Introduction
1.1 The Significant Drop in GPU Prices
According to a April 2022 report by CCTV Finance on Shenzhen's Huaqiangbei electronics market, graphics card prices have plummeted, ending a two-year surge. For instance, NVIDIA's popular "RTX 3060" model dropped from approximately ¥6,900 in 2021 to around ¥5,100-¥5,200—a staggering 25%-26% decline.
1.2 Why Are GPU Prices Falling? — Ethereum’s Mining Paradigm Shift
The price drop is closely tied to Ethereum's consensus mechanism transition. GPUs, as computational units, serve dual purposes: gaming and Ethereum mining. The latter involves dedicating GPU power to compete for transaction validation rights on Ethereum's network, earning ETH rewards. Mining profitability depends on ETH's market price and the miner's share of the total network hash rate. Since gaming demand for GPUs remains stable, industry experts attribute GPU price volatility primarily to Ethereum mining.
Data from Bitinfocharts shows that during the GPU price crash, despite ETH's price decline, mining profitability per hash rate remained relatively stable. This suggests that falling ETH prices alone don’t fully explain the GPU price drop. Instead, we argue that the decline stems from Ethereum’s shift from Proof-of-Work (PoW) to Proof-of-Stake (PoS). Under PoS, miners' rewards will depend on their staked ETH relative to the total staked, eliminating the need for expensive hardware like mining rigs.
2. The Evolution of Ethereum’s Merge
The Ethereum Merge refers to the integration of Ethereum’s current PoS consensus layer (Beacon Chain) with its PoW-based execution layer (Mainnet). Post-merge, the consensus layer will handle node validation, while the execution layer manages Ethereum Virtual Machine (EVM) operations, rendering PoW mining obsolete. Although the Ethereum Foundation has delayed the merge multiple times, the transition to PoS is now imminent. On April 11, 2022, the merge testnet launched, with full implementation expected by late 2022.
2.1 Why Merge? — Fairness, Security, and Sustainability
Ethereum’s merge is pivotal because:
- Fairness: PoS lowers entry barriers—users can validate with a standard laptop and internet connection, democratizing rewards.
- Security: PoS’s slashing penalties deter repeated attacks, making malicious actions cost-prohibitive.
- Sustainability: PoW’s energy-intensive mining consumes ~44.49 TWh annually; PoS cuts this by 99.95%, per Ethereum Foundation estimates.
2.2 Merge Timeline — Completion by 2022
The journey began in 2017 when Vitalik Buterin proposed PoS transition by 2019 ("ETH 2.0"). Delays ensued due to technical complexities. Key milestones:
- Dec 2020: Beacon Chain staking tests began, requiring 32 ETH per validator.
- 2021: London hard fork (EIP-1559) and Altair upgrade prepped for the merge.
- Mar 2022: Kiln testnet successfully transitioned to full PoS, with >106k validators and 3.4M testnet ETH staked.
Post-merge, Ethereum’s roadmap includes:
- 2023 (The Surge): Sharding to boost TPS from ~13 to ~100k/sec via 64 shards + Layer 2 rollups.
- Beyond: Further upgrades like Verkle trees and historical data pruning to enhance scalability.
3. The Fall of Old Paradigms: Racing Against the Merge
Ethereum’s PoS transition spells uncertainty for GPU miners and ASIC manufacturers. Yet, until the merge completes, mining remains viable—current network hash rate stands at 1.039 PH/s (April 2022).
3.1 Impact on NVIDIA and AMD
- NVIDIA: 45% of Q4 2021 revenue came from gaming/mining clients ($3.4B). Its LHR (Low Hash Rate) GPUs and CMP (Crypto Mining Processor) lines highlight mining’s market influence.
- AMD: 54% of Q1 2022 revenue ($4.8B) derived from compute/graphics, including mining GPUs.
An estimated 26.76 million GPUs are actively mining ETH, with NVIDIA cards dominating (e.g., RTX 3060 at 40% share). Post-merge, reduced demand may flood the secondhand GPU market, pressuring prices.
3.2 Alternatives for PoW Miners
Options for ETH miners include:
- ETC Mining: Ethereum Classic (ETC), a 2016 ETH fork, retains PoW. However, ETC’s mining rewards are ~1.5x lower than ETH’s (April 2022).
- New Chains: Miners could pivot to smaller-cap coins (e.g., Ravencoin, Monero), though these lack ETH’s liquidity.
4. Emerging Opportunities: Node Staking Services
4.1 Post-Merge Economics: Staking Rewards and ETH Deflation
Post-merge, annual ETH issuance drops ~89% (from ~13k ETH/day to ~1.5k). Combined with EIP-1559’s fee burns, ETH may enter deflation (estimated -0.96% annual supply growth by Dec 2022). Stakers could see ~7.9% APR, nearly doubling Beacon Chain’s current ~4.61%.
4.2 Market Scale: ETH Staking to Grow 3x
As of April 2022, 9.7% of ETH (11.7M ETH worth $35B) is staked. Mature PoS chains like Solana stake 40%-70% of supply, suggesting Ethereum’s staking rate could triple to ~30%.
4.3 Competitive Landscape
- Node Operators: Crowded, with 40k+ providers charging 5%-10% fees.
- Custodial Services (e.g., Exchanges): Centralized, ~15% fees; limited liquidity options.
- Liquid Staking (e.g., Lido): Non-custodial, ~10% fees; stETH tokens enable DeFi participation. Lido dominates with ~90% market share.
- Infrastructure Providers (e.g., SSV Network): Pioneers in Distributed Validator Technology (DVT), reducing slashing risks.
👉 Explore Ethereum staking opportunities
5. Investment Outlook: Focus on Ecosystem Growth and Staking Providers
Ethereum’s merge marks a leap into PoS-era competition. Key plays:
- Liquid staking leaders (e.g., Lido) poised to benefit from rising ETH staking rates.
- DVT innovators (e.g., SSV Network) addressing post-merge security needs.
- Layer 2 and sharding solutions to alleviate Ethereum’s scalability woes.
FAQ Section
Q: Will Ethereum’s merge reduce gas fees?
A: No—merge focuses on consensus, not scalability. Sharding (2023) aims to lower fees.
Q: Can I unstake ETH post-merge?
A: Yes, withdrawals unlock after the first post-merge hard fork (~8 months post-merge).
Q: What happens to my GPU post-merge?
A: GPUs can transition to gaming/other PoW coins or be sold secondhand.