Why are miners rushing to buy graphics cards instead of CPUs? When will the graphics card shortage end?

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Recently, it has been a nightmare for PC gamers. Those who want to buy a new computer or upgrade their configuration suddenly find that they can’t buy all the parts! In addition to the CPU, which has been out of stock, graphics cards are even harder to find recently. Even if a new graphics card is found, the price is two or three times higher than the official price. The price of old graphics cards has also increased instead of decreased compared to two years ago, which makes people feel as if they have stepped into the wrong world line.

The official price of RTX3080 is 5499 yuan, but it has been hyped up to 8,000 or 9,000 yuan or even tens of thousands of yuan.

Some friends saw the news of new graphics cards being released before the New Year, and sold their old graphics cards to keep the money for buying new ones. Now they find that not only can they not buy new graphics cards, but they can't even afford old graphics cards of the same model. In fact, they can earn several thousand more by selling the graphics cards later. What caused this magical phenomenon? There is only one answer, that is, the mining boom has come.

The recent high prices of graphics cards and the difficulty in obtaining one are due to the rapid rise in the price of digital currencies and the use of graphics cards for mining has become a good business. So the question is, why do we have to use graphics cards for digital currency mining instead of speculating on CPUs? When will the price of graphics cards drop? Let's talk briefly.

Why do we use graphics cards instead of CPUs for mining?

First of all, we need to understand the concept of mining. Digital currencies represented by Bitcoin and Ethereum use blockchain technology. Computers contribute computing power to the blockchain network and can obtain digital currencies distributed in proportion to the computing power. This process is decentralized and guaranteed by algorithms. The process of exchanging computing power for digital currencies generated by the blockchain algorithm is called mining.

The computing power required for mining is often completed through algorithms such as hashing and decryption. Such algorithms have a characteristic that they are low in complexity but extremely strong, which is exactly what GPUs are good at.

Both CPU and GPU can perform calculations, but they are good at different things. CPU has fewer cores, but a complex architecture, with a complex logic control unit, and is better at complex calculations; while GPU has a large number of cores, but a relatively simple architecture, which is very suitable for high-throughput high-density calculations. To make a rough analogy, the CPU is equivalent to a college student who knows advanced mathematics, while the GPU is like a hundred primary school students who only know four arithmetic operations. College students are definitely better at solving Olympiad math problems, but if you have to solve 1,000 addition, subtraction, multiplication and division problems, a college student can never calculate faster than a hundred primary school students - primary school students can do parallel calculations together, but how many problems can a college student solve at a time?

A simple comparison of CPU and GPU architectures shows that CPU is suitable for complex, low-density calculations, while GPU is suitable for simple, high-density calculations, which coincides with mining.

The hash and encryption algorithms used in mining are just like a massive amount of addition, subtraction, multiplication and division problems. They are not difficult, but require constant repetitive calculations, which requires a huge amount of computation, which coincides with the strengths of graphics cards.

In this round of digital currency boom, graphics card prices have been greatly pushed up. The biggest driver is not the most well-known Bitcoin, but Ethereum.

Ethereum's price trend over the past year has risen more than ten times (chart from BitFan)

Today, the computing power involved in Bitcoin mining is already very large. Graphics cards alone are no longer able to obtain sufficient distribution weight in the mining pool. Now, special mining machines are needed to get a share of Bitcoin mining. Ethereum is different. It can still be obtained through graphics card calculations. Moreover, its algorithm Ethash also has very high requirements for RAM. The results of the calculations will be directly stored in RAM. The current RAM capacity limit is 4G. Therefore, graphics cards with a certain level of computing power and large video memory are now very popular. In order to achieve stronger mining performance, many miners will overclock the video memory.

It can be seen that graphics cards are indeed one of the most suitable tools for mining Ethereum at present, while CPUs are not good at this.

Graphics card price increase: Who is fueling the trend? Are players' complaints useful?

The market of Ethereum is as hot as Bitcoin, and the popularity of graphics cards has also increased accordingly. The price of Ethereum has soared from more than 700 US dollars at the beginning of the year to about 2,000 US dollars now. A current high-end graphics card such as 3070 or 6800XT can mine 24 hours a day. After deducting the electricity bill, it can still earn dozens of RMB a day, and it will pay back and continue to make money in a few days. With such huge profits, graphics cards are sold out. When can ordinary PC users buy a satisfactory graphics card?

The current approximate profit from mining Ethereum is more (about 1.5 times) half a month ago. The current Ethereum price has fallen, and the mining speed has increased due to the increase in the computing power of the entire network.

To answer this question, we need to analyze the reasons for the rise in graphics card prices, as well as the attitudes and countermeasures taken by various parties in the market towards mining.

