Ethereum miners on the eve of the “merger”: Don’t panic, just keep mining

This year, the most critical time node in the Ethereum ecosystem (and even the entire blockchain technology field) is the "merge" between ETH1 and ETH2.

Although the official has not given an exact date for the "merger", according to Vitalik Buterin's prediction, if everything goes well, the "merger" may take place as early as August. At that time, the Ethereum consensus mechanism will change from Proof of Work (PoW) to Proof of Stake (PoS), and the ETH1 difficulty bomb will also be launched after the merger is completed (mid-September).

The impact of the "merger" will be comprehensive, and this article will focus on the Ethereum miners who will be the first to be affected. With only a little over a month left before the expected merger, how is their survival status? What countermeasures have they taken for the mainnet merger? Will the Ethereum miners who have persisted for seven years since the first Ethereum block was mined in July 2015 lose their jobs because there is no more mining to do? Odaily Planet Daily communicated with several miners to clarify the above issues.

1. “We can still mine for at least another year”

As the merger approaches, Ethereum miners are not as anxious as the outside world imagines, and they are still optimistic about the future of mining. Many miners even said that they do not think the "merger" can go on as scheduled, and conservatively estimated that "mining can be continued for at least another year."

“I think the possibility of Ethereum completing the merger this year is very low, and it may not be possible next year. If you look at the previous PoS tests, you will find various bugs.” Miner Lao A told Odaily Planet Daily, “According to Ethereum’s consistent tone, the August merger will most likely be further postponed.”

The situation described by Lao A does exist. In the Ropsten test network merger in early June this year, various bugs such as concurrent vulnerabilities, block proposal problems, and synchronization problems appeared one after another, causing 14% of validators to be offline during the transition period. Fortunately, the merger was successfully completed as scheduled. After learning from the lessons, the development team completed the Ethereum Sepolia test network merger in early July; the last test network merger (Goerli) before the main network merger is also on the agenda, but the specific time has not yet been determined.

According to the prediction of Ethereum founder Vitalik Buterin, if everything goes well, the merger may take place as early as August; if other conditions arise, it may be postponed to September or October. Ethereum developer Tim Beiko said that Ethereum is expected to merge between late August and November, and only a catastrophic event or failure can prevent the merger this year; due to the technical issues involved, it is almost impossible to give an exact date for the merger to occur.

The uncertainty of the specific time of the merger is one of the motivations for Ethereum miners to continue to persevere. In addition, in the eyes of many miners, even if the merger is completed, PoW mining will not end immediately, but will continue for a long time in the "PoS+PoW" coexistence mode.

“After the merger is completed, it will take some time to verify security. The project will not be migrated to PoS immediately. The PoW chain still needs miners to maintain operation. This cycle is very long, and may take one or two years.” Miner Lao Jia believes that the ETH1 difficulty bomb expected to explode in September this year will continue to be postponed, and miners will not face a situation where there is no mine to mine.

In addition, miners are not optimistic about the future of PoS. "After ETH is converted to PoS, it will become a digital bond, which may cause US regulatory intervention." Lao A revealed that several major mining machine manufacturers are concerned about the future regulatory dilemma of PoS. "With the introduction of regulation, community consensus may split, which may eventually lead to Ethereum fork. For me, mining one ETH can get airdrops of other forked coins, and I don't have to worry about the income problem."

2. After the price of coins fell, ASIC chip machines are more resistant to risks

Positive predictions about the future are prompting Ethereum miners to expand their operations.

Data from Etherscan shows that in June last year, China closed down its mining farms, and Ethereum’s computing power declined during off-peak hours, falling to 480 TH/s at one point. Since then, the computing power of the entire network has steadily increased, and on May 13 this year, it set a new historical record of 1126 TH/s, with the highest increase in the past year exceeding 130%.

The increase in computing power is partly due to the official arrival of mining machine futures ordered early last year, and large mining farms continue to expand production; the other part of the computing power is contributed by retail investors, especially in the second half of last year, when the price of ETH soared from US$2,200 to US$4,800 (November 2021), driving retail investors' FOMO sentiment. Slava Karpenko, CTO of 2Miners, a mining pool that specializes in serving small miners and retail investors, said that since November last year, the number of active users of the organization has increased by 70% to about 120,000.

