Original title: "What Will Ethereum Miners do After The Merge?》

first level title

Original compilation: Biscuit, chain catcher

summary

• summary

• The Merge of Ethereum will force $19 billion worth of POW mining practitioners to find another way.

• Most existing Ethereum miners cannot find POW mining coins with equivalent economic benefits in the market. The total market cap of GPU-minable tokens excluding ETH is $4.1 billion, or about 2% of ETH's market cap. ETH mining income accounts for 97% of the daily income of GPU miners.

• Many large miners plan to move to a data center-oriented business, with an emphasis on providing high-performance computing services.

Miners can contribute GPU computing power to Web3 protocols such as Render Network, Livepeer, and Akash.

Instead of using computing power to determine which miner should create a new block, the PoS mechanism relies on collateral pledged by nodes to determine the creator of a new block. Therefore, if the transition of Ethereum to PoS is successful, Ethereum miners will be eliminated. So, what impact will the merger have on miners and mining hardware?

first level title

Hashrate drops

While the Ethereum merger has been promised for years, ongoing technical challenges keep pushing back its timeline. Based on the eagerness of ETH core developers and the successful merger of the Ropsten testnet, assuming there are no accidents, the mainnet merger is expected to be on track from August to September.

This can be further illustrated by looking at trends in GPU resale prices. The resale value of popular mining GPUs including the RTX 3090, 3080, 3070, 3060, 2080, and 2070 has dropped rapidly over the past six months. GPU prices have dropped an average of 47% since December 2021. The recent drop in cryptocurrency prices has negatively impacted mining profitability and has also increased the supply of GPU miners on secondary markets such as eBay. Finally, as the merger looms, fewer and fewer miners are willing to invest in new mining rigs.

first level title

ASIC and GPU miners

There are two types of Ethereum mining machines: ASIC and GPU. An ASIC (Application Specific Integrated Circuit) is computer hardware designed for a specific purpose, and the hashing algorithm for Ethereum is programmed into an Ethereum ASIC miner. GPU miners can solve complex PoW calculations and can also be used for more general applications. GPUs, for example, are often found in workstations and gaming computers to render images, encode video, or perform any other application that requires repetitive calculations.

Due to the distributed nature of the Ethereum mining industry, it is difficult to determine the exact ratio of ASIC and GPU miners on the network. BitPro CEO Michael D'Aria estimates that 90% of miners are based on GPU mining machines, while the other 10% are based on ASIC mining machines. Bitsbetripping host Michael Carter, who specializes in crypto mining consulting, told Messari that he estimates 20-30% of miners on the network are ASIC-based.

Data centers that provide high-performance computing

• Mining other PoW tokens

• Data centers that provide high-performance computing

• Computing for the Web3 protocol

• first level title

Mining other PoW tokens

Mining other PoW tokens

For some crypto enthusiasts, mining has become a hobby. They tend to passively earn cryptocurrency from mining rigs or gaming computers. For others, mining is an investment business with the goal of earning a return on investment.

With Ethereum abandoning the PoW mechanism, both types of miners are wondering what other PoW tokens can be mined. In a related thread on Reddit, some miners stated that the strategy after the ethereum merger is to switch to mining any profitable cryptocurrency. Relying on WhatToMine, a site that calculates mining returns, miners can determine how profitable cryptocurrencies are to mine based on the type of mining machine they specify and the cost of electricity.

Some large miners appear to be following a similar path. Hut 8 corporate vice president Sue Ennis told Messari that Hut 8 is considering mining other PoW tokens such as Ethereum Classic after the ethereum merger. However, they continue to hold only BTC on their balance sheets. Hut 8 also plans to switch its GPU hashing power to the Luxor Mining Pool to mine tokens including BTC, DASH, ZEC, and SC, with all profits paid in Bitcoin.

The problem with miners switching from mining ETH to other PoW tokens is that the market size for these tokens is nowhere near the size of Ethereum. As of June 9, the total market capitalization of GPU-minable tokens other than Ethereum was $4.1 billion, accounting for about 2% of Ethereum's market capitalization.

Since hashrate cannot be used to compare the computing power of networks with different hashing algorithms, total miner revenue becomes the next best approach. Among the top seven GPU-minable coins by miner revenue, Ethereum accounts for 97% of total GPU miner revenue. Ethereum Classic came in second with 1.9% of total GPU miner revenue. This shows how small the market for GPU-minable tokens without Ethereum is.

