The rise of cryptocurrency has had a major and unexpected impact on many adjacent industries. This includes gaming, with one company, Nividia, especially feeling the heat.
Crypto mining is intensive, and the hardware market to make it possible is growing quickly. The hardware market specializing in mining equipment could grow by nearly $3 billion in the next three years.
This figure is based on the perceived future growth of the mining industry in general. As the number of mining pools grows, so will the demand for products created specifically to meet the unique demands of a mining rig.
This goes double for capable graphics processing units (GPU) as the demand for these chips is much higher than the current global supply.
Why do miners need special equipment?
In order to build a machine capable of mining cryptocurrencies, a number of requirements must be met. As a result, the majority of ‘off the rack’ computers don’t cut it.
Mining requires computers to solve challenging mathematical puzzles called proof of work (POW). The POW is a requirement to validate the transaction properly and rewards the miner with coins. The process of solving these puzzles requires a lot of trial and error, making it impossible for a human to carry out themselves.
An important part of this process is the head-to-head nature of mining. All miners are given the same chance to solve these puzzles, with the rewards being given on a first-come, first-serve basis.
This means if you are the first to solve the puzzle, you reap all the rewards. This also means that other miners will need to stop on that block and move to the next.
The competitive nature of mining only furthers the need for a capable computer to handle not only solving these puzzles but also to enable it to do it faster than everyone else.
When bitcoin mining first began, most normal desktop computers were sufficient enough to carry out such operations. However, the puzzles increase in difficulty as more are mined.
In order to keep up miners must invest in powerful GPUs and Application Specific Integrated Circuits (ASICs). Not only are GPUs and ASICs faster than simply using a CPU, but they also use a lot less energy.
Ethereum’s shift to proof of stake
It should be noted that ethereum is one of the few popular cryptos that can still be mined with GPU power, though they are expected to move past POW with the launch of ETH 2.0.
When that happens, the demand for miners and all of this hardware will take a massive dip. As a result, businesses like Nividia are capitalizing on this demand. Most cryptos miners use ASICS for coins like bitcoin and litecoin.
However, this has resulted in both a GPU and ASIC shortage. While ASICs aren’t used much outside of mining this isn’t of particular concern. However, GPUs used by gamers are being snatched up by miners, creating a problem for Nvidia.
Nvidia combating GPU shortage
Nvidia is one of the companies that has not only been affected by mining. It’s also one that has had the most effect on the industry in return.
The company is known for creating high-powered graphics processing units and computer chips that are primarily used for PC gaming and certain professional markets like the automotive industry.
Recently, however, the crypto world has realized that these high-powered GPUs are not only suited for intense gaming, but also crypto mining. As Nvidia’s current GPU lineup stands, the GeForce and RTX lines are not only the go-to cards for many avid games but also crypto miners.
The rush on graphics cards has been a major boom for Nvidia in terms of sales and profits. However, they have seen their supply of cards dwindle to critical levels.
In recent months, the company has been hard-pressed to keep inventory on the shelves in many stores and online retailers. The demand amongst gamers for these GPUs is high enough when the new models roll out, but now, with miners also scrambling to buy as many as possible, the supply isn’t there.
Now, many gamers are left with the difficult, if not impossible task, of finding available hardware to run games at high quality.
The problem has gotten so bad that some retailers conduct lotteries for the GPUs and charge over a 50% markup. Smuggling has also been an issue with a recent story detailing a fishing boat full of Nvidia gaming cards instead of fish.
A two-pronged solution
To combat this, Nvidia has taken a two-pronged approach as frustration from all parties involved heightens.
First off, Nvidia took its existing GPUs and “nerfed” them to be less attractive to miners. While gamers are mostly interested in the graphics abilities of these chips, miners are all about the hash rate.
Hash rate is basically the speed that each try takes for your computer to try and solve the mining algorithm. The higher your hash rate and the faster your computer is at guessing the right answer.
Gamers are not so reliant on this particular area of performance, and therefore the throttling of the GPU’s hash rate mostly makes them less attractive to miners.
So how does making its product less appealing to a major market help Nvidia?
Nvidia offering crypto-mining specific hardware
The second part of the approach sees Nvidia will look to capitalize on this GPU shortage by giving miners something they desperately need — a custom solution.
The new line of GPUs is called Nvidia CMP, or Crypto Mining Processor, and will fill the gap that the newly nerfed RTX line.
While Nvidia has announced the new line, they haven’t released the details about all the models just yet. Only the base model, the 30HX, is currently available online. Nivida launched the 30HX and 40HX models in Q1 of 2021. Meanwhile, the 50HX and 90HX are Q2 launches.
The 30HX CMP is the budget model, at $700, with the lowest Ethereum hash rate of 26 MH/s. The 40HX is rated at 36MH/s and the 50HX at 45 MH/s. The HX90 is the heavyweight of the group, touting an Ethereum hash rate of 86 MH/s.
Nvidia planning to bank $400 million off of crypto before July
Nvidia is putting a lot of faith in the future of its crypto-chips after first-quarter fiscal earning saw CMP sales of $155 million.
One reason for this is the impressive sales the line has amassed in just a couple of months. Based on the sales to date, Nvidia expects sales to exceed $400 million in the current quarter ending June 30.
It seems, however, that Nvidia is aware of the short life this line may have with many cryptos, including bitcoin, being mined using more advanced methods.
In a call with analysts, Nvidia CEO Jensen Huang said, “What we hope is that the CMPs will satisfy the miners and will stay in the professional mines,” and that the new product “protects graphics cards supply for gamers.”
Protecting the gaming market
Huang makes it obvious that the CMP line was developed to protect the gaming market. This is understandable as it makes up the vast majority of Nvidia’s clientele.
He also notes the gaming market is at the highest it’s ever been. In addition, he won’t allow them to miss out because GPUs are being hoarded by miners. That gaming-focused clientele did make more than $2.75 billion for Nvidia in revenue last quarter.
Therefore, it makes a lot of sense for Huang and Nvidia to protect them. Even if it means branching into mining-specific products.