Ethereum’s incoming switch to Proof-of-Stake driving down GPU prices

Ethereum’s incoming switch to Proof-of-Stake driving down GPU prices

GPUs are rendered to become obsolete once Ethereum fully transitions to Proof-of-Stake

By Shashank Bhardwaj

Image: Shutterstock

The golden days of Graphics Processing Units (GPU) being deployed in crypo mining appear to be coming to an end as the Ethereum network prepares to transition from proof-of-work (PoW) to proof-of-stake, slashing GPU prices.

GPUs are specialised processors widely used for crypto mining and are meant to accelerate graphics rendering. From its very inception, The Ethereum network has relied on the Proof-of-Work (PoW) consensus mechanism. In PoW systems, the verification of transactions and the addition of new blocks is done by utilising large amounts of computational power.

Ethereum’s imminent shift to a proof-of-stake (PoS) system, also called the Merge, will render the GPU obsolete, as users will be able to validate transactions and produce new blocks by staking or locking up Ether. PoS also has a number of advantages over PoW, such as higher energy efficiency, lower entrance barriers, fewer hardware requirements, stronger anti-centralization immunity, and better support for shard chains.

As per data from Tom’s Hardware, the asking price for popular GPU models on eBay has dropped by 37% since May 2021. The price decline has intensified this year, starting at 7.4% in January, 9.5% in February, and 12% in March. According to 3D Center Germany’s Easter weekend roundup, AMD GPU prices dropped by 13% on average, while Nvidia GPU prices fell by 6%.

GPU miners “are not really investing in new equipment at the moment, since prices have been high for a while,” according to Joe Downie, chief marketing officer at hash power broker NiceHash. Instead, “most of them are likely waiting for when Ethereum moves to PoS, to buy up the secondhand GPUs”.

“It’s widely accepted as a poor investment right now since the ROI (return on investment) is much longer,” he added.

The price of Ethereum in recent times has been relatively low, while mining complexity has increased, adding to the negative pressure. The conflict in Ukraine has pushed down cryptocurrency values even further, making mining less economical. Add to this the slowing consumer demand in China and Europe over the past month. All of these factors are pushing GPU prices even lower.

The writer is the founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash