Miner’s Bitter Losses With Ethereum Merger After Fat Cow Phase: “I Didn’t Believe It Would Happen”

The owner of a small market in Rio de Janeiro, young Yuri Castro (26), saw in cryptocurrency mining an opportunity to make money amid the price spike of 2017. After a period of low prices, the business picked up again in 2020, where Ethereum (ETH) gained 464%. “It was basically a Chinese business, very high profitability for very little cost,” says the miner InfoMoney.

However, everything changed after Ethereum updated Merge, responsible for almost zero consumption and emissions from the computer network responsible for verifying transaction data. This is because the migration involved putting an end to mining, giving way to machines that, instead of powerful graphics cards, must have at least 32 ETH ($42,200) in the digital vault.

Until September 15th of this year, when the update came, Ethereum was the main domestic cryptocurrency for mining, because its system accepted video cards like those used by gaming computers – in the case of Bitcoin (BTC), it is necessary to use specialized machines called ASIC – these.

Like Ethereum, there are still a few coins that still allow mining. However, due to the much lower value of these cryptocurrencies, the profitability of mining is also much lower. The change in the ETH validation system therefore ended a business that had proven profitable in Brazil, even without the country having the cheapest energy prices in the world, nor easy access to solar panels.

“At the peak I controlled more than 100 GHz of Ethereum mining, today I control 48 GHz,” says Castro, who after the 2020 boom also started advising people interested in the mining business, recommending equipment, explaining how to set up and perform remote monitoring.

One of her clients is financial analyst Camila Leira (32), also from Rio. “When I joined, in November last year, the income was around R$ 3 thousand per month,” he says. At this rate, it would take a little more than a year to recoup the roughly R$42,000 invested in the business – in practice, a set of video cards on a shelf in a closed room with air conditioning all day, powered by solar energy.

However, with the cessation of ETH mining, the yield dropped to only 200 BRL per month, which eventually extended the payback period to more than a decade. “I have two thousand dollars today [em criptos, cerca de R$ 10,7 mil] in the wallet. We are waiting to see what will happen, how the market will react. It is a project for 10 or 15 years”.

Using solar energy, Camila’s situation is not even the worst. This is because when accounting for electricity costs, the current yield of mining any other digital asset is negative, leaving behind a loss of up to BRL 400, per machine, every month.

According to Castro, due to the high cost of electricity, many are giving up their jobs and selling their plates on the market even after the price of these products has fallen due to excess supply. “He ended up selling those records at a loss, because of the panic in the market”.

The problem is further aggravated if we consider that not everyone was ready for the upheaval in this market. Although Ethereum Merge has been known for years, many were surprised. “I didn’t even believe it would happen before, I thought it could be postponed again, as it happened”.

Some miners were left in the dark even when the merger took place. “We received calls from people who are not our customers asking what happened, why the machines were turned off, why they stopped mining from yesterday until today,” says Castro.

“They did not follow the market, perhaps they were carried away by the emotion of a quick profit, not taking into account that it is a high-risk investment, that even mining becomes volatile despite the capital invested in the equipment”.

Even if some hope for the future, for now mining cryptocurrencies such as Ravencoin (RVN), Ethereum Classic (ETC) or even the new Ethereum PoW (ETHW), the situation is one of complete uncertainty. “At this moment we can say that [a mineração] finished for those who have energy costs”.

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