12/09/2022
What will happen with GPU mining after Ethereum forks to Proof of Stake?
The majority of GPU miners are probably asking themselves what will happen in the next couple of weeks when Ethereum moves from Proof of Work to Proof of Stake.
In this article, I will try to explain what I believe will happen after The Merge and what will be the optimal mining solution for GPU miners after the merge.
How much GPU computational power does Ethereum utilise compared to other projects?
It's hard to define this metric because each algorithm uses a bit different workload on a GPU. Instead of deep analysis, I decided to compare how much of RTX 3060 Ti’s would be mining on an algorithm if only this GPU would be mining it. RTX 3060 Ti is decently versatile.
As you can see on the table above, Ethereum ulilizes 94.45% of total computational power compared to other projects.
Note that it is hard to tell the percentage of GPU and ETH ASICs that are currently mining on the Ethereum network. I would guess that around 30% of hashrate comes from ASICs. For mining profits, it would be best that the majority of hashrate on Ethereum comes from ASICs because these ASICs will not be able to mine Ergo, Ravencoin and other non-ethash algorithms; thus they will not increase the competitiveness on these projects.
This means that Ethereum’s computational power (hashrate) will be either removed (rigs will be shut down) or transitioned to other projects that are listed below Ethereum. The ASICs on Ethereum will probably move to mining Ethereum Classic. We will see a huge growth in ETC nethash and difficulty.
When will miners notice mining profitability decrease?
Miners will probably not notice any extreme profitability drop just before the merge. The difficulty bomb will be triggered only couple of days before the merge. Since the dificulty bomb increases difficulty only on every couple of days. the difficulty will not be increased as much to leave a mark on the profitability before the PoS.
A couple of months ago we could see the effects of the difficulty bomb on the mining rewards. The effects of difficulty bomb on mining rewards is very well explained in this article. Note that this will probably not happen this time as the merge is scheduled soon after the difficulty bomb will be triggered.
BTW, you can check Ethereum Merge countdown here.
The Merge will happen only once the Terminal Total Difficulty (TTD) reaches a certain level - the trigger point for The Merge is a predefined terminal total difficulty. Once this is reached, the next block on the Ethereum blockchain will be validated by Proof of Stake consensus instead of Proof of Work.
We might see a day or two of delay of The Merge. It might not happen exactly on the 15th of September as it depends on the amount of hashing power on the Ethereum network.
So, what to expect will happen with mining profitability after the Ethereum Merge?
All the miners who will stay “in the game” in the days after the Merge and after will be switching to other projects that will be more profitable than Ethereum at that time. In couple of weeks after The Merge there will be no “most profitable coin to mine”, but instead there will be multiple equally profitable coins to mine.
Ethereum has a very huge total computational power on its network. No coin can “take in” that amount of hashing power and keep up with the same profitability. The daily mining volume of all the other coins combined is only around 3% of the current Ethereum daily mining volume!
Daily mining volume is the total mined coins in a day, multiplied by its price.
This will likely to happen after The Merge:
Disclaimer: This is an educated guess and does not necessarily mean that events will take place in the exact manner.
#1 Some miners will not be profitable
Because Ethereum currently holds around 95% of total GPU hashpower, the total computational power will probably be at least halved as the miners with high electricity costs will simply not be profitable anymore or the ASICs will stop mining.
#2 Miners will migrate to the second most profitable coin after Ethereum
The majority of the other half miners will probably go mining Ethereum Classic. The ETC nethash could increase by a factor of ~12.
#3 The second most profitable coin difficulty will increase
The difficulty of ETC will also increase by a factor of up to ~12. Rig with 500Mh/s currently earns $6.5 daily, but would only earn $0.5 per day.
#4 Miners will migrate to the third most profitable coin and make it unprofitable
Next, miners will switch to the next most profitable coin, probably Ravencoin. The difficulty will increase there too, so it will make it way less profitable. Thus, miners will be looking for the next “most profitable coin”.
#5 Miners will continue to the next most profitable coin
The next target might be Ergo. Nethash and difficulty will increase, profits will decrease.
#6 The process will continue until the difficulty on ETC will decrease
Miners will continue to look for the next coins that will be more profitable than the previous ones. Because the miners will drop off the previous coins, the difficulty will decrease on these coins, profitability will increase slightly back again.
I expect that this process will continue until the profitability of all the coins will be equal. Give or take.
We will see a couple of weeks of huge difficulty adjustments on most of the GPU minable coins.
#7 A lot of projects will be equally profitable
In a couple of weeks or maybe months, a lot of GPU mineable projects will be equally profitable for miners.
After this period, mining profitability will be very dependent on the price of the coin. Once the price of the coin will increase, so will the profitability, thus miners will be switching to mine this project.
Since there will be briefly more miners mining it, the difficulty will increase and the profitability will decrease again. GPU miners expect to change pools and coins quite often.
Will the profit switching be the new normal?
Yes, it is expected that the profit switching will be the new normal. You can expect the extensive switching to stop once one of the project/coin sees a huge price increase. Once the price of some coin will be high enough, so that even increasing difficulty will not make the coin profitability decrease, then we can expect that coin to stay on the first place of profitability as the most profitable coin to mine. This is what happened with Ethereum, its price rose so much that the network hashrate & difficulty could not follow it. In other words, there was not enough mining hardware to reach the equalibrium where mining would only pay of to the people with really cheap electricity.
Until then, expect to switch pools quite often in order to squeeze the most of your GPU.
Summary - What should I be mining with a GPU?
There will be a lot of manual intervention needed for GPU miners in the next couple of months. If you are mining directly to a pool, you will experience issues like pool hopping penalties, finding a good pool, leaving dust coins on a pool, exchanging to preferred cryptocurrency and generally spending a lot of time to make mining as efficient as possible.
Luckily there is NiceHash. NiceHash takes care of everything for the miner. You are always mining the most profitable project, to be precise, you are selling your hashing power to the highest bidder. But the trick is that the highest bidder will always try to mine the highest paying coin.
