ethereum It is the second most important cryptocurrency in the world in terms of market capitalization, only behind Bitcoin, with a valuation that today exceeds 143,000 million dollars. Since its launch, this blockchain has become the preferred one to host decentralized finance projects, NFTs and fan tokens, among others. And this year he will make his most important evolutionary leap hand in hand with The Merge.
But what is it The Merge And what consequences will it bring both inside and outside the cryptocurrency market? The Merge is the name that has been chosen to identify the system’s Ethereum transition process Proof-of-Work (PoW or Proof of Work) to Proof-of-Stake (PoS or Proof of Stake). The most salient point of this change – at least for the general public – is that it will no longer depend on miners to add new blocks to the blockchain, but on validators.
This will mean, plain and simple, that Ethereum will abandon mining and will drastically cut its energy consumption globally. But its impact will go even further, as a notable drop in the demand for graphics cards is estimated.
Not only would this help to end a component shortage that has been going on for more than 18 months, but even would lead to an oversupply which would drive down the price of GPUs. Something that has already begun to be seen in recent times with the collapse of cryptocurrency prices, but that promises to deepen.
‘The Merge‘, the merger that will change Ethereum forever
We have already established that The Merge It is how the change of mechanism that Ethereum will face is known, abandoning the model Proof-of-Work and adopting the Proof-of-Stake. However, this will not happen overnight. This transition has been occurring gradually for some time with different implementations that have occurred in test networks or testnets.
In 2020, the developers of Ethereum released what is known as beaconchain, the new consensus layer that will replace mining. It works alongside the main network (or Mainnet) of Ethereum, which is the execution layer.
Sometime in the second half of 2022, there will be the fusion (mergein English) of the beaconchain with the Mainnet of Ethereum; thus, the algorithm in the execution layer will be changed from PoW to PoS. A specific date for this to happen has not been determined, but it has been mentioned for a long time that it would be between next August and September.
So far, the step Proof-of-Work a Proof-of-Stake in the test networks it has been given with good results. In fact, earlier this month the transition from the testnet ropstenone of the last before facing the modification in the main network, without major inconveniences.
As we have mentioned before, once Ethereum works with the PoS system mining will be obsolete. From now on, it will no longer be the miners who produce new valid blocks on the blockchain; their place will be taken by the validators, who will have to deposit 32 ETH each —an amount equivalent to about $38,000 at current prices— to unlock the software that will precisely allow them to validate the proposed transactions and blocks.
But The Merge it will not force all users to deposit that amount of ETH. This will be only for nodes that want to propose new blocks, replacing the work of miners. Other individuals who wish to bring decentralization to the network will be able to continue running their own “non-block generator” node, as is the case today.
Relief for the demand for graphics cards?
Once Ethereum converts to Proof-of-Stakeit is estimated that your energy consumption would be reduced by up to 99.95%. So turn off the rigs of mining would make it go from the current 122 terawatt-hours per year to only 0.01 tWh/year.
And while it is true that Ethereum mining equipment can also be used with other cryptocurrencies —Zilliqa or Ethereum Classic, for example—, it is very likely that most are disconnected for profitability reasons. In fact, rumors recently grew of multiple miners considering suspending their operations when the price of ETH fell below $1,000.
Thus, and knowing that soon the rigs to mine Ethereum they will become obsolete, a significant drop in the demand for graphics cards is expected; forecast that is consistent with a report recently published by Morgan Stanley. This would help defuse (or outright end) the tremendous pressure that major GPU manufacturers, as well as distributors and retailers, have been under.
Let’s not forget that the cryptocurrency boom, coupled with chip shortages and coronavirus pandemic restrictions, made it impossible to get graphics cards for months. And the few that were available were sold at exorbitant prices and, even then, sold out quickly. The madness was such that buyers flocked to the doors of the stores to get one of the few units in stock.
And no, for the umpteenth time, Bitcoin has had nothing to do with it.
This has been one of the most frequent mistakes when talking about cryptocurrency mining in the last year and a half. Every time the media discussed the graphics card shortage, Bitcoin mining was cited as the cause. And although the confusion could have its logic —after all, it uses the mechanism Proof-of-Work like Ethereum—BTC mining rigs don’t rely on GPUs for the computational power needed to add new blocks to their blockchain.
Currently Bitcoin mining is done mostly through devices called SO C (Application-Specific Integrated Circuit).
Second-hand graphics cards will surely be ‘gifted’
when it’s complete The Mergethe drop in demand for graphics cards will surely lead to an oversupply in the market. But not only new models, but also second-hand; and the latter are likely to be sold at giveaway prices.
However, hardware that has been exposed to continuous use for cryptocurrency mining could come with problems. If you want to know how to identify if a GPU has been used intensively to mine Ethereum, we recommend you read this article that we have published on hypertextual.
Once the developers of Ethereum activate the “difficulty bomb” which will discourage the use of rigs of mining while the transition to Proof-of-Stakewe will gradually see the effect on the market for computer components and on the environmental impact of cryptocurrencies. We will be attentive to the news.