Ethereum merges, Nvidia's revenue plummets, and the era of graphics card mining officially ends

"Graphics card mining" has reached a critical juncture of destiny.

On August 26, Nvidia released its second quarter financial report, which showed that the revenue of its mining chip CMP-related business, which was classified as "OEM and Others", fell by 66% year-on-year. The reason for its poor performance was the drag of its gaming business, which mainly sells GPU products for gaming graphics cards to consumers. Nvidia said that the 33% year-on-year decrease in revenue in the second fiscal quarter was due to the decline in sales of PC (personal computer) gaming graphics cards.

Nvidia Chief Financial Officer Colette Kress said: "Volatility in the cryptocurrency market, including price drops or changes in the methods of verifying transactions, has affected demand for our products and our ability to accurately calculate the degree of interference in the past, and this will continue to happen in the future." But when talking about the impact of mining activities, she admitted that it is still impossible to accurately measure the impact of cryptocurrency on the business.

On the same day, the official foundation of Ethereum, one of the world's largest blockchain ecosystems, issued an announcement, announcing that Ethereum officially abandoned the PoW mechanism (proof of work mechanism) and turned to PoS (proof of stake mechanism). This transition is called the Merge. It will first be activated on the beacon chain through the Bellatrix upgrade. After that, Ethereum's proof of work (PoW) chain will migrate to proof of stake (PoS) when a specific total difficulty value is reached. According to the Ethereum Foundation's forecast, the time to trigger the merger is expected to be between September 10 and 20, 2022.

Whether it is Nvidia’s financial report or Ethereum’s announcement, both reveal a major change: the golden age of graphics card mining is over.

The so-called graphics card mining involves the operation mode of the blockchain network. Both Bitcoin and Ethereum use a proof-of-work mechanism called PoW, under which computing power becomes the key to obtaining block rewards. Based on the principle of PoW, people gradually discovered that GPUs have a height in "mining" that CPUs cannot reach, which has made various types of GPUs the main force in mining. The rising prices of cryptocurrencies have caused a surge in mining income, and miners' rush to buy mining cards has even caused graphics card prices to rise for various manufacturers.

A crypto miner told Jiemian News that the main graphics card mining models are Nvidia RTX series 3080 and 3090 8 cards. As the graphics card market was out of stock, most of the graphics cards sold on the market are futures, and some have even been pre-sold three months in advance. Due to the high market popularity, most graphics card mining machines flow directly into the hands of dealers/channel dealers after leaving the factory, and then are deployed to mines by miners to participate in mining. It is difficult to buy spot models on the market.

Since Bitcoin mining machines are already monopolized by professional ASIC equipment, the absolute main force of graphics card mining is on the Ethereum network. Now that Ethereum has chosen to abandon the PoW mechanism, it also means that countless mining cards will face the crisis of elimination.

Currently, the computing power of the entire Ethereum network is maintained at 913T. Each block rewards miners with 2 ETH and the handling fee provided by users. The current ETH price is around US$1,650, which has been halved compared to the high price of US$4,000 in 2021. Once Ethereum switches to the PoS mechanism, the right to receive rewards will belong to Ethereum users who have a large amount of ETH and participate in staking, rather than miners with a large number of mining machines.

For this reason, in recent months, some Ethereum miners have decided to hard fork the Ethereum network, insisting on the PoW path and refusing to switch to the PoS mechanism. This forked network has begun testing, but has not received majority support in the Ethereum ecosystem.

Ethermine, the largest mining pool in the Ethereum network (accounting for 33% of the total network computing power), issued an announcement on August 19, announcing that it would end the Ethereum PoW mining pool business and close the Ethereum mining pool after September 15. At that time, it will not be possible to use GPU and ASIC machines to mine Ethereum on the mining pool. In the announcement, Ethermine reminded miners that they would not be able to mine on the Ethereum server after the merger, and stated that it would not support any PoW chain forks.

The statement from the largest mining pool also means that even if the current Ethereum miners choose to use a fork to reject Ethereum’s decision to switch to PoS, judging from the reactions of leading exchanges, developers, and project parties, miners’ continued insistence on the PoW fork will not shake the foundation of the Ethereum ecosystem.

A person close to the crypto mining industry told Jiemian News that if the merged Ethereum runs well and no major on-chain problems occur, then the industry's attention will inevitably be focused on the PoS consensus mechanism. At that time, the currencies with the PoW consensus mechanism will face an unprecedented consensus crisis. In addition, they have long been criticized for their energy consumption, which may have a major impact on the mining pools of PoW currencies.

But he also emphasized that the role of miners will not disappear in the blockchain network. As the infrastructure for maintaining the security of the blockchain network, these graphics card mining machines can still mine other PoW currencies, such as ETC, and the income is also considerable. It can be foreseen that a large number of graphics cards will not flow into the second-hand market.