Quick thoughts on the Merge and GPUs

0x4C0a
April 4th, 2022

Is anyone gaming out GPU scenarios heading into and after the Merge? I check in every once and a while to miner subreddits r/ethermining and r/gpumining, here's a collection of possibilities and second order effects

TLDR: i think GPUs will get cheaper, but not at the Merge


first we should consider whether a miner has ROId aka "broken even." they are much more likely to ride through the Merge. these are probably long-term miners who have been through things, unlikely to make quick decisions, and bc they are already ROId, don't need to

just because they don't need to, doesn't mean they won't. getting a good price before others may be tempting enough to drop out pre-Merge and hedge

larger operations might also project out to see they will make X$ by mining and Y$ by selling the GPUs, and the day that Y>X, you would expect them to sell

if they haven't ROId, it's a little more complex. some may try to frontrun the flood, but there's less pressure in absolute $ terms if you run a small setup. some are hobbyists doing it for fun, or can use GPUs for gaming if things become too unprofitable

however, as we know, difficulty is self balancing - if miners leave to sell their hardware, it becomes that much more lucrative to stick around and get the last ETH block rewards from PoW

based on what i've observed, i think this "frontrunning" effect will be less dramatic. as mentioned, Ethereum still pays the best out of any GPU coin. leaving that income on the table doesn't seem likely

second, inertia + a "wait and see approach" are strong predictors

case in point, 1559 (Aug. '21) was projected to significantly cut miner revenues, but bc Ethereum is so profitable it didn't seem to effect total hashrate. (IIRC the May '21 drop is related to china mining bans). meaning - many miners waited it out and ended up sticking around

adding to "wait and see" factor: miners (and the rest of us lol) don't know exactly when the Merge/the end of PoW will take place. we have projections and best guesses, but it will be ready when its ready. i don't blame miners for not acting within this uncertainty

interestingly, HR growth rate since EOY has slowed - is this The Market already whispering its expectations? I wonder if total hashrate / growth rate will materially react to an announcement of total terminal difficulty TTD (akin to block height in a regular network upgrade)

quick interjection about TTD

so back to miners that haven't ROId: based on reddit discussion, many miners expect to move to a lower hashrate GPU coin. given this is a very common public sentiment, i'm pretty sure it's not going to work out as expected

ethereum provides income for most of the GPU hashrate market today. after the Merge, they need to look elsewhere if they choose to keep mining

https://2cryptocalc.com/gpu/24h
https://2cryptocalc.com/gpu/24h

it seems to follow that the chains will not be able to maintain the same level of profitability when ~95% more hashrate suddenly redistributes itself

this point is often countered with the claim that "miner inflows = demand/ interest in the coin = significant price increases" seems like motivated reasoning at best

so again: i think GPUs will eventually fall in price, but whether it happens directly at the Merge or not depends on how many miners have ROId, and how much the want to hedge against future unprofitability in the GPU world

maybe a slow bleed? we'll see!

caveat - keep in mind i have a pretty limited perspective, i don't have insights into non-english mining communities, or how larger miners plan to operate

that's it - check out additional discussions here on r/ethereum which partially prompted these tweeeets

Arweave TX
UOSiMbighPGG3zCnLQjyg1EZNpdPok7Igq1dEIvDPsQ
Ethereum Address
0x4C0a466DF0628FE8699051b3Ac6506653191cc21
Content Digest
jtseh00dkSWP8_PndXf4cW2lJC_VpG1w73sj2ViFGqc