China’s Ethereum Mining Pool Sparkpool To Stop Offering Services Following PBOC’s Clampdown on Crypto

Sparkpool, one of the world’s largest Ethereum mining pools, is shutting down its shop amid China’s move to ban crypto assets within its jurisdiction.

On Monday, September 27, the China-based Sparkpool, the second-largest Ethereum mining pool in the world, announced that it had stopped offering services to new users in China as of September 24 and also plans to entirely suspend services to all its existing users in china and abroad as of Thursday, September 30.

Hangzhou-based Sparkpool stated the move is aimed to protect the safety of user assets in response to regulatory policy requirements announcement by the People’s Bank of China (PBOC) last Friday that effectively banned cryptocurrency.

In other words, Sparkpool wanted to be maximally compliant with regulatory requirements. Last Friday, China tightened its crackdown on cryptocurrencies and crypto-assets, declaring all cryptocurrency-related activities illegal.

The communist party-ruling central bank also affects businesses outside the country, advising overseas exchanges not to offer cryptocurrency services or conduct digital transactions with China’s people. The PBOC has also stated that it will work with domestic agencies to carry out comprehensive monitoring.

Sparkpool launched in 2018 and eventually became one of the world’s largest mining pools for ether. It is the second-largest miner in terms of the hashrate on the network, behind Ethermine, the world’s largest Ethereum mining pool.  

Sparkpool’s mining power currently contributes about 142 TH/s, about 22% of Ethereum’s global hashrate, just under Ethermine’s share of 24%.

China advised local authorities to crack down on crypto mining in May, but Chinese miners had quietly resumed Ethereum mining operations over the last few months.

Other firms also have followed SparkPool’s move. On Sunday, September 26, two of the world’s largest Bitcoin exchanges stopped taking users from China following the renewed cryptocurrency ban by the PBOC. Huobi announced last Sunday that it would stop serving existing users in China by the end of this year. Binance also has blocked new registrations of accounts by mainland customers.

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Top Ethereum Mining Pool SparkPool to Shut Down

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The China-based Ethereum mining pool SparkPool has announced it will shut down services for all users following stricter enforcement of crypto mining bans in the country. 

SparkPool Shuts Down

SparkPool, the second largest Ethereum mining pool, has announced that it will end all services and operations by Sept. 30.

The pool, based out of Hangzhou, China, initially told users that it would stop offering its services in mainland China last Friday, following regulatory changes from Chinese authorities. However, in a subsequent notice posted to the SparkPool website and Twitter account today, the company confirmed that it would be stopping its services to users both “at home or abroad.” 

In the notice, SparkPool stated that it had made the decision to help protect user’s assets. The pool also said it would send out additional information concerning the shutdown through announcements and on-site messages. Currently, the shutdown is planned to take place early morning on Sept. 30. 

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Launched in 2016, SparkPool is one of the longest-running Ethereum mining pools and currently accounts for 21% of the Ethereum network hashrate. According to MiningPoolStats, SparkPool has over 68,000 miners connected to its Ethereum pool, producing 141TH/s (Terahashes per second) of hash power. 

SparkPool also provides pools for two other proof-of-work blockchains, Beam and Nervos, which will also shut down at the same time as the Ethereum pool.

The latest crypto crackdown in China has mostly been a reiteration of previous provisions declaring cryptocurrency-related activities illegal. However, unlike previous bans, authorities are now increasing surveillance and enforcing harsher penalties on those caught running illegal mining operations. As such, companies dealing with cryptocurrencies in China are likely to either shut down or move abroad to avoid running afoul of the new regulations. 

Disclaimer: At the time of writing this feature, the author owned BTC, ETH, and several other cryptocurrencies. 


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Ethereum’s EIP 1559 Fee Market Scheduled to Launch in July

An All Core Developers call today confirmed that the Ethereum Improvement Proposal (EIP) 1559 would be packaged with the London hard fork this coming July regardless of the mining industry’s discontent with the proposal.

Developments Are Underway

The event will mark one of the significant milestones ever made on the Ethereum blockchain.

From the information given, about five other EIPs are likely to join EIP 1559 in London.

