PoW-based Ethereum used about 23 million megawatt-hours of electricity per year and accounted for about 93 percent of GPU mining rewards. But after the Merge most miners are out of business — and now there’s suddenly too much redundant hash power, which can’t be deployed to mine Bitcoin since it’s mined with more efficient ASIC rigs.
Unlike GPUs, which are multipurpose computer hardware demanded by gamers, designers, AI researchers, and miners, ASICs — or application-specific integrated circuits — are designed for the sole purpose of mining a specific cryptocurrency, which makes them more power intensive and more profitable. This specialized hardware makes GPU mining largely obsolete for major PoW cryptocurrencies like Bitcoin or Dogecoin. This also means that for Ethereum miners, there’s just a handful of ASIC-resistant tokens left that can still be mined with GPUs.
The most notable alternatives are, obviously, Ethereum Classic, a 2016 fork of Ethereum that originated as a result of a DAO hack, and ETHPoW, a separatist PoW blockchain aimed at die-hard miners resentful of the loss of their primary income. Other GPU-friendly PoW projects worth mentioning are Ravencoin (RVN), an ASIC-resistant fork of Bitcoin, and Ergo (ERG), a blockchain that supports smart contracts and has its token supply capped at under 100 million ERG.
However, as more miners flock to other chains, mining difficulty increases and profits shrink. Since the increased number of miners was competing for the same rewards, the hashrate of these networks exploded hours following the Merge. As a result, many miners were driven out of the race due to not being profitable at current electricity prices.
“GPU mining is dead less than 24 hours after the Merge,” tweeted Ben Gagnon, chief mining officer at bitcoin miner Bitfarms (BITF). According to him, the three largest GPU chains — Ergo, Monero, and Raven — have very low profits, and “the only coins showing profit have no market cap or liquidity.”
Ethereum Classic, for instance, saw its hashrate increase from 66.4 TH/s to 291.52 TH/s between September 14 and September 15, as block rewards fell from 58 cents to just over 1 cent.
“As suspected, too many ETH miners switched over to ETC. Even running new generation hardware at sub 3 cent power is not profitable on ETC now,” tweeted Ethan Vera, COO of Luxor, the crypto software and services company that also runs an Ethereum mining pool.
“We estimate that around ~140 TH can be on the network based on current economics. Even then, miners are making gross profits close to $0,” he added. “In total it looks like about 20-30% of ETH miners have found a temporary new home amongst other blockchains, the rest are shut down.”
Currently, all GPU-friendly PoW networks can’t provide enough rewards to miners. Small miners with home-run mining rigs will most likely just dump their equipment on the used market and move on, but large mining companies are now facing a hard time. Those with access to cheap electricity will probably survive, but others would be forced to sell their assets and shut down. Finally, there’s also a third way: to move from crypto and sell computational power to the fast-growing AI industry.
