YEREVAN (CoinChapter.com) – Ethereum Network will face the long-awaited Merge in Aug.-Sep. 2022, according to the founder Vitalik Buterin. The Merge will mark the complete transition from the proof-of-work (PoW) consensus mechanism to proof-of-stake(PoS), a cheaper and more energy-efficient alternative. So once Ethereum switches to PoS, the miners would become obsolete.
Meanwhile, Ethereum also represents a $19 billion mining industry, which would have to either migrate to a different Network or find a new industry altogether. In addition, the mining scene outside the Ethereum Network is not fit to accommodate a large wave of graphic processing unit (GPU)-based miners.
Notably, there are two main types of mining equipment that ETH miners use: GPUs and ASICs (application-specific integrated circuits). Given the decentralized nature of the Network, it is hard to say the exact distribution between the two.
But some estimations assess that most miners work with GPUs, as they are more versatile. ASICs, on the other hand, are computerized hardware designed for a specific purpose, in this case, mining Ethereum’s hashing algorithm. So, what will the miners do with their equipment once the Merge occurs? Will they migrate or leave the industry altogether? Here are some possible ways out:
Mining other PoW coins
Both individual miners and large mining pools will have to shift their focus once the Merge happens. Thus, many websites popped up that determine which coins are most profitable to mine based on specified hardware and electricity costs.
Sue Ennis, the Vice President of Corporate Development at mining company Hut 8, told Sami Kessab, a researcher for Messari, that Hut 8 is considering mining alternative PoW coins such as Ethereum Classic after The Merge. Meanwhile, the company plans on donating its GPU hash power to the Luxor Mining Pool, which includes coins like BTC, DASH, ZEC, and SC, with all profits being paid out and held in Bitcoin.
However, the alternative coins’ market size presents a severe problem. The total GPU-mineable coin market cap excluding Ethereum is currently $4.1 billion as of June 9, which is roughly 2% of Ethereum’s market cap. Also, Ethereum represents 97% of the total GPU miner revenue.
Research from Sami Kessab for Messari.io
Thus, it is unlikely that mass migration to other PoW could be sustainable.
Shifting from Mining to a Computing Services Business
While individual miners might find it easy to pivot and repurpose their equipment, large-scale mining companies could be in a pickle. Large-scale capital investments, warehouses, infrastructure, and mining hardware have to be put to an alternative use.
So several mining companies like Hu8 and HIVE Blockchain have invested in top-tier GPU cards for mining Ethereum, which have allowed them to be repurposed into providing high-performance cloud computing services.
The demand for high-performance computing is likely to grow, given the boom in gaming, artificial intelligence, and movie animation. This growth will provide large-scale miners the opportunity to become high-performance compute providers with a strong new revenue stream once Ethereum merges.
Providing Compute to Web3 Protocols
Serving Web3 needs is another possible direction for obsolete Ethereum mining gear. The purpose of Web3 is to recreate the internet on open, decentralized, and permissionless protocols. Thus, it is important to rebuild the “infrastructure” for video streaming applications, rendering 2D and 3D objects, and cloud servers.
That’s where GPUs find a second life. All the services mentioned above rely on a distributed network of participants to provide GPUs. It looks like Ethereum miners can transition the use of their GPUs to a handful of Web3 protocols and call them home.
Moreover, the Web3 window is open to small-scale miners and larger ones as well. According to Sue Ennis, Hut 8 considers using its data centers to “serve as a node operator/provider” for Web3 protocols in the future.
Following a successful mainnet merge on Ethereum, GPU mining PoW coins will likely collapse to a much smaller group. Furthermore, mining alternative PoW coins might only be profitable for a small number of miners with access to cheap energy.
However, miners willing to invest the time and additional capital will be able to find another way out. For example, transition into high-performance data centers or node operators/providers for Web3-compute protocols.
Lilit is a Yerevan-based Markets writer, skilled in 3 languages, and interested in writing about the tech world, trading, art, and science. She also has a background in psychology and marketing, which helps deliver the right message to the target audience.
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