Does the Ethereum Merge spell the end of GPU mining?

After the Ethereum Merge, GPU mining faces extinction due to a lack of alternatives.

After the Ethereum Merge, GPU mining is at risk of dying out due to a lack of alternatives. Are the miners' days numbered? And what does this mean for PC gamers?

With Ethereum's consensus mechanism change during the Merge, the blockchain broke away from the proof-of-work process for validating its transactions, where miners used powerful GPUs. For them, mining ETH with their graphics cards had been a highly lucrative venture up to that point.

While many miners sold off their hardware in preparation for the Ethereum transition and staked their Ether to continue earning on the Ethereum blockchain after the Merge, others are still trying to unload their pricey GPUs. What follows is a secondary market with tumbling prices.

Others are trying to get by on smaller, GPU-mining-based blockchains like "Ethereum Classic" to keep converting the hash power of their chips into cash—with limited success, as mining becomes less profitable and as many Ethereum miners shift to the alternatives.

Where should the hash power go?

Ethereum wasn't the only blockchain that supported GPU mining for a long time. Tokens from all Ethereum forks, such as "Ethereum Classic," can be mined with graphic chips. Proof-of-work blockchains like Ergo or Ravencoin also drew Ethereum miners hoping to recoup lost income.

The problem: these blockchains can’t absorb the full migration of Ethereum’s hashrate without mining becoming unprofitable there.

In a blog post on Hashrate Index, Colin Harper and Erick Vera of crypto mining firm Luxor Technologies dive deeper into Ethereum’s hashrate migration. They estimate that after current churn, nearly 84 percent of the hashrate will be unused. According to this data, Ethereum Classic, Ravencoin, and Ergo together can only absorb about 15 percent of the migrated hash power. Most miners won’t be able to make money there. PC gamers, who have long complained about sky-high GPU prices, should be happy—because prices for GeForce 3070, 3080, 3090 Ti and the like likely haven’t hit bottom yet.

Another reason miners are seeking alternative revenue streams is that coins mined on the alternatives (except Ravencoin) are substantially lower in value than those on Ethereum.

Many GPU miners are also watching electricity costs rise further and may decide not to spend more on power than they can earn by selling mined coins—especially since there’s no end in sight to the energy crisis.

Harper and Vera are confident that only the most efficient and powerful hash-hungry setups will be able to generate meaningful profits. Small and mid-sized miners would be squeezed out.

Sell-off

Many miners should have seen this coming. One could think they were simply waiting for the successful Merge announcement to sell their ETH and take the last profits. This is likely one reason Ethereum’s price fell a few hours after the upgrade was completed.

Now they’re left with billions of dollars’ worth of graphics cards and other mining gear they can’t profitably use. A broad sell-off of gear looks set to unfold. According to Harper and Vera, Nvidia’s GeForce RTX 3090 is already 68 percent cheaper on eBay than a year ago. This trend could continue; the company’s stock has fallen about 50 percent over the past year. The company bore big losses, especially during the merge week.

Now that demand for Ethereum mining is waning, the GPU mining process is clearly losing its appeal. The collapse of Ethereum’s hard fork "ETHPoW" epitomizes the miners’ likely fate to come. The oft-cited scenario of miners’ death seems to be playing out in a world dominated by proof-of-stake.