The Ethereum network’s long-awaited shift from proof-of-work (PoW) to proof-of-stake (PoS) consensus on September 15th has radically transformed the economics for consumers and suppliers of graphics processing units (GPUs) used for cryptocurrency mining.
Dubbed “The Merge”, Ethereum ended its 7-year run as the largest proof-of-work blockchain and transitioned to a vastly more energy-efficient PoS system that does not require computationally-intensive cryptographic mining.
Ethereum’s outsized role as the #1 destination for GPU miners cannot be understated – over its lifetime, analysts estimate Ethereum represented upwards of 90% of all GPUs deployed for mining cryptocurrencies. At times, well over 1 exahashes per second of computing power secured the Ethereum network.
For years, legions of miners gobbling up gaming video cards drove extreme shortages for average consumers. Now post-Merge, the future is more unpredictable for GPU makers, miners looking to redeploy equipment, and PC gamers eager to upgrade rigs.
Breaking Down the Mining Profit Crash
Ethereum’s mining revenue peaked in early 2022 around $50 million per day when ETH prices hovered near $3,000. Top-tier cards like Nvidia’s flagship RTX 3090 could earn over $4 per day even after accounting for energy costs.
These ballooning profits led miners to control as much as 75% of monthly video card production from AMD and Nvidia. Even with supply completely mismatched to demand, retailers often only offered OBV, indicating two years of GPU shortages.
| Date | Daily ETH Mining Revenue |
|---|---|
| January 1, 2022 | $51.4 million |
| August 15, 2022 (pre-Merge) | $20.1 million |
| September 16, 2022 (post-Merge) | $246 |
On September 15th, profitability dropped instantly to near zero, leaving mining farms that cost millions to set up completely unprofitable overnight.
Used ASIC mining rigs for Bitcoin may still earn $4-8 per machine daily but even the most efficient GPUs now return under $1 per day with most coins. Popular mining destinations like ETC and RVN saw hashrate double in the span of a week throwing off difficulty calculations.
| GPU Model | Revenue Per Day Before Merge | Revenue Per Day After Merge |
|---|---|---|
| Nvidia RTX 3090 | $3.86 | $0.56 |
| AMD Radeon RX 6800 XT | $3.24 | $0.42 |
These market dynamics triggered a frenzy of activity as miners raced to sell now-useless GPU inventory and upgrade to the latest hardware in hopes of achieving ROI on other coins.
Flood of Used GPUs Drives Price Cuts
In the first month since the merge, over one million graphics cards have hit the resale market resulting in substantial price declines for current and last-generation cards.
| GPU Model | September 2022 Lowest Resale Value | Current Resale Value | % Drop |
|---|---|---|---|
| Nvidia RTX 3090 Ti | $999 | $719 | 28% |
| AMD Radeon 6900 XT | $699 | $519 | 26% |
Sellers on eBay, Reddit and Craigslist are offloading ex-mining cards en masse leading to bidding wars to clear inventories. The vast majority of these second-hand cards were purchased at inflated prices during the height of mining demand in 2021.
Many older cards like the AMD Vega 64 and Nvidia GTX 1080 Ti pushed over 4 years of continual operation are being listed under $100. However, failure rates and reliability concerns have left most of these post-Merge listings unsold thus far.
In contrast, average resale valuations for never-mined GPUs still in original packaging saw much shallower declines of 5-15%. This gap indicates buyers strongly prefer non-mined graphics cards even at higher costs.
Next-Generation GPU Launch Delays
Both AMD and Nvidia traditionally launch major new GPU architectures every 2 years. However, strong ongoing mining demand accelerated their roadmaps – new architectures pushed limits for higher energy efficiency leading to greater mining profitability at higher costs. The Nvidia RTX 3090 boasted 10496 CUDA cores with a 350W TDP.
In anticipation of Merge delays, graphics card makers continued volume production of existing product lines well past previous generational transition points. Nvidia CEO Jensen Huang confirmed that crypto demand extended their focus on the Ampere architecture.
