Now that ETH has transitioned to the energy-friendly proof-of-stake, there lies a very rocky road for all proof-of-work miners at large. Exacerbated perhaps, by this merge, those who chose to stay with the original, PoW version of ETH, are sustaining huge losses. The situation is no different for other such tokens.
Says Rajagopal Menon, vice president, WazirX, “After the merge, the power consumption to secure Ethereum has been cut down by around 99.95%. This in turn brings down a lot of arguments about Ethereum, DeFi, and NFTs ‘killing the planet’. As a byproduct, it also makes Ethereum ESG compliant which can be good for more regulatory-driven institutions that may want to start exploring the Ethereum ecosystem. This will also make Ethereum more friendly to gamers and NFT artists concerned about the environmental impact of crypto.”
But in the wake of this event, ETH PoW prices had inched up as high as $141. However, these came tumbling down steeply to $4.55 before stabilising at $9.55. Ethereum’s original PoW hard-fork, ETH Classic, is trading a little higher at $27.
But revenue troubles spill beyond this. Mining any crypto, even BTC, is increasingly becoming an expensive affair. Consider this. Bitcoin is currently trading at $18,929.32. Right now, data suggests that it costs about $40,424.67 to mine one BTC in India. It’s a loss-making situation with no reprieve. Many prominent crypto mining rig makers like Bitmain are already cutting on selling costs of rigs whose value has already dipped by 70%.
The situation is no better in the US, where it costs $21,088.53 to mine 1 bitcoin. No wonder, many crypto mining companies are on a sell-off spree, while some, like Compute North, have already filed for bankruptcy. Notably, till 2020, the US only housed about 3.5% of global bitcoin mining hubs. But 2 years down, the figure has touched a whopping 38%.
One of the major reasons for this is the soaring energy costs and all the global carbon neutralisation efforts that will come undone if PoW mining continues for long. In order to stay on track to meet the UN’s 2030 sustainable development goals, global emissions need to come down by 45% by 2030.
Between 2021-22, BTC mining generated 27.4 million tonnes worth of CO2. That’s equal to the annual emissions of 6 million cars. Except for Dogecoin (and that’s a memecoin presently worth $0.06116) and BTC, there are no other PoW tokens among the top 10 cryptos. Another mined crypto, Monero, leaves miners with $1.08 of electricity costs for revenue of $0.99. On an estimate, Monero miners pay up to $394 in power costs for $361 they manage to earn.
Fuelled by already skyrocketing energy prices, which are again set to rise by 50% in 2022, it seems like PoW mining has run its course.