So the Merge is on the brink of happening…finally.
Excitement and jubilation are in the air. But not everybody is looking forward to this monumental moment.
Those miners are just different eh?
To recap a bit, for those who have been living under a rock, Ethereum is on the verge of upgrading its consensus protocol from a Proof of Work network to a Proof of Stake network. Proof of Work required the processing power of many specialized computers to run highly complex mathematical computations, such as SHA256. With Proof of Stake, miners can participate by staking a minimum amount of ETH in “pools” to have a chance of being part of the consensus protocol. No 3rd party computing machines are necessary and some may say this is beneficial to the environment as less energy intake is needed. In Bitcoin, Proof of Work is still the main consensus protocol which has been one of the leading reasons Bitcoin is so decentralized. But Bitcoin does receive flack for using a lot of energy.
So considering Ethereum’s Proof of Work will slowly become obsolete, this leaves its existing miners in the dust with what to do next. There will be no more ETH for them to mine for using their hoards of GPU miners. This is reflected in the markets for GPUs as well. For example, NVIDIA GPU prices have taken a beating over the past few months. A NVIDIA RTX 3090 GPU in May 2021 would have cost over $3,000. Now that same GPU is selling for just under $930 which represents over a 70% drop in price.
Some mining companies such as Hive Blockchain and Hut 8 Mining Corp. have released updated business plans to reflect how they will deal with the post-Merge. Hive, a publicly traded company, plans to explore other blockchains to continue its mining operations. Hut 8 Mining, another major miner, will meanwhile pursue ventures outside of crypto1.
If you think about it, a lot of mining revenue is going to be funneling to other validators on the Proof of Stake network. Ethereum miners generated $733 million in revenue in August 2022. The question then becomes, how will those POW miners make up for that loss of revenue?
Many other miners are looking for creative ways in repurposing their plethora of running GPU rigs. Some have decided to use them for supporting cloud computing, artificial intelligence, Machine Learning, or VFX rendering services to customers.
Even some miners are looking to redirect their hashrates towards another forked Ethereum token, Ethereum Classic. The token ETC, over the past few weeks, witnessed network metrics surging to lifetime highs and ETC tokens gaining value in a mostly little-changed crypto market. The Ethereum Classic hashrate reached over 48.64 terahashes per second (TH/s) as of Tuesday morning, having surged more than 133% since July 2.
Some other PoW coins have also been a hot choice for Ethereum miners to pivot to. Other coins suchs as Ravencoin, Bitcoin Gold, Monero, and ZCash have seen some interest recently. Many miners originally were not optimistic that the Merge would even happen at all, but now that it is, many miners are feeling a sense of sadness knowing that their profitable venture is going away.
Some have even decided to stick it through by opting to continue to mine the ETH PoW token when the Merge happens. These miners, although a very small bunch, believe in the soon-to-be forked coin when it happens. Many in the space don’t think this ETH PoW token will gain traction or popularity, but many can also make the argument that Ethereum Classic is still around. The crypto space is not entirely filled with all profit seekers, but rather many in the space are in it for the tech and its altruism.
For the past year, Ethereum hashrate has been quite steady with hashrates peaking around May of this year. Ironically, many miners have been loading up on hashrates to take advantage of the last seconds of PoW mining on Ethereum. But after the Merge completes, expect to see a load of miners halt their mining operations.
Perhaps a win for the environmental sustainability proponents but maybe a loss for the Proof of Work diehards who say that form of consensus as the most optimal form in cryptocurrencies. Or perhaps many miners would also pivot their hashrates to the king of PoW, Bitcoin. Maybe Vitalik, the founder of Ethereum, will somehow plan to incorporate mining back into Etherem. Then again, earlier when New York State Senate lawmakers passed a bill that will halt permits for new cryptocurrency mining facilities, Vitalik was completely against it ‘I oppose banning proof of work’.