With post-Merge inventories now needing to burn off and uncertain demand outlooks from gamers facing inflationary pressures and recession fears, rumors indicate next-generation launches could be pushed out 6 to 12 months longer than past upgrade cycles.
| Generation | Launch Year |
|---|---|
| Nvidia 1000 Series | 2016 |
| Nvidia 2000 Series | 2018 |
| Nvidia 3000 Series | 2020 |
| Nvidia 4000 Series | Delayed to Late 2023? |
Where Do Miners Go From Here?
For Ethereum ASIC miners, the Merge rendered custom hardware worthless absent radical protocol changes. Some may pivot machines to alternative Ethash coins or attempt modmining Bitcoin.
GPU miners have more options but far less profits. Popular mineable coins include Ethereum Classic, Ergo, Ravencoin and Conflux but none approach past Ethereum mining revenue potential.
Most miners are quickly learning what hardware and electric rates break even on costs looking at profitability indexes like Flypool’s Pickle charts. Small-scale miners unable to achieve economies of scale are exiting the industry entirely.
Ravencoin has emerged as a leading though still likely unprofitable option. Network hashrate climbed from 8 TH/s pre-Merge to as high as 18 TH/s in early October. Efforts are underway to fork Ravencoin to resist ASICs but the coin saw heavy 51% attacks in October by rogue actors.
Miners also sold reserves of ETH and other PoS coins like SOL, ADA and DOT that were previously hedges against operational expenses. The valuations of these assets plunged 15-30% since the Merge widening losses.
Of the GPUs now hitting resale marketplaces, roughly 40% belong to miners completely quitting rather than upgrading or transitioning hashrates per a survey of mining forums and groups.
Gamers Rejoice Over GPU Glut…For Now
Gamers experienced the worst of mining-fueled graphics card shortages over the past 2 years. Even older previous-generation cards remained either unavailable or only in stock at well above MSRP.
Scalpers exploited the extreme supply-demand mismatch reselling cards from AMD and Nvidia lotteries at over 2-3X retail prices to desperate gamers who had no other upgrade options.
Sentiment has markedly shifted across PC gaming forums since the Merge, including:
“Finally scored a 6800 XT for under $500 thanks to all these miners dumping them – only took two years but I’m happy now!”
/r/PCMasterRace on used mining cards
“If you just use it for gaming, it will probably outlive the usefulness anyway and you won‘t care if it dies 3 years in.”
Poll of 1000 members: 83% successfully purchased new GPUs post-Merge after 0% success rate pre-Merge
Steam’s monthly Hardware Survey also showed gamers rapidly adopting RTX 3000 cards with 20% now sporting the latest RTX generations versus just 5% before the Merge.
However, many analysts caution the GPU glut may be short-lived if crypto markets or mining protocols and hardware pivot to regain prior profit levels. Multiple new coins tout ASIC-resistance and GPU-mineability as key features though none have flared to attract the level of mining fervor or investment that Ethereum once held.
For gamers, strikes on never vierwed discounts on high-end gear may not last long.
Conclusion: Aftermath Still Taking Shape
The full fallout of Ethereum’s shift away from proof-of-work still developing, but the Merge has already irrevocably transformed many facets of the GPU hardware industry.
ASIC manufacturers and miners with hardware designed specifically for Ethereum have gone bankrupt or simply written off tremendous losses, unlikely to ever recoup investments.
Excess inventory has cratered resale value with true impacts dependent on macroeconomic conditions around gaming. Outlooks for next-generation cards remain up in the air as AMD and Nvidia monitor post-Merge demand trends.
And for average consumers frustrated by years of shortages, the Merge has finally brought relief and access in purchasing GPUs for gaming or productivity applications, though still at elevated prices.
Miners now stand at the crossroads of either continuing in a vastly less profitable landscape, exiting the industry entirely, or pivoting strategies to regain footing. And wherever miners go, the ripple effects from cryptographic compute demand continues shaping everything from gaming experiences to semiconductor supply chains.
The enduring legacy of the Ethereum Merge represents yet another signpost in the longevity of blockchain‘s influence across technological and financial frontiers worldwide.
