If Ethereum switches to a proof-of-stake (PoS) method of network maintenance, as planned, it will eliminate the need for miners, slow demand for graphics processing units (GPUs), and dramatically reduce energy requirements, according to Morgan Stanley in a report released Monday.
Ethereum developers are hoping that the Merge will take place by September, and possibly as early as August, but given previous delays, it wouldn’t be surprising if the transition from proof-of-work is delayed until early next year, according to the report.
According to the bank, cryptocurrency mining has had a massive impact on the gaming graphics market in the last 18 months, driving an estimated 14 percent of revenue in 2021 while remarkably contributing to a crucial graphic shortage, which enhanced overall mix and pricing.
GPU demand is expected to slow, but chipmaker Nvidia is less vulnerable to cryptocurrency mining demand than it was in 2017-19, according to the note.
Furthermore, demand for crypto mining, which contributed to a shortage of graphics cards, began to decline in the first half of the year, according to the bank.
Both Nvidia and AMD, another chip maker, have argued that they have minimized the downside scenarios from crypto, but Morgan Stanley predicts a drop in gaming GPU demand in the first quarter of next year, due in part to curtail demand due to a decline in working from home, cryptocurrency migration to PoS, and tough consecutive comps after channel inventory rebuild in 2022.
Because it is not profitable for all of those computers to mine other cryptocurrencies after the Merge, Ethereum miners will most likely sell their used GPU equipment, the bank said, adding that net ether (ETH) supply is expected to fall after the Merge, and may even turn contractionary, making it unlikely that all of the miners become stakers.
Moving to PoS will not solve Ethereum’s scaling issues, such as the number of transactions per second, nor will it result in lower transaction fees, according to the report.
Because of how nodes validate network activity, PoW protocols are known to be resource-intensive. Proof of stake requires less computing power and may use up to 90% less energy, according to MS.