A common misconception in the mining world is that an increase in hash rate will lead to an increase in token price, when in fact the opposite is true. If ETH GPU miners flooded a PoW token overnight, it would drastically increase the mining difficulty of that token, resulting in lower mining rewards. The end result is that most miners are not profitable. Only those miners with access to the cheapest energy will remain profitable, which will likely be institutions and large mining companies. Therefore, only a fraction of the ETH hashrate is able to migrate to other GPU-mineable tokens.

The only way for other public chains that can mine tokens through GPUs to receive Ethereum computing power is to increase the price of tokens by several orders of magnitude. Given that the user activity on these public chains is much lower than that of Ethereum, the probability of a sharp rise in the price of their tokens is very small. Furthermore, most PoW public chains lack a community other than the miners themselves.

Overall, a mass migration of miners to other PoW coins is unlikely to be a sustainable solution. Any increase in the hash rate will increase the difficulty of mining and drive most miners out of the profitable range. Unless mining coin prices increase by several orders of magnitude, the network can only accommodate a fraction of Ethereum's hash rate, which is unlikely based on the current fundamentals of these projects. But it is still possible that there will be a PoW network that will allow miners to reach consensus and be adopted.

first level title

Data Center Oriented Business

The scale of Ethereum miners has grown from individual miners with small mining machines to large mining companies operating thousands of mining machines and publicly listed. While small miners may transition easily following the Ethereum merger, for larger miners who have invested heavily in mining hardware, dedicated warehouses, and power-related infrastructure, deciding what to do next will be very difficult.

Demand for high-performance computing will continue to grow as gaming, artificial intelligence, and film animation flourish. This growth is an opportunity for large miners to gain substantial new revenue streams once the Ethereum merger happens.

Demand for high-performance computing will continue to grow as gaming, artificial intelligence, and film animation flourish. This growth is an opportunity for large miners to gain substantial new revenue streams once the Ethereum merger happens.

Livepeer Network: A decentralized network for video streaming that relies on miners to use GPUs to provide video transcoding services.

The purpose of Web3 is to rebuild the Internet on an open, decentralized, and permissionless protocol. In order to achieve this, a distributed infrastructure needs to be established as the base layer. This includes building infrastructure for video streaming applications, rendering of 2D and 3D objects, and cloud servers. What these services have in common is that they rely on a distributed network of participants to provide GPU computing services.

Miners can redirect their GPU power to a handful of Web3 protocols, including:

• Render Network: Distributed GPU computing power market, allowing users to contribute computing power for rendering. The network allows GPU miners to sell their rendering power to anyone in need, such as artists, designers, and researchers.

• Livepeer Network: A decentralized network for video streaming that relies on miners to use GPUs to provide video transcoding services.

• Akash Network: A decentralized cloud computing power market, providing a cooperation platform for providers with additional computing power and users seeking computing power. Akash aims to integrate the GPU market into its platform in the second quarter of 2022, enabling the network to handle data-intensive workloads such as machine learning, artificial intelligence, and cloud gaming.

first level title

Transition to PoS staking

Miners who have accumulated ETH from mining can choose to sell their GPU miners and become an Ethereum PoS validator node. The network requires validators to stake at least 32 ETH to run a validator node. In return for validating transactions, validators are rewarded in the form of block rewards, tilt incentives, and MEV. Depending on the number of stakers and the level of network activity, yields can range from 7% to 13%. For miners who do not have 32 ETH or do not want to take the risk of running a verification node, they can also participate in the pledge through ETH 2.0 pledge service providers.

first level title

Future Use Cases for GPUs: Zero-Knowledge Proofs (ZKP)

Zero-knowledge proofs (ZKP) allow users to cryptographically prove that they know a secret without revealing the secret to each other. ZKPs are an essential solution for blockchain scaling and improving privacy. With ETH 2.0 focusing on a Rollup-centric roadmap, zk-rollups are increasingly popular as a layer 2 scaling solution, with projects like Starknet and zkSync leading the way. Other projects using ZKP besides Rollup include Mina, Filecoin, and Zcash.

Paradigm recently wrote an article about hardware acceleration of ZKPs. The article discusses that as ZKPs gain popularity and complexity, the technology will need specialized hardware to scale to its intended scale, which will create a market similar to Bitcoin mining:

“As users seek more expressive, high-performance, and private computation, the complexity of using ZKPs will increase. This will result in slower proof generation, requiring specialized hardware to generate proofs in a timely manner.

first level title

Summarize

Summarize

After the Ethereum mainnet is successfully merged, the GPU mining market for PoW tokens may shrink rapidly. As miners realize that mining other PoW coins will only keep the few miners with access to cheap energy profitable, then most of the GPU miners will be resold on the secondary market. Miners willing to invest time and money will be able to transition to high-performance data center operators or node providers for the Web3 hashrate protocol — both markets are growing rapidly.