ethereum ecosystem to Beacon, an upgrade being dubbed “ethereum 2.0,” is the next step in the process. Getting everyone on board with the move is where the difficulty bomb becomes significant.
The Ice Age
This isn’t the first time in ethereum’s history that a difficulty bomb has detonated.
It’s happened a few times, including in 2017, 2019, and again last year.
When a difficulty bomb detonates, it floods the system with artificial miners, driving up the mining difficulty. That means new blocks will appear more and more slowly on the network. “If you increase the difficulty really, really quickly, it’s just not profitable for new miners,” explained Beiko.
But each time it’s gone off, the community has reset the clock in order to bring the difficulty level back down to normal levels.
Etherscan.io
While you don’t need a bomb to go off to roll out proof-of-stake mining, it certainly helps move things along by closing the on-ramp to proof-of-work mining. Beiko calls it more of a stopgap measure.
In essence, the point of the difficulty bomb is to force miners and node operators to upgrade their software after a predetermined amount of time has passed, according to Nic Carter, Castle Island Ventures general partner and Coin Metrics co-founder.
In December, if the deadline for detonation isn’t pushed back, the bomb will go off, and you’ll see another parabolic rise in difficulty, like the ones pictured in the chart above. But this time, developers won’t be rewinding the clock.
It will be the start of ethereum’s proof-of-work “Ice Age.”
Not everyone’s happy
While the upgrade to ethereum 2.0 has a lot of backers, not everyone is happy about the change.
“There are some miners who are against it, but it’s in their financial interest to be against it,” said Beiko.
Once the protocol has fully migrated to a proof-of-stake model, there won’t be any revenue to be made from ethereum mining.
At that point, miners have a few options for what to do next.
There are a lot of other chains that support GPU-based mining, so miners could simply choose to start mining other cryptocurrencies.
They could also decide to just shut down mining operations entirely and sell their mining equipment. Beiko expects to see a lot of that.
“We’ve also seen many mining farms and mining pools on ethereum start to get into staking,” he said.
“We’ve seen mining pools use their profits to set up validators on ethereum. We’ve also seen them offer pooling services for their users who might not have 32 ether but still want to validate the network.” So even if you don’t have $90,000 parked in ether, you still might be able to keep some skin in the mining game.
Altimeter Capital CEO Brad Gerstner said Thursday that he’s moving out of the “bomb shelter” with Nvidia and into a position of safety, expecting that the chipmaker is positioned to withstand President Donald Trump’s widespread tariffs.
“The growth and the demand for GPUs is off the charts,” he told CNBC’s “Fast Money Halftime Report,” referring to Nvidia’s graphics processing units that are powering the artificial intelligence boom. He said investors just need to listen to commentary from OpenAI, Google and Elon Musk.
President Trump announced an expansive and aggressive “reciprocal tariff” policy in a ceremony at the White House on Wednesday. The plan established a 10% baseline tariff, though many countries like China, Vietnam and Taiwan are subject to steeper rates. The announcement sent stocks tumbling on Thursday, with the tech-heavy Nasdaq down more than 5%, headed for its worst day since 2022.
The big reason Nvidia may be better positioned to withstand Trump’s tariff hikes is because semiconductors are on the list of exceptions, which Gerstner called a “wise exception” due to the importance of AI.
Nvidia’s business has exploded since the release of OpenAI’s ChatGPT in 2022, and annual revenue has more than doubled in each of the past two fiscal years. After a massive rally, Nvidia’s stock price has dropped by more than 20% this year and was down almost 7% on Thursday.
Gerstner is concerned about the potential of a recession due to the tariffs, but is relatively bullish on Nvidia, and said the “negative impact from tariffs will be much less than in other areas.”
He said it’s key for the U.S. to stay competitive in AI. And while the company’s chips are designed domestically, they’re manufactured in Taiwan “because they can’t be fabricated in the U.S.” Higher tariffs would punish companies like Meta and Microsoft, he said.
“We’re in a global race in AI,” Gerstner said. “We can’t hamper our ability to win that race.”
YouTube on Thursday announced new video creation tools for Shorts, its short-form video feed that competes against TikTok.
The features come at a time when TikTok, which is owned by Chinese company ByteDance, is at risk of an effective ban in the U.S. if it’s not sold to an American owner by April 5.
Among the new tools is an updated video editor that allows creators to make precise adjustments and edits, a feature that automatically syncs video cuts to the beat of a song and AI stickers.
The creator tools will become available later this spring, said YouTube, which is owned by Google.
Along with the new features, YouTube last week said it was changing the way view counts are tabulated on Shorts. Under the new guidelines, Shorts views will count the number of times the video is played or replayed with no minimum watch time requirement.
Previously, views were only counted if a video was played for a certain number of seconds. This new tabulation method is similar to how views are counted on TikTok and Meta’s Reels, and will likely inflate view counts.
“We got this feedback from creators that this is what they wanted. It’s a way for them to better understand when their Shorts have been seen,” YouTube Chief Product Officer Johanna Voolich said in a YouTube video. “It’s useful for creators who post across multiple platforms.”
CEO of Meta and Facebook Mark Zuckerberg, Lauren Sanchez, Amazon founder Jeff Bezos, Google CEO Sundar Pichai, and Tesla and SpaceX CEO Elon Musk attend the inauguration ceremony before Donald Trump is sworn in as the 47th U.S. president in the U.S. Capitol Rotunda in Washington, Jan. 20, 2025.
Saul Loeb | Via Reuters
Technology stocks plummeted Thursday after President Donald Trump’s new tariff policies sparked widespread market panic.
Apple led the declines among the so-called “Magnificent Seven” group, dropping nearly 9%. The iPhone maker makes its devices in China and other Asian countries. The stock is on pace for its steepest drop since 2020.
Other megacaps also felt the pressure. Meta Platforms and Amazon fell more than 7% each, while Nvidia and Tesla slumped more than 5%. Nvidia builds its new chips in Taiwan and relies on Mexico for assembling its artificial intelligence systems. Microsoft and Alphabet both fell about 2%.
The drop in technology stocks came amid a broader market selloff spurred by fears of a global trade war after Trump unveiled a blanket 10% tariff on all imported goods and a range of higher duties targeting specific countries after the bell Wednesday. He said the new tariffs would be a “declaration of economic independence” for the U.S.
Companies and countries worldwide have already begun responding to the wide-sweeping policy, which included a 34% tariff on China stacked on a previous 20% tax, a 46% duty on Vietnam and a 20% levy on imports from the European Union.
China’s Ministry of Commerce urged the U.S. to “immediately cancel” the unilateral tariff measures and said it would take “resolute counter-measures.”
The tariffs come on the heels of a rough quarter for the tech-heavy Nasdaq and the worst period for the index since 2022. Stocks across the board have come under pressure over concerns of a weakening U.S. economy. The Nasdaq Composite dropped nearly 5% on Thursday, bringing its year-to-date loss to 13%.
Trump applauded some megacap technology companies for investing money into the U.S. during his speech, calling attention to Apple’s plan to spend $500 billion over the next four years.