Ethereum will migrate to its new PoS blockchain later this year, abandoning block mining and causing a major shock to the GPU industry, according to Morgan Stanley.
Sheena Shah, a strategist at Morgan Stanley, the US-based financial services multinational, spoke about the impact of the migration from Ethereum to the new consensus protocol based on Proof of Stake (PoS) will be in demand for GPUs, following the closure of block mining.
Considering that Ethereum is the second-largest blockchain network in the industry by market cap and the second-largest by computational power after Bitcoin, Shah argues that its migration to PoS could drastically disrupt the GPU industry.
Demand for these GPUs will decline in the months following Ethereum's migration to PoS.
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Although these devices can join other blockchains, such as Ethereum Classic or Zilliqa, to continue generating income from block mining activity, the Morgan Stanley strategist and author of the research report on the migration from Ethereum to PoS, predicts that the owners of these devices may not connect to alternative networks; mainly because the fall in cryptocurrency prices has reduced the profitability of this activity in recent months.
GPU demand and price will fall when Ethereum migrates to PoS protocol
In its report explaining the impact of Ethereum's migration to Proof of Stake (PoS), Morgan Stanley argues that ether mining drove 14% of GPU manufacturers' revenue last year.
Although these graphics processing units are primarily manufactured for the gaming industry, the profitability of mining cryptocurrencies with these cards attracted great interest from crypto miners.
Nvidia, one of the world's largest GPU manufacturers, benefited in 2021 from high demand for GPU cards for cryptocurrency mining. According to its Q2021 260 earnings report, the company generated over $XNUMX million from GPU sales for the crypto industry.
Although Nvidia had added software to limit the power of its GPUs and thus reduce their use in crypto mining, miners managed to overcome this limitation to unlock their power and continue mining cryptocurrencies with them.
However, the current drop in crypto assets on the market has reduced the profitability of crypto mining, so many crypto miners are selling their equipment at a discount around the world. Added to this situation will be an oversupply of GPUs when Ethereum migrates to the PoS consensus protocol, the Morgan Stanley strategist noted in the report.
Given this, it can be expected that the price of these graphics processing units will continue to fall in the coming months.
PoS won't save Ethereum from its current problems
Ethereum is expected to migrate to its new blockchain, based on Proof of Stake (PoS), later this year.
However, the financial services multinational does not believe that migrating Ethereum to a new consensus protocol will solve its scalability problems.
In its report, Morgan Stanley argues that moving to proof-of-stake will neither increase the network's scalability nor reduce its gas fees significantly.
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Ethereum commission fees started to increase significantly in mid-2020.
The rise of DApps and the frenzy over DeFi being developed on Ethereum and, subsequently, over NFTs and the Metaverse, have increased the use and demand for this blockchain network, to the point of affecting its scalability and raising commission rates to the point of becoming prohibitive for many users.
According to data from Bit InfoCharts, the average transaction fee on Ethereum is close to $5 at press time. Last May, this same fee exceeded $196 per transaction at a time of high demand and network congestion.
Ethereum will be a more sustainable blockchain
On Twitter, several Ethereum investors acknowledge that Ethereum could remain a highly expensive network for many investors.
However, after its protocol migration, Ethereum will consume much less energy than it currently requires to operate. It is estimated that it will reduce its energy consumption by 99,5%, becoming a more sustainable and environmentally friendly blockchain.
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