Opinion The Cryptocurrency Mining Dilemma of Graphic Card Manufacturers

The Cryptocurrency Mining Dilemma of Graphic Card Manufacturers

March 3, 2018

For the first time in recent history and seemingly out of the blue, the big graphics card developers and manufacturers are facing a similar problem. This problem is equally pressing in AMD as well as it is in Nvidia or any other big maker of GPU, regardless what market segment they cater to.

The problem is best described like this: what should they do about the rise of interest in cryptocurrency mining? At the present point, the companies are just getting to terms with the fact that this interest is actually reflecting on their earnings. The trend is not that easily defined, but all big companies apparently profit off of the mining activity.

At the same time, there is a range of issues with the future of the same trend, however unclear it might be. The dilemma is unexpected but each company has to resolve it somehow and provide a path forward not just for the customers, but also for the shareholders. Here are some of the main points of this issue, as well as an exploration of the potential ways a GPU manufacturer might approach the same market threat and opportunity.

Getting to Terms with Mining Needs

It might seem strange now, but only six months or some before, the GPU producers did not even acknowledge that something different is happening with the graphics card demand. While GPUs began to be used for mining purposes several years ago, their numbers were still relatively small.

The hashing power needed to mine a big cryptocurrency like bitcoin overcame the potential of any PC or laptop just a year or two after its launch. However, most big companies that are focused on mining never used the GPU racks but instead employed specialized mining rigs. These custom-made computer units were created precisely for mining purposes and sold with large price tags.

So, where did the spike in GPU needs come about? Mainly, it was spurred on by the rise of altcoins in 2017, many of which could be easily mined using homemade GPU racks. Most mining companies are working on big cryptocurrency systems, so the smaller ones were ideal for the home miner type.

GPU Company Silence

People started noticing that graphics cards are starting to be more sought after right at the start of 2017. The retailers were struggling to fill their shelves and online portals had to employ waiting lists for potential buyers.

Those who did not want to buy dozen or more GPU but just one for the new computer were baffled by this need. Yet, the companies clearly had some idea that the rise in GPU purchases did not come from a boost in some particular eSport or anything similar.

Instead, it was produced directly by the individuals or small mining pools that were building mining rigs using GPUs. At this point, it can be only speculated how the upcoming period took place, but clearly, there were opposing sides of the same argument in the industry.

What is to be done about Miners?

There is no shred of doubt that AMD, Nvidia, and practically any other big graphic card makers clearly understood that the rise in demand for their product came from the miners. But months passed between that moment and their decision to start accepting the same fact publicly.

At first, it is unsure how many individuals in these companies knew or understood what crypto mining is. The hardware designers and engineers must have known, as well as CTOs, but the rest could have been completely ignorant about this process.es

When they were confronted with the same information, it could be expected that many were taken back by the decentralized nature of all of it. Could company like AMD or Nvidia be seen as a business that supports a digital venture that could be, in theory, banned by most of the world’s governments?

Any such voices inside of the companies could find plenty of similar ideas coming from the traditional financial domain. For them, like all cryptocurrency naysayers, the fact that millions use it for things like online purchase, investment, and even online betting does not make any difference. There is no government behind this form of currency or commodity, so it cannot be supported by any mainstream business.

There must have been others who stated that the companies should embrace the miners and come up with specialized graphics cards that could serve them even better. But any such move would seem as reckless if the tide of public opinion and then legislature turns against cryptocurrencies.

Saying Yes, but…

In early 2018, the companies could not continue pretending that mining needs to not impact their business. During this period, most of them came out with their reports on earnings and acknowledged that cryptocurrency mining really did make a difference in their profit margins.

But, these statements came without anything that would suggest that the companies are thinking about changing their operations to support this trend. Instead, they focused on the high level of cryptocurrency volatility and unpredictability of the entire industry.

Because of these, all big companies took the position of being open to miners as long as they act as any other customer. At the same time, the underlying current of opinion seems to be that they did say yes to miners, but that the full acceptation will come only if cryptocurrencies become accepted by governments as well.

The Future Profits

Right now, the position of all of these companies is very much safe. They can continue to see their profits go up, even if the trend of the second half of 2017 winds down. The truth is that cryptocurrency domain is not going anywhere and neither are the miners using GPU rigs.

The companies can comfortably ride the same way by silently and slightly boosting their production quotas but still keep a way of scaling down when the demand drops. This makes GPU makers the ideal secondary beneficiary of the cryptocurrency miners which can have a rise in profits without risking anything, including their reputation.