Does the merge herald the end of GPU mining?

With the change in Ethereum’s consensus mechanism during the merge, the blockchain for validating its transactions broke away from the proof-of-work process, in which miners worked with powerful graphics cards (GPUs). For them, mining ETH using their graphics chips has been a very lucrative business to date.

While many miners are selling their hardware in preparation for the Ethereum transition and putting the proceeds into Ether to continue earning money on the Ethereum blockchain after the merge thanks to staking, others are still trying to get rid of their expensive graphics cards. What follows is a secondary market of tumbling prices.

Still others try to save themselves in smaller GPU mining-supported blockchains such as “Ethereum Classic” in order to continue to convert the computing power of the graphics chips into hard cash – with moderate success, because mining is becoming less and less lucrative, also because so many Ethereum miners switch to the alternatives.

What to do with the computing power?

Ethereum was far from the only blockchain that enabled GPU mining. The tokens of all Ethereum forks, such as “Ethereum Classic”, can be mined with the graphics chips. Proof of work blockchains such as Ergo or Ravencoin also became the target of Ethereums miners, who wanted to recover their lost earnings there.

The problem: These blockchains cannot intercept the full migration of the Ethereum hash rate without mining there becoming unprofitable.

in one blog entry on Hashrate Index, Colin Harper and Erick Vera from the crypto mining company Luxor Technologies get to the bottom of this hashrate hike in Ethereum. They calculate that after the current churn is still scarce 84 percent of hash power will remain unused. According to this, Ethereum Classic, Ravencoin and Ergo together are only able to intercept 15 percent of Ethereum’s migrated computing power. Most of the miners will no longer be able to earn money there. PC gamers who have long complained about horrendous prices on the graphics card market should be happy about that – because the prices of GeForce 3070, 3080, 3090 Ti and Co. have in all probability not yet bottomed out thanks to this ditch.

Another reason for miners to look for alternative sources of income is that the mined coins of the alternatives (with the exception of Ravencoin) offer significantly less income than Ethereum.

Many GPU miners are also seeing electricity costs continue to rise and could therefore decide against spending more on electricity than they can earn from selling the mined coins – especially since there is no end in sight to the energy crisis.

Harper and Vera are therefore certain that only the most efficient and capable miners will be able to generate significant profits. Small and average miners would be squeezed out.

sale

Many miners should have been aware of this fact. One might think they were just waiting for the announcement of the successful merger before selling their ETH to take the last profits. That may be one of the reasons for the Ethereum price drop a few hours after the upgrade was completed.

Now they’re sitting on billions of dollars worth of graphics cards and other mining gear that they can’t use profitably. There are signs of the large-scale sale of the devices. According to Harper and Vera, the Nvidia GeForce RTX 3090 graphics card on E-Bay is already 68 percent cheaper than last year. This trend could continue to increase, shares of the manufacturer are also seen for the year dropped by 50 percent. In the merger week in particular, the company saw major losses.

With the disappearance of the mining demand on Ethereum, the GPU method obviously loses its appeal. The collapse of the rogue Ethereum hard fork “ETHPow” is emblematic of the coming fate of miners. The frequently drawn scenario of the miner dying seems to come true in times of proof-of-stake dominance.