The upcoming Ethereum Proof-of-Stake (PoS) Merge marks a significant turning point for the network. If successful, it will conclude the current era of Ethereum mining and raise a critical question: where will the existing computational power dedicated to ETH go after the transition?
This shift has been a topic of discussion within the crypto community, often framed as, "What will Ethereum miners do after the Merge?" The general consensus is that they will migrate to other Proof-of-Work (PoW) chains, such as ETC and Ravencoin (RVN), though their options are notably limited.
This article delves deeper into that notion of "limited options," analyzing how Ethereum's current hash rate might be redistributed across alternative networks in the existing mining economy.
Analyzing the Hash Rate Migration
As of early September 2022, the total hash rate of the Ethereum network was approximately 764 TH/s. The mining hardware dedicated to producing this hash power is estimated to be worth around $8 billion.
For miners, the technical process of redirecting their hash power to other Ethash-based algorithms or GPU-mineable tokens is relatively straightforward. However, the primary challenge lies in the economic viability of such a move. These alternative blockchains have a limited capacity to absorb this hash rate while allowing miners to remain profitable.
A higher hash rate on any network leads to shorter block times, which subsequently triggers an increase in mining difficulty. As the difficulty rises, the revenue generated per unit of hash power declines for each miner.
Consequently, only a small number of PoW tokens are positioned to receive a portion of Ethereum's former hash rate. For the vast majority of miners, the profitability on these chains will be significantly lower than what they experienced on Ethereum—with a few potential exceptions.
The following analysis uses data from September 6, 2022. Assumptions include an average mining rig efficiency of 2.55 J/MH and an electricity cost of $0.06 per kWh.
Projected Hash Rate Absorption by Alternative Chains
Among the available options, ETC, RVN, and Ergo are considered the most viable destinations for migrating ETH miners. While other tokens exist, their potential impact is negligible.
Even under optimal assumptions, for miners to break even at an electricity cost of $0.06/kWh and with hardware efficiency of 2.55 J/MH, the combined hash rate on these three chains would need to reach a minimum of 139 TH/s. This represents about 15.88% of Ethereum's former total hash power.
Other blockchains, such as Beam, Bitcoin Gold, and Aion, collectively could absorb less than 0.7 TH/s of hash rate.
This implies that a staggering 734.43 TH/s—over 84% of Ethereum's hash power—would have nowhere profitable to go. This stark reality underscores why the PoS Merge is often described as the potential death knell for large-scale GPU mining.
Nevertheless, some miners will navigate this transition more successfully than others.
The Role of Operational Costs and Hardware Efficiency
The analysis above is based on average figures. In practice, a miner's operational costs and machine efficiency are critical variables.
Retail miners relying on residential electricity rates are expected to be the first and most affected. Unless they operate the most efficient hardware available, turning a profit on ETC or any other alternative chain will be challenging, if not impossible—even with top-tier equipment, high electricity costs can erase margins.
In contrast, large-scale mining operations with access to low-cost electricity and highly efficient hardware are better positioned to survive. For example, an ETC miner paying $0.03 per kWh with machines running at 2.55 J/MH would require the network's total hash rate to stay below 282 TH/s to break even. A miner with ultra-efficient hardware at 1.57 J/MH would need the total hash rate to remain under 460 TH/s to be profitable.
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The Future of Mining Hardware After the Merge
For miners unable to remain profitable, the question becomes: what will they do with their hardware?
Some may choose to hold onto their equipment, betting on a future recovery in the mining economy for GPU-mineable assets. However, a much larger portion is likely to sell their gear.
We've already seen a steady trickle of used graphics cards onto the market throughout the year. The Tom's Hardware GPU Pricing Index reported that the average eBay price for an NVIDIA GeForce RTX 3090 in August fell by 9.5% compared to July.
Data from eBay's own market analysis shows that the average price for the same model has plummeted by approximately 68% over the past twelve months.
We anticipate this decline will accelerate significantly after the Merge. The global chip shortage and the Ethereum mining boom were significant drivers of GPU price inflation over the last two years. The end of ETH mining is poised to reverse that trend.
The Broader Impact on GPU Mining
The successful completion of the Ethereum Merge will undoubtedly reshape the cryptocurrency mining landscape. While a segment of ETH's hash rate will migrate to other chains, a large portion will simply vanish from the market. Only those miners with the most efficient operations and lowest costs are likely to continue.
The industry will be watching closely to see how this new era affects hash price—the dollar value of earnings per unit of hash power—across remaining GPU-mineable tokens, as well as the secondary market for graphics cards.
Frequently Asked Questions
What will happen to Ethereum miners after the Merge?
Most miners will attempt to migrate their hash power to other Proof-of-Work blockchains that are compatible with GPU mining, such as Ethereum Classic (ETC) and Ravencoin (RVN). However, due to limited economic capacity on these chains, a significant portion of miners are expected to become unprofitable and may shut down their operations.
Which cryptocurrencies will benefit from the ETH hash rate migration?
ETC and RVN are the primary candidates to absorb a portion of the migrating hash power. Ergo is another potential beneficiary. However, the economic capacity of these networks is limited, meaning they can only support a fraction of Ethereum's former hash rate before profitability for all miners on the network declines significantly.
Will GPU prices drop after Ethereum moves to Proof-of-Stake?
Yes, it is highly anticipated that the market will see a notable decrease in GPU prices. The end of Ethereum mining will remove a major source of demand for high-end graphics cards. This, combined with the increasing sale of used mining hardware, is expected to drive prices down further.
Is it still profitable to mine other coins after the Merge?
Profitability will depend almost entirely on a miner's electricity costs and the efficiency of their hardware. Large-scale operations with access to cheap power and modern ASICs or efficient GPUs may remain profitable on select chains. For the average retail miner, however, profitability will be challenging to achieve.
What is the long-term outlook for GPU mining?
The long-term outlook is uncertain. The departure of Ethereum, the largest GPU-mineable network, is a major blow. The viability of GPU mining will now depend on the success and adoption of smaller PoW chains, as well as potential new use cases for decentralized computing power that may emerge in the future.
Can miners simply switch to another coin easily?
Technically, yes. Miners can easily configure their equipment to mine any coin that uses a compatible algorithm (like Ethash or KawPow). The barrier is not technical but economic. The sudden influx of a massive amount of hash power onto a small network makes it unprofitable for everyone.