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Nvidia and retailers unsuccessfully fight cryptocurrency mining

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Nvidia and retailers can't stop GPU mining. Fortunately, the problem might end up solving itself.

OPINION: Some cryptocurrencies need a lot of computing power for effective mining. This is especially true of coins like bitcoin and Ethereum.

The vast majority of bitcoin hashing power now lies in the hands of ASIC miners and their overclocked warehouses, but GPU miners are still present in the mining pools, and in other coins.

  • ASIC mining: Application specific integrated circuit mining involves using chips specifically designed for mining, in order to better outperform the competition.
  • GPU mining: Mining with graphics processing units (video cards). Multiple GPUs can be hooked up for more mining power and more rewards, and some coins' mining algorithms also favour GPU mining to prevent domination by ASIC miners.

Unfortunately for gamers or anyone else who wants a reasonably priced video card these days, the growing popularity of cryptocurrency has led to high prices and card shortages. The problem started with the most powerful top-of-the-line cards but then trickled down the price chain as those sold out.

"Gamers come first for Nvidia"

Just 6 months ago, Nvidia CEO Jen-Hsun Huang's told the press: "Cryptocurrency and blockchain are here to stay. Over time, it will become quite large. It is very clear that new currencies will come to market. It’s clear the GPU is fantastic at cryptography. The GPU is really quite well positioned."

AMD took a more cautious stance, preferring not to willingly overexpose itself to the potentially fleeting mining market, but in the end having little choice.

But now Nvidia is looking to shift its focus more strongly towards its core market.

"Gamers come first for Nvidia. All activities around our GeForce products are for our core audience. We recommend our trading partners make arrangements to ensure that gamers’ needs are still met in the current climate," Boris Böhles, Nvidia's PR manager in Germany, told ComputerBase.

Unfortunately for gamers, Nvidia's hands might be tied.

Valiant attempts

According to MCV UK, some retailers are:

  • Limiting orders to one per customer – Naturally a good way of preventing hoarding.
  • Pushing pre-built PCs harder – Miners don't want to buy a computer when all they want is the GPU. Gamers might be more open to it.

Unfortunately, retailers are finding themselves just as squeezed as end users, and are themselves paying higher prices for a limited stock of video cards.

Reports suggest that the serious miners are purchasing wholesale, rather than filling their carts at (or above) retail prices.

Possible solutions

MCV highlughts two solutions and the flaws of each.

  • Make more cards: Obvious on paper, risky in practice. Increasing production runs for the potentially fleeting GPU mining boom is hard to justify from a business perspective, especially as AMD and Nvidia have both previously expressed concern about overexposure to mining rather than their core business focus.
  • Lock the cards: Nvidia may be able to lock down the cards to prevent their use in mining, but this may not work in practice and would also close off some of the other non-gaming non-mining GPU applications.

Will the problem just solve itself?

Retailers and manufacturers are having trouble and no real solution seems to be on the cards. But eventually, the problem might solve itself on the cryptocurrency side of the fence. It's impossible to say for sure, but there are some signs that change will come in 2018.

Most of them come down to the fact that improvements are ongoing, and that no one really wants to blow a literal country's worth of electricity and processing power on a blockchain.

Bitcoin is an exception, not the norm. It just happens to have become extraordinarily valuable and in-demand on top of a system that was never properly designed to accommodate so much interest.

Rarity is high on bitcoin's list of important features. This takes the form of sternly controlled mining rewards to manage inflation.

Essentially the system automatically adapts to make sure inflation (mining rewards) and block creation time (which affects transaction speed and cost) continues predictably regardless of how much computing power or energy is put into mining.

Then it went and became extraordinarily valuable in 2017, at which point everyone started mining it. This led to a massive influx of mining power without any actual benefit to the network as a whole, because that's how it was designed.

With so much more computing power, energy and value pouring into bitcoin, mining quickly became an arms race. A single GPU quickly became just a drop in the mining pool, and people started to sweep the shelves clean. Even the largest mining conglomerates couldn't get enough power.

Because the bitcoin network doesn't actually benefit from getting more power, its appetite is essentially infinite. As long as the mining arms race continues, bitcoin's energy and computing power consumption will continue to grow.

The arms race has continued, and at the time of writing:

These objectively ludicrous statistics are intended to highlight just how anomalous bitcoin is compared to all other cryptocurrencies, and how much of an impact this coin alone is having on the demand for mining equipment.

There are several reasons this problem might largely solve itself in 2018.

  • Ethereum Casper: Ethereum is the world's second largest coin by market cap, and second most valuable coin by value, and it currently runs on a relatively inefficient proof-of-work system the way bitcoin does. This means it's consuming a lot of computing power and energy to handle its transactions, and a lot of the people buying GPUs are doing so for the purposes of Ethereum mining. Later this year it will be shifting to a proof-of-stake mining system instead, which means it can no longer be mined with GPUs.
  • Bitcoin's shrinking market share: Unlike most market share charts, bitcoin started off at 100% and has been declining since then. Bitcoin consumes a disproportionate amount of energy and processing power, so a decline next to more efficient coins may turn around the arms race effect if it outpaces the growth in bitcoin uptake.
  • Shifts from proof-of-work: Proof-of-work was one of the most reliable and tested early mining systems, but its inherent inefficiencies mean it's less popular than it used to be.
  • The growth of consortium and private blockchains: Many of the blockchains emerging today use private and consortium (part public, part private) systems. This means the mining power of any given new coin is more likely to be centralised "in house" these days. For example, a blockchain-as-a-solution company might run its clients' blockchains through its own servers, and tune them for efficiency.
  • Mainstreaming and de-hyping: As cryptocurrency becomes more mainstream its growth is likely to stabilise. The sudden increase in demand combined with the uncertainty of future growth are the main factors preventing Nvidia and AMD from effectively satisfying both miners and gamers. As this (possibly) stabilises throughout 2018 it's likely to become easier.

So, just avoid frying your video card for the next year or two and you might be alright. Perhaps.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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