Is the launch of Ethereum 2.0 beacon chain still a good time to buy graphics cards for mining?

The ETH2.0 beacon chain has officially started, and the ETH price has once again climbed to around $600. Graphics card prices have also soared, and many participants are bullish. However, the arrival of ETH 2.0 has also brought uncertainty to the return on investment of graphics card mining. Many people are beginning to wonder whether they can still buy expensive graphics cards now?

There is more room for speculation in Ethereum mining revenue this year

This year, the mining popularity of Ethereum is significantly higher than that of Bitcoin. Since the beginning of the year, the computing power of Ethereum has increased by more than 80%, far exceeding the increase in the computing power of Bitcoin. The main reason is that the DeFi market in August stimulated a strong rebound in the price of ETH.

At present, affordable graphics cards are hard to come by. According to IT Home on November 15, although Nvidia's new generation of RTX 30 series graphics cards have been released, most platforms are out of stock or have a high premium. ASUS UK once stated on its official Twitter that it would complete the delivery of graphics cards as soon as possible and suggested that buyers contact suppliers directly.

Some foreign netizens also posted an apology email from GeForce, saying that the demand for the RTX 3070 ordered in October was extremely high, so it could not be shipped as scheduled and was expected to be shipped on November 20 or later.

Although manufacturers have announced that they will continue to increase production capacity, it is expected that it will be difficult to ease supply and demand in the short term when the price of the currency is skyrocketing. The backlog of graphics card orders may be shipped after December. We also learned that Xindong’s newly launched A10 Pro futures will also be shipped in December-January. Therefore, it is expected that after December, Ethereum’s computing power will continue to usher in explosive growth.

For mining, the price of coins always precedes the computing power. In the last bull market, after the ETH price peaked on January 10, 2018, the mining computing power continued to soar until it reached its historical peak on August 6, 2018. At a time when Bitcoin is at a new high, although the price of ETH continues to soar, it is still far from the previous high. Due to the greater room for profit game and the lagging growth of computing power behind the price of coins, this wave of enthusiasm for graphics card mining machines will obviously continue for some time.

The ETH dual-chain merger is unlikely to happen before the end of 2021

The ETH 2.0 research team revealed in the latest AMA event in November that the research work on realizing data sharding and merging has been completed, and only engineering development and coordination issues remain. At the same time, light clients, merging and sharding will be developed in parallel. This parallelization of work means that the dual-chain merger may come earlier than expected.

However, for developers, the coordination of the merger will be more difficult because they have to deal with the ever-growing ETH1. Therefore, Vitalik believes that we will not see a mature test version of the merger and sharding until the end of 2021. This means that we may not see the official merger of ETH1 and ETH2 until at least 2022.

According to official documents, after Phase 0 (PoS) is launched, there will be two active Ethereum chains. Users can send ETH from ETH1 (PoW main chain) to ETH2 (beacon chain), but can no longer migrate ETH back to ETH1. The beacon chain of Phase 0 was officially launched on December 1.

In Phase 1, data sharding allows transactions to be run in parallel, which will be the key to improving Ethereum's scalability in the future. At this time, the ETH1 chain and the ETH2 chain will still run in parallel. Phase 2 is the stage where the functions of the entire system begin to merge. The shard chain transitions from a simple data container to a structured chain state, and smart contracts will be reintroduced. The merger of ETH1 and ETH2 will occur in the middle of this phase 1.5.

Before the full merger, ETH1 (PoW chain) will remain active while testing and transitioning on ETH2 (PoS chain). This means that ETH rewards on the network will be paid to both Ethereum 2.0 validators and PoW miners. Therefore, the total inflation rate of these two chains may initially surge, but will eventually converge to 0-1%.

Vitalik once mentioned that once ETH1 and ETH2 merge, PoW will no longer exist. So the time when Phase 1.5 actually arrives will be the biggest variable that determines the fate of graphics card miners.

Problems faced by PoW miners in the later stage

According to the current market quotation, if you buy 6 3080 cards, the assembly cost is more than 40,000 yuan. Using the static computing power when the coin price = 600 US dollars, the payback time is less than 8 months . Whether you sell coins while mining or save coins to sell at a high point, considering the lag of computing power relative to the coin price increase and the high residual value of graphics cards in the upward trend, the actual payback period for miners may be much shorter than the current static forecast value, that is, you can get your money back before the middle of 21 years. Then the dual-chain merger that will only occur at the end of 21 years or even 22 years will not have much impact on current miners, and they may even get excess returns. Because before the merger, Ethereum may not have new computing power, but the coin price will soar.

However, for some graphics cards or brand mining machines that will not be delivered until after the Spring Festival, the uncertainty of payback and revenue will increase, because the payback time may be later than the merger.

As mentioned above, Ethereum’s current parallel development may lead to the merger being earlier than expected. If ETH breaks through the previous high of $1,440, the locked ETH value is expected to exceed $1 billion or even more. The timing of the merger is related to the release of this part of the pledged user funds. Driven by financial interests, developers may be more motivated to bring the merger forward.

In addition, there is a saying that once ETH is completely converted to PoS, the original miners' computing power can be transferred to other small currencies, and graphics card mining can continue, which will eventually drive a surge in small currencies. However, there are two problems with this view:

1. As cryptocurrency investors become more rational, will some small coins with little practical value really appreciate simply because of the switching of miners’ computing power?

2. If small currencies take over the huge computing power cut from ETH, the miners' income will be diluted, which may accelerate the mining and selling, and cause the price of small currencies to continue to fall. For example, the market value of ETC, the largest graphics card mining currency besides ETH, is only US$700 million, and there are frequent negative news about 51% attacks. Its market value and fundamentals are not enough to support strong selling pressure.

It can be said that the hashrate switching to smaller currencies brought about by the merger of ETH1 and ETH2 may not necessarily have an optimistic outcome for these PoW coins, and may even be disastrous. Therefore, it may not be realistic to imagine that GPU mining will continue after the merger of the two chains.

In any case, all assumptions about miners' return on investment are based on the continued optimism of the market next year. In this process, the price of coins and computing power will probably go through multiple rounds of competition, and eventually reach a certain degree of profit balance. (Special author: miaohash Editor: Wu said blockchain)

The header image is from bitcoinexchangeguide