The upcoming Ethereum merger will turn the network’s consensus system into “proof of stake”. Here’s why miners care.
Ethereum miners earned $18 billion in 2021, more than Bitcoin miners
According to Arcane Research’s latest weekly report, ETH mining revenue totaled $18 billion in 2021, slightly more than Bitcoin miners’ $17 million revenue.
Even in 2022 so far, Ethereum miners have led the race in terms of revenue. Here is a graph that compares the mining revenues of the two largest cryptocurrencies in the market over the past few years:
It seems like based on the current rate, Bitcoin miners will end the year 2022 making about $10 billion | Source: Arcane Research's The Weekly Update - Week 30, 2022
As you can see in the chart above, BTC mining revenue was ahead of ETH until 2021, when the latter coin’s validator got ahead.
With recent revenue being so high in the billions, Ethereum miners have invested a large amount of money in acquiring more graphics cards to improve their profits.
However, soon this revenue will disappear instantly when ETH’s transition to a proof-of-stake (PoS) mechanism is complete.
In the “proof of work” (PoW) consensus system, which crypto currently uses, miners act as network validators and compete against each other by solving computer puzzles.
PoS, on the other hand, does not involve any “miners”. Instead, here, any investor can become a validator by locking a specific amount of coins into the network’s “staking” contract, and it also does not require substantial computing power.
These validators, called “stakers”, are chosen at random to hash the next transaction in the chain. However, bettors with larger amounts get better chances of being selected.
The advantage of PoS over PoW is that it significantly reduces the amount of computing power involved in validating transactions. As a result, it is also a more environmentally friendly mechanism.
The next Ethereum merger will complete the switch to PoS, which is very worrying for miners as it means they will become obsolete.
These miners have virtually no options left to turn to as Bitcoin mining uses different chips than ETH GPU miners and no other crypto is big enough to fill the revenue gap of ETH.
Something miners can try is to help other GPU-mined coins grow. One such potential crypto is Ethereum Classic, which has seen a 155% increase in the last month. However, at present, ETC’s mining revenue is only 3% of ETH’s.
If switching to another crypto doesn’t work out, their only choice will be to drain their GPU stacks that they’ve invested $15 billion in.
As of this writing, the price of Ethereum is hovering around $1.6k, up 20% in the past week.
Looks like ETH has sharply rebounded | Source: ETHUSD on TradingView
Featured image from Michael Förtsch on Unpsplash.com, charts from TradingView.com, Arcane Research