The Ethereum mining community is diverse, both geographically and demographically. A 28-year-old translator from Ukraine runs computing hardware on his balcony to make cryptocurrency.
He can then buy clothing and other necessities. A retired woman in Argentina uses her gaming computer to double her monthly pension. A Canadian college student has enough money to purchase a BMW motorcycle, a modified Dodge Charger SRT 2006 and gas each month.
Even those not involved in the blockchain industry know that the recent crypto market crash has been very painful for anyone whose financial security is dependent on the currencies. The price of Ether fell 70% in the past year as of June 15. A lesser-known factor, “the merge”, is also set to stop Ethereum mining completely, resulting in a loss of earnings for up to 1 million people. The translator from Ukraine, who requested anonymity out of fear of being robbed, said that this would be a major financial hit and nearly a complete loss to a good source of income.
Bitcoin and Ethereum are the largest cryptocurrency networks in terms of market value. They record transactions using a process called proof-of-work. This is where computer resources are used to solve difficult math problems that add blocks to a public ledger. As a reward, miners are paid in cryptocurrency. Bitcoin mining is a highly skilled process that requires specialized equipment. As a result, regular people have virtually lost their ability to participate in the mining process. Ethereum mining is dependent on the type of graphics cards that are found in typical gaming PCs. Many regular people can still do it.
The contest of making computers work harder is proof-of-work. It consumes a lot of energy. One of the main criticisms of cryptocurrency is its environmental impact. Since the inception of Ethereum, developers have been working to shift to a proof-of-stake model. To be rewarded for using software that correctly batches transactions into new blocks, and checks the work done by other validators, “stake” would be used to set aside or “stake” a certain amount of Ether.
The power consumption of Ethereum could be cut by proof-of-stake, which could reduce it by around 99%. This would also make it impossible for miners to find work, which is a serious blow considering the capital investment required to set up operations. Bitpro Consulting estimates that Ethereum miners have spent $15 billion on graphics processing units, or GPUs. This doesn’t account for ancillary costs such as wiring and transformers.
Although the Merge is expected in August, no official date has been set. Many miners believe that the Merge will be pushed back again. Aydin Kilic is the chief operating officer of Hive, an industrial Ethereum miner. “I don’t believe they’re going to be in a position to pull it off.” Others involved in Ethereum consider the Merge inevitable. Tim Beiko, a computer scientist and coordinator of Ethereum developers, said that “the odds of it happening this year” is very slim, between 1% and 10%. “I want to avoid someone buying a mining GPU today, and the Merge occurs this summer,” rendering it nearly worthless.
Miners are expanding their operations despite all of this. The prices of GPUs have fallen by more than half in the last year, which has led to an increase in purchases. According to Etherscan, Ethereum’s hashrate (a measure of how much power is used to support the network) has almost doubled over the past year. Even with the crypto price slump, mining Ethereum can still be more profitable than supporting Bitcoin. Slava Karpenko is the chief technical officer at 2Miners. This organization helps smaller miners pool resources to support Ethereum. According to him, the group’s active users have increased by 70% in November to around 120,000.
The Ether price drop has made it more difficult to recoup costs. Mike Lam, a 38-year-old engineer from Ontario, has been mining for one year and has only earned about $5,000 in crypto. He also pays $650 monthly electricity bills. Aaron Petzold (24-year-old college graduate) is mining Ethereum at his Wisconsin parents’ home. He estimates that he is only four months away to recoup more than $28,000 of his initial investment. He says, “My hope is that I will continue mining until the very end.” It’s full of uncertainty. Nobody knows what’s coming. Many people are, I believe, in denial.”
The Merge will leave miners with nothing. Their mining equipment will be able to be used elsewhere after the Merge. Some are even planning to mine additional coins or find other uses for their gear. Petzold plans to use his rigs in rendering, a type of digital video production that can consume significant computing resources. He says that there are many other uses for the cards. You can turn it into a render farm and you can use different machine-learning options. They are not as profitable as mining.
Flexpool, a Canadian mining pool operator, is seeking to increase its coins and to have its developers code for other crypto projects. An executive asked to remain anonymous as Chris out of fear of being robbed. He said, “It’s almost like a typewriter business.” “No one buys typewriters anymore so you need to move into other businesses with the capital you invested in typewriters.”
Others, such as Ivan Zhang (35), and Karol Przybytkowski (36), plan to sell their graphics cards and allow other miners to use their facility in upstate New York to host their gear for a fee. However, with many Ethereum miners expected to rush to sell GPUs right after the Merge GPU prices will likely fall further. Bitpro’s chief executive officer Mark D’Aria says that the company will stop buying graphics cards in the next few weeks. D’Aria states, “My view is that no matter what price we pay today, it will be much less after this event.” “We will just sit back and watch it all happen, then we’ll pick up the pieces.”
Some miners want to make more money by mining other coins that use GPUs such as Ravencoin or Ethereum Classic. It is more difficult to make a profit if there are many miners that flock to any coin. Crypto breeds optimism and miners are creating the reasons why their operations will survive. Mikel-Angelo Chalfoun (30) pays $9,000 per year to rent a warehouse in Dubai that will house and power his 76 graphic cards. He claims he can outcompete miners who have higher costs. He says, “No matter how expensive crypto becomes, no matter what the crypto winter will bring, I’m good, and I will never mine at loss.”
Others feel betrayed by the miners. They need the miners up until the Merge! Lam, a Canadian engineer who has 50 graphics cards stored in his basement, says that it’s strange. They need us. They will need us until they throw us away.”
