The end of Ethereum mining could be a bonanza for GPU customers

The end of Ethereum mining could be a bonanza for GPU customers

Although these GPUs were liquidated after flooding in China in 2018, they provide a good picture for the flood of GPUs hitting the used market these days.

Although these GPUs were liquidated after flooding in China in 2018, they provide a good picture for the flood of GPUs hitting the used market these days.

To most of the world, yesterday’s long-awaited Ethereum “Merge” — which took the cryptocurrency from proof-of-work mining to a proof-of-stake model — is known to have cut Ethereum’s energy consumption by 99.95 percent. But for gamers, the merger has already contributed to a dramatic shift in the market for GPUs and could continue to drive graphics card prices down going forward.

In recent years, crypto miners had been acquiring as many GPUs as they could to power their mining rigs, leading to short supplies and greatly inflated prices for consumers who just wanted better graphics on their PC games. However, this trend seems to have reversed itself at the end of 2021, when the dollar-denominated prices of most cryptocurrencies began a long step that made GPU mining unprofitable in many areas.

Prices for GPUs have already fallen through 2022, causing GPUs to routinely go for significantly less than their MSRP on auction sites like eBay. GPU manufacturers have been left with an unexpected surplus of excess inventory.

Last month, Nvidia announced preliminary results indicating weaker demand for its high-end cards than expected. “Changes in cryptocurrency standards and processes including, but not limited to, the pending Ethereum 2.0 standard may also create increased aftermarket resale of our GPUs and may reduce demand for our new GPUs,” the company said.

Nowhere to run to, baby

You might think that Ethereum miners could simply switch to other cryptocurrencies that still rely on proof-of-work mining (including Bitcoin, which remains the largest cryptocurrency by market capitalization). The forked Ethereum Classic, which sticks to the token’s original proof-of-work model, has emerged as an alternative that tries to fill that very role.

But a recent report found that pre-Merge Ethereum was responsible for a whopping 20 to 39 percent of electricity usage for cryptoassets. That’s such a large proportion of the crypto mining space that all those miners moving to other tokens en masse will quickly lead to an overabundance of data supply. That in turn would quickly reduce returns to the point where only miners with extremely cheap power could make money.

We are already seeing the cycle play out on Ethereum Classic. As miners began to flock to the fork after the merge, the increased access to computing power has already made it almost impossible for miners to make money.

The overall hashrate of the Ethereum network has been falling for months, suggesting that some miners may have gotten out well before the merge.
Magnify / The overall hashrate of the Ethereum network has been falling for months, suggesting that some miners may have gotten out well before the merge.

Luxor COO Ethan Vera told The Block that only about 100 TH/s of Ethereum’s mining capacity would be able to “find a home” on other proof-of-work tokens after the merger. That leaves about 90 percent of the previous Ethereum mining network that “basically won’t have any use for GPUs in crypto mining” after the merger, Vera said.

“GPU mining is dead less than 24 hours after the merge,” Bitfarm’s Chief Mining Officer Ben Gagnon tweeted Thursday morning. “The only coins showing profits have no market cap or liquidity. The profits are not real.”

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