First of all, the reason for the price increase of graphics cards is obvious, that is, the skyrocketing prices of digital currencies such as Ethereum, which is closely related to the recent extremely loose monetary policy - so many US dollars have been printed, money is becoming less and less valuable, and you have to find something to preserve its value. Blockchain digital currency, which is decentralized, has a generally constant quantity, and has a certain scarcity, has become a new good place for investment and a good topic for speculation.

In other words, as long as the monetary easing policy continues, blockchain digital currencies still have reasons to support their prices. It should be emphasized here that this view does not constitute investment advice. The market is risky, so please invest with caution.

The computing power of the entire Ethereum network is increasing, and the difficulty of mining is increasing. It can be seen that many GPUs are constantly being invested in Ethereum mining.

As a mining tool, graphics cards have seen their prices skyrocket as the cryptocurrency market has soared. So what are the attitudes of various parties in this mining boom?

GPU manufacturers and sellers

Let’s first talk about the GPU sellers, which are NV and AMD, which are well known to everyone. From a pure buying and selling perspective, the mining boom will not cause substantial losses to NV and AMD, but may instead boost sales—it doesn’t matter who you sell the GPU to. However, the factory price of GPUs is relatively fixed, and the sales channels are relatively single, basically only for AIB and AIC manufacturers. As long as the GPUs can be sold out, whether the GPUs end up in the hands of PC gamers or miners, the money that can be earned will not be much different.

However, it should be taken into account that PC gamers are a stable group of GPU consumers, and this group has been the main force supporting the GPU consumer market for many years; the demand for GPUs from miners fluctuates greatly with the market, and the market is not stable. If you want to have a long-term business, it is still meaningful to maintain the GPU supply for PC gamers and prevent the PC game market from further slumping. Therefore, some measures to restrict gaming GPU mining have also been launched one after another.

NV will limit gaming GPU mining performance and launch mining cards

For example, NV plans to limit the mining performance of GPUs through vBIOS and drivers in new products; on the other hand, it plans to launch special mining cards without display interfaces and graphics rendering functions to avoid the impact of the mining boom on the traditional market. However, AMD does not seem to have many related measures. Considering that the current generation of NV GPUs has stronger mining capabilities and N cards are more popular among miners, it is understandable that AMD's response is not so fierce.

Graphics card manufacturers and distributors

Let's take a look at the situation of AIB and AIC manufacturers, that is, graphics card manufacturers and their downstream distributors. For these manufacturers and distributors, it is in their own interests to sell the GPUs at a higher premium and earn more profits. At the same time, they do not have the means like NV to limit the use of GPUs through vBIOS and drivers, so they have neither the intention nor the ability to meet the needs of PC gamers.

Under such a stance, some AIB, AIC manufacturers and distributors may be more inclined to raise the shipping price of graphics cards and sell them to miners who are more willing to pay high prices and buy graphics cards in bulk. In the market trend of rising graphics card prices, it is more rational to stock up and wait for miners to buy in large quantities at high prices - PC gamers do not have this purchasing power. This has led to the current situation of scarcity and high prices of graphics card products on the market.

In addition, in the mining boom, owning a large number of GPUs is equivalent to owning a wealth mining machine, which has led some upstream graphics card manufacturers to even engage in mining themselves. Recently, a manufacturer posted a picture of its graphics card mining on its official Twitter account, suspected of interfering in mining, which attracted strong condemnation from PC game players.

PC Gamers

For many years, PC gamers have been the main force supporting the GPU consumer market. However, PC gamers must also realize that this consumer group is shrinking and the sales of gaming graphics cards are shrinking year by year.

We can observe this phenomenon from the prices of "sweet spot cards" over the years. More than a decade ago, the price of sweet spot cards such as 8600GT was stable at around 1,000 yuan during the market cycle, which is also the pricing range of sweet spot cards familiar to PC players; five years ago, the listing price of GTX1060 reached 2,000 yuan; and the recent sweet spot cards, such as GTX2060 and RTX3060, have all reached the listing price of 2,500 yuan. Even without the mining boom, the actual selling price would be higher than the listing price.

The reason why graphics cards keep rising in price is that the market for PC gamers is shrinking, and the reduction in sales cannot spread the R&D costs as before, so graphics card prices are rising. This is partly due to the expansion of the integrated graphics market, and partly due to the shrinking PC market.

Taking Steam players’ hardware usage as an example, a large number of players still use old products such as the GTX1060, which have limited purchasing power.

Perhaps there are factors such as inflation, but we can compare it with the game console market. The number of game console players has been relatively stable, and the mainstream pricing of game consoles has been between $399 and $599 from 20 years ago to now. Even the latest generation of PS5 and XBOX SX only sells for $499, which has not increased year by year like graphics cards.