EIP 1559 Is a Big Deal

High Ethereum gas fees have been a great inconvenience in the Ethereum blockchain for a while now. In a few months, this might not be an issue anymore. Ethereum Improvement Proposal (EIP)-1559 will provide a solution for ETH high gas fees by improving how transactions operate on Ethereum and modifying the network’s current monetary policy’s underlying economics.

A significant feature of this new fee structure is that the inclusion fee is paid only to ETH miners. The mining will still burn essential costs under this plan. It ensures that it is only possible to use Ether-Tokens for transactions on the Ethereum network. In turn, it supports the economic value of ETH tokens within the Ethereum ecosystem and the risks associated with reducing risks involved with miner extractable value (MEV).

This burn is also designed to balance inflation on the Ethereum network, thus granting ETH miners block prizes and inclusion fees. Ensuring that the miner does not pay the base fee on an Ethereum block is vital because the mining incentive to exploit the TX fee is essentially removed to collect even more charges from network users.

Given the current difficulties of choosing the correct transaction fee, the proposal has been well received by Ethereum’s developers and consumers. On the other side, the miners and the mining pools have gathered against the initiative as it advanced to mainnet.

Campaigns Voting Out EIP

Indeed, Ethereum mining has been an incredibly lucrative business as of late. The total mining revenue surpassed a record $1.3 billion in February, with some 50% coming from fees alone, according to CoinMetrics. An increase in both the price of ether and transaction fees has introduced a wave of new hash power to the network, which is more than double that of a year ago.

Flexpool, a minority mining pool, started a publicity campaign against the EIP. There then joined several minority pools, followed by Ethermine and SparkPool. More than 60% of the hash power of the Ethereum network is now contrary to the proposal. Having about 10% hash capacity, F2Pool is the largest pool in favor of EIP.

On the call, developers from Ethereum chose to pair EIP 1559 with a difficulty blast delay. Also known as the “Ice Age,” the bomb raises the Ethereum network mining difficulty incrementally. Péter Szilágyi, the leading team at Geths, said that pairing EIP 1559 with the delay made it impossible to forge Ethereum without any technological barriers at that time.

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Minority Mining Pools Threaten to Collude Against Contentious Ethereum Update

Ethereum miners have formed a cartel of sorts to thwart the implementation of a now contentious proposal – one they say cuts into their bottom line unfairly.

Eight Ethereum mining pools amounting to around 30% of the network’s hash power have cast their support behind tiny mining pool Flexpool’s stance against Ethereum Improvement Proposal (EIP) 1559.

The small pool – which only mined 10 blocks among 48 miners in December – is now calling on Ethereum miners to jump ship from major mining pools that support the update such as Sparkpool (24% network hash power) and F2Pool (11%).

“Don’t be a slave to your mining pool. Blacklist pools that support robbing their miners just so that they can inflate the price of [ETH] for rich speculators,” a Flexpool blog post reads. 

Since the blog post was published on Jan. 14, some 400 miners have joined Flexpool, CEO Alexander Sadovskyi told CoinDesk in a Telegram message.

EIP 1559

First proposed in April 2019 by Vitalik Buterin, EIP 1559 flips the traditional mining payment scheme on its head by burning most of the transaction fees typically given to miners in a bid to address transaction fee volatility and improve the blockchain’s woeful use interface. (Here’s a short description from Ethereum developer Tim Beiko). 

One blockchain analyst went as far to call EIP 1559  “the biggest change to any blockchain post-release.”

And although the update has not been officially accepted for mainnet, the EIP has received strong support among developers and could be forked into the Ethereum codebase sometime after the Berlin hard fork. That hard fork is roughly queued for February or March.

Runaway fees

It’s understandable why Ethereum miners would want EIP 1559 to never be implemented, or at the very least delayed. 

Miners have been a big winner from an uptick of on-chain activity sparked by the emergence of decentralized finance (DeFi). Indeed, mining profitability is reaching near three-year highs as on-chain congestion pushed transaction fees to record highs in 2020, according to data collected by BitInfoCharts.

Not only this, but Ethereum mining is an industrial-scale business. 

Firms such as China-based Linzhi have begun rolling out new ASIC Ethereum miners developed over the last few years. A simple protocol change would force miners toward lesser-known Ethash coins – a potential waste of R&D money. Not to mention other Ethash coins are “really unprofitable,” Sadovskyi said on Telegram.

Paired with ether (ETH) breaking its all-time high on Tuesday, it’s easy to see why miners are fighting tooth and nail to keep the printing press running as is.

