September 15, 2022 marked a pivotal turning point for cryptocurrency networks. On this date, Ethereum completed its long-planned "merge" – transitioning the blockchain from proof-of-work (PoW) to a proof-of-stake (PoS) consensus model. For Ethereum miners using GPU rigs, the profitability math changed overnight setting off shockwaves across gaming hardware markets worldwide.
In the following deep-dive analysis, we will explore:
- Key events leading up to Ethereum‘s merge to PoS
- Impacts on GPU mining profitability
- Market effects as ex-miners sell used graphics cards
- How other cryptocurrencies were influenced
- What the future looks like for crypto mining and PC gaming hardware
The Rise of GPU Cryptomining
Graphics cards have played a central role in Ethereum network‘s security model and ecosystem since inception in 2015. Their parallel processing strengths mine Ether far faster than CPUs. As custom mining hardware like ASIC rigs largely targeted Bitcoin, Ethereum mining on consumer gaming GPUs took off.
Ethereum Cryptocurrency Mining Evolution
| Year | GPUs Created | Avg. Hashrate | Daily Revenue* | Top Coin Price |
|---|---|---|---|---|
| 2017 | GTX 1000s | 15 MH/s | $3 per GPU | $700 |
| 2019 | RTX 2000s | 35 MH/s | $5 per GPU | $350 |
| 2021 | RTX 3000s | 100 MH/s | $20 per GPU | $4800 |
* Revenue for an RTX 3090 GPU minus electricity costs
As the table shows, improving GPUs and booming Ether prices drove mining farm profits to soaring new heights in 2021. Investing $5000 into 6 high-end graphics cards could net over $70 per day by mid 2021 – with full ROI possible within just 2-3 months.
Crypto bubble headlines in mainstream media drove droves of PC gamers towards monetizing idle GPUs. Even the global chip shortage didn‘t deter over two million new Ethereum miners joining in under a year.
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Despite anti-mining algorithms in Nvidia‘s RTX 3000 Founders Edition cards, scarcity allowed miners to resell cards at extreme markup. Even used last-gen cards sold for twice their launch prices on eBay.
Dwindling stocks coupled with relentless demand from miners left gamers worldwide struggling to purchase graphics cards anywhere near manufacturers‘ MSRPs. Reviewers named the shortages among the worst supply crunches ever faced by PC builders.
Why Ethereum Pushed Forward with the Merge
Against the backdrop of financial speculation driving network expansion to potentially environmentally risky levels, Ethereum developers accelerated plans to switch consensus models years ahead of schedule.
The proof-of-stake (PoS) model had long been slated to follow early PoW days once network conditions sufficiently decentralized and hardened the blockchain against attack scenarios. By late 2021, confidence emerged that accelerated merge timelines could work.
Interviews with lead Ethereum developers highlighted four key motivators behind expediting the merge:
- Sustainability: Eliminate energy-intensive PoW coin minting
- Security: Mitigate excessive miner concentration risk
- Scalability: Enable faster/cheaper transactions via upgrades
- Profitability: Control mining profitability spiraling out of control
After extensive testing, proposals formalized to transition the mainnet to proof-of-stake consensus in mid 2022. The merge would render existing PoW mining equipment obsolete overnight without changing currency functionality.
The date was set – the merger occurred flawlessly on September 15, 2022. Ethereum finished shifting from publicly mined blocks full of GPU-powered transaction validations to a closed set of PoS validators staking 32+ ETH to secure blocks.
Profitability and Paybacks Shattered Overnight
After the merger activated, profitability for Ethereum mining – the highest paying use of commodity GPUs – dropped over 98% in a single epoch.
Mining Revenue per RTX 3090
| Date | Revenue |
|---|---|
| 9/14/2022 | $2.21 |
| 9/15/2022 | $0.05 |
| 9/30/2022 | $0.02 |
With power costs factored in, miners now operate at considerable loss. Payback periods on equipment no longer make any logical sense. Used ASIC models like Antminer E3 lost 99% of market value practically instantaneously.
Home miners with just a few GPUs felt less impact due to lower startup costs. But fleet operators now owe on hundreds of instantly obsolete cards polluting their mining racks.
Positive cash flow models that justified equipment loans and ongoing CapEx evaporated overnight with the Merge delivering an icy reality check to overzealous entrepreneurs.
What About Other Coins?
Many enterprise-scale miners struggled to pivot strategies to alternate PoW coins like Ethereum Classic and Ravencoin. But extreme difficulty spikes matched big hashrate shifts to these second tier names.
Despite periodic spikes, GPU mining lacks long term viability outside of Ethereum‘s pre-merge economy of scale. The final nail in coffin seems reluctantly evident for all but the most ardent hobbyist miners.
Used Graphics Card Prices Plummet
Shortly following the merge, waves of specialized high-end graphics cards flooded the secondary resale markets.
eg. ebay completed listings, stockx pricing charts, etc.
Values on AMD Radeon and Nvidia GeForce cards remain highly volatile week-over-week depending on specific model demand/availability. However, across the board, used pricing sits well below August lows in nearly all cases.
We expect pricing to fall further as retailers blow out merge-aftermath inventory of last gen cards. For gamers and PC builders, the next 6-12 months will deliver once in a lifetime values not seen since the early 2010s.
Lessons Learned From the GPU Cryptomining Age
Ethereum‘s emergence fostered the explosive growth of consumer GPUs as the engine of a $500B public blockchain and financial system powering over $100B of transactions in 2021 alone. Driven by this insatiable commercial momentum, this newly created hardware segment catalyzed rapid technical achievements from AMD, Nvidia, and partners over a span of just 5 years.
However, unchecked speculation added too much instability and turbulence to hardware supply chains designed for the reliability demands of high performance computing customers. As regulators address rampant issues like pump and dumps or fraud to restore public trust, the enterprise hopes Web 3 builds itself on the lessons absorbed by veteran miners leaving the GPU scene in this post-merge age.
With their short but dramatic role in accelerating decentralized networks now concluded, graphics cards finally return to focus on their original purpose – gaming. Both gamers and mining firms now look forward at rebuilt roadmaps after a history making technological cycle resets to leave another batch of winners and losers in its wake.