The number of PC gamers is shrinking, which means that it is increasingly difficult for this group to support the GPU market. The current mining boom has allowed GPUs to find new sales channels. In the past, there was a lack of market for graphics cards, but now there is a lack of graphics cards for players. This may be the magic of the market.

When will the graphics card shortage end?

To solve the problem of graphics card shortage, we need to start from both the source and demand.

Source: Can GPU mining be restricted?

As mentioned earlier, NV plans to limit the mining performance of ordinary gaming graphics cards through vBIOS and drivers, and will launch dedicated mining GPUs to prevent the mining craze from impacting the gaming market while meeting the needs of miners. However, whether these measures can produce immediate results is probably worth discussing.

NV's move to restrict GPU mining is generally only at the software level, which means that the mining capabilities of the GPU itself have not been weakened. Through vBIOS and drivers, if the GPU is detected to be running a mining algorithm, the GPU's performance will be restricted at the software level. But the question is whether this detection and restriction can be foolproof.

Most blockchain digital currency mining uses hashing, encryption and other algorithms, but the specific algorithms are different. As shown in the figure below, the algorithms of Bitcoin BTC, Ethereum ETH, Raven coin RVN, and Litecoin LTC are all different, and there are countless types of blockchain digital currencies, and it is difficult to sort out the algorithms one by one. The algorithms of some popular coins are restricted by software, and everyone turns to mining unpopular coins - now the computing power required to mine unpopular coins is also very large. Is it enough to fully detect whether the GPU is mining through vBIOS and drivers? This is a question mark.

Different coins have different algorithms. Can vBIOS and drivers limit all mining algorithms? (Chart from f2pool)

In addition, are the restrictions at the software level unbreakable? This is also a question. The method of modifying vBIOS to crack certain functions of the graphics card has existed since ancient times. Can vBIOS and drivers prevent cracking? Even more so, under the generous reward of the mining boss, will the vBIOS without mining restrictions that was tested internally leak out? Players had better pray that this will not happen. Judging from the actual market reaction, the RTX3060 was still out of stock in an instant when it was first released. It seems that everyone has certain expectations about what will happen next.

Now let's talk about the GPUs specially launched for mining. Data shows that the efficiency of special mining GPUs such as 90HX and 50HX is not as good as the mainstream graphics cards currently on the market. Many of them, such as 50HX, 40HX, and 30HX, still use the previous generation Turing architecture. From the perspective of mining energy efficiency, they are lower than Ampere architecture GPUs and have limited competitiveness.

The ability of mining cards to run hash algorithms is not stronger than that of graphics cards, and there is no advantage in mining performance (chart from AnandTech)

In addition, we need to understand a common sense, that is, the production capacity of the wafer fab is limited. If the sales of this type of mining GPU are hot enough, it will inevitably have a squeezing effect on the production of gaming GPUs. If upstream manufacturers find that the sales of mining GPUs are very hot, then will the production capacity allocated to gaming GPUs be reduced? This is worth worrying about.

Is it possible to limit the GPU mining by directly reducing the computing power at the hardware level? I am afraid it is difficult to do. Graphics rendering is originally a low-complexity but huge computing demand, which is similar to the characteristics of mining algorithms. Cutting the computing power of mining on GPU hardware will also have a negative impact on games, rendering, etc., which is not worth the loss.

In short, the restrictions on vBIOS and drivers can indeed limit gaming GPU mining to a certain extent, and the introduction of dedicated mining cards can also divert the mining market, but whether they can be effective remains to be discussed.

Demand: When will graphics card prices increase?

As mentioned above, the reason behind the price increase of graphics cards is the hot market of blockchain digital currency, which is closely related to the loose monetary policy. Under the epidemic, in order to maintain the economy, it is difficult for monetary policy to change in the short term, and mining may still get relatively ideal returns.

Last year, the US dollar was printed crazily. 23.6% of all the US dollars in history were printed just last year (M2). Everyone needs to buy assets to preserve their value.

When will the price of graphics cards return to normal? This is closely related to the overall economic environment. In the past two years, monetary policy was relatively tight, and the price of digital currency was at a low level. It was not so cost-effective to use graphics cards for mining, so everyone could buy graphics cards at a relatively affordable price. If this round of graphics card speculation is to end, I am afraid that the overall economic environment needs to return to normal.

Summarize

Due to its unique hardware architecture, GPU is naturally suitable for mining, which leads to a shortage of graphics cards in the hot market of digital currency. If graphics cards want to return to normal prices, the restrictions of upstream manufacturers can certainly play a certain role, but it still depends on the historical process. I hope that the global economy can get back on track and give digital currency speculators less reasons to hype.