Larger Ethereum mining pools react

Only time will tell if bigger mining pools react to the collusion campaign sparked by Flexpool. The three largest mining pools – BitFly, F2Pool and Sparkpool – are either anti-EIP 1559 or neutral, according to CoinDesk inquiries.

BitFly has long been against the proposal. It reaffirmed its stance in a tweet saying the EIP may put “Ethereum’s future at risk.”

F2Pool Director Da Liang told CoinDesk in a Telegram message that it is “neutral at this stage and not ready to announce anything officially,” regardless of earlier tweets from F2Pool co-founder Chun Wang indicating a pro-EIP 1559 stance. 

It also seems as if dominant Ethereum mining pool SparkPool is walking back its prior stance on the EIP. In June, SparkPool CEO Xin Xu told CoinDesk that a “better fee model design is needed” and that the pool had been “supportive of EIP 1559 for a long time.”

That may not be the case as SparkPool Telegram admin “CZ” said no SparkPool employee had given a public stance on the subject. He added: “Obviously, mining pool (sic) always oppose 1559.” The pool’s official Twitter chat also promoted an article against the EIP on Jan. 20. 

SparkPool has yet to respond to requests for comment.

Which way, Ethereum man?

Dissenting Ethereum miners need at least 51% of the network’s hash power to nix implementation of EIP 1559.

Here – in the extremely unlikely scenario – a dominant anti-EIP 1559 mining cartel would be able to censor miners that have implemented the update. Any blocks conforming to the new rule set with EIP 1559 would be stopped from being processed.

Beiko, the unofficial project manager for EIP 1559, told CoinDesk it’s unlikely to come to that point, particularly because of how early EIP 1559 is in its development.

“It’s worth noting how ‘early’ 1559 is in the deployment process,” Beiko told CoinDesk in an email. “Yes, it’s been worked on for a while (mostly because of how big of a change it is and how much R&D there was to do), but it’s still not scheduled for any mainnet upgrade.”

Beiko added the EIP could be skipped for multiple reasons going forward including consensus issues among Ethereum Core Developers. 

“I’m obviously biased here, where I think shipping as is is probably the best path forward, but this is ultimately not my call. The best the people working on 1559 can do is make a compelling case for it to the community,”  Beiko said.

Sadovskyi told CoinDesk he expects Ethereum developers to make some concessions to miners given the public backlash fomenting in the mining community. He said it’s unlikely Ethereum developers totally disregard miners as “Ethereum devs care about their reputation.”

“The response from eth dev team, non-miner community has been very dismissive, often hostile,” Charles Spears, VP of Strategy at Ethereum mining firm American BitPower, told CoinDesk in a Telegram message.

“There is a narrative that miners are making tons of money and yes, times are great right now. But GPU miners really took it on the chin for a couple years there, which we feel goes unnoticed,” he said.

Developers respond

On the other hand, miners serve the Ethereum network and not the other way around. The thinking goes that there will always be a mining market as long as it’s profitable. Moreover, Ethereum mining has always had an uncertain shelf life as Eth 2.0’s proof-of-stake (PoS) consensus mechanism does away with it all together.

A recent lesson in decentralized governance also indicates where this struggle could go: Programmatic Proof-of-Work (ProgPoW).

That failed campaign was a multi-year attempt to update Ethereum’s mining algorithm from Ethash to the newer ProgPoW. It failed to reach consensus among developers multiple times, despite many in the mining businesses best efforts. It left large parts of the Ethereum ecosystem antagonized which may in some part be fueling sentiment around EIP 1559.

So, what power do miners have? Not much, unless they want to attack the Ethereum network itself, Ethereum developer Micah Zoltu wrote in a Jan. 20 blog post.

“Any censorship attack by miners against the interest of users will almost certainly result in the core developers taking very aggressive action against miners,” he explained in the blog post. “The most likely retaliation that the core devs could execute would be a rush to launch Proof of Stake, which would completely remove all miners/mining from Ethereum.”

So maybe we do get Eth 2.0 a bit faster than expected?

Probably not, Beiko said, as following through on colluding against the update would bare large costs for mining parties.

“It is easy for [miners] to signal they are against the change, and much costlier for them to actually follow through on things like forming cartels,”



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