However, over the past month, the computing power of the Ethereum network has experienced a slight correction. Data shows that the computing power of the entire network is currently reported at 930 TH/s, a 17% drop from the high point.

The decline in computing power is mainly due to the precipitous drop in the price of ETH, which once fell below $1,000 from $3,000 in early May to $880, with the largest drop exceeding 70%. As a result, some mining machines were forced to shut down after falling below the shutdown price. Glassnode data shows that ETH miners' revenue in May fell 27% from April (US$1.39 billion) and fell 57% from the same period last year.

However, several miners interviewed by Odaily Planet Daily told that they started hedging as early as $2,000-3,000, so the short-term slump in the price of the currency had little impact on them. In addition, they felt that the current ETH price has been severely oversold and is in the bottoming stage, so they did not choose the "mine-withdraw-sell" model and gradually began to hoard coins.

In addition to using financial instruments for hedging, some miners have started to choose ASIC mining machines with higher mining efficiency to improve their risk resistance since last year. Among them, Innosilicon's A10 and A11, OmniVision's Pineapple V1 and Bitmain's Antminer E9 are very popular.

Taking E9 as an example, antpoolminer data shows that its computing power can reach 2400M, and its power consumption is 1920w, which is far higher than the graphics card RX580 8 card (240M, 1200W), and its unit computing power consumption is 1/6 of the latter; E9 is also the machine with the highest mining profit at present, with a daily mining profit of 53 USDT and a shutdown coin price of 88 USDT.

In fact, the shutdown price of ASIC mining machines is generally between 100 and 200 US dollars (for Ethereum), and the decline in the price of the currency has little impact on it. Some miners, including Lao A, have gradually upgraded some of their mining machines to ASIC mining machines since last year (Lao A chose to replace 100%). According to BitPro CEO Michael D'Aria, the current ratio of ASIC and GPU mining machines in the entire network is about 1:9, that is, only 10% of the computing power comes from ASIC; Bitsbetipping host Michael Carter believes that the proportion of ASIC computing power is higher than 10%, and may reach 20% to 30%.

As ETH prices fell, the resale price of GPU mining machines in the second-hand market was almost halved, and even Nvidia's stock price began to fall, falling from $286 to $152 in the past three months, a cumulative decline of 47%. Pierre Ferragu of New Street Research added that miners have purchased about $3 billion worth of graphics cards since the beginning of 2021, and these graphics cards "are now pouring into the second-hand market."

In any case, as the market goes down, it becomes more challenging for miners to recover their costs. Many miners also give advice that now is not the best time to buy graphics cards or ASIC mining machines at the bottom, especially for retail investors, it is best not to choose heavy asset investment.

3. Dig until the last moment

"I am a "leek" who bought the mining machine at the high point last year. Now I still have one year to get my money back." Miner Xiao C bought two Innomina A10 mining machines last year. "I hope I can continue mining until the last moment. There are many uncertainties here, and no one really knows what will happen."

Fighting to the last moment is the choice of Ethereum miners. It is not only an emotional persistence, but also a consideration of interests. After all, compared with other PoW currencies, the income from Ethereum mining is still considerable. Once there is really no more mining, miners will not really lose their jobs.

For ASIC mining machines, they can and can only choose ETC, which has the same hash algorithm as Ethereum, for mining. It is precisely because there are fewer options in the future that ASIC mining machines, although they have excellent performance, do not account for a large proportion of the total network computing power.

(GPU Mining)

For GPU miners, there are relatively many options. First, you can continue to mine other PoW tokens (ANON, ETC, Zcash, Zclassic, ZEL, etc.) - of course, the more computing power you put in, the greater the competition, and the lower the returns. Secondly, GPUs can also provide high-performance computing, rendering and other services for Web3 middleware protocols. For example, Hut 8 will open its data center as a node operator/provider for Web3 protocols such as Render Network.

“There are other uses for these GPUs: you can turn it into a rendering farm, you can do different machine learning options. They’re just not going to be as profitable as mining,” explained miner Petzold.