Are Ethereum Miners Ready for Changes in GPU Mining?

Contents

1. Reports show that NVIDIA GPU's computing power restrictions to prevent cryptocurrency mining have now been bypassed by miners.

2. Nvidia and its competitor AMD are developing dedicated chipsets for crypto miners.

Gamers and miners have been at loggerheads ever since cryptocurrency miners realized that the graphics processing units (GPUs) used to process the demanding visuals of PC games can be mined. As soon as GPUs became available, cryptocurrency miners snapped them up, causing inventory to tighten and prices to soar, ultimately leaving gamers with nothing.

This tension flared up again last week when it was reported that GPU manufacturer Nvidia has imposed limits on chip computing power to prevent miners from mining cryptocurrencies. Once miners are found to be mining cryptocurrencies such as Ethereum, the chip efficiency will be reduced. After the news was disclosed, some industry experts said that the chip computing power limit set by Nvidia is almost impossible to circumvent. This limit can reduce the cryptocurrency mining ability of the RTX 3060 graphics card by 50%, but it was soon reported that the Beta driver version can bypass Nvidia's graphics card mining computing power limit.

As the world's two largest chip manufacturers, Nvidia and AMD produce graphics chips that mainly meet the needs of gamers and crypto miners, but with the rise of the cryptocurrency market and the surge in cryptocurrency mining revenue, the chip industry has become increasingly concerned, as mining operators are eager to buy graphics card inventory, causing GPU prices to soar.

Meanwhile, chipmakers have recently struggled with issues such as raw material scarcity, and miners have had difficulty with ethereum’s shift to a proof-of-stake consensus model that will eventually eliminate mining altogether.

Ethereum-specific GPU

In February of this year, NVIDIA launched a dedicated chipset for Ethereum miners, but the company also announced at the same time that it would limit the computing power of the new graphics card RTX 3060 GPU, which means that crypto miners will not be able to achieve the expected results using this graphics card for mining. According to relevant reports, the transmission speed of NVIDIA GeForce RTX 3060 is about 40-45 MH/s, but once mining begins, the speed will drop to 20-25 MH/s. Using this mod will help miners unleash the full potential of the GeForce RTX 3060 graphics card, up to 50 MH/s

Nvidia's move is seen as a response to gamers, many of whom are very worried that a surge in demand for graphics cards from crypto miners will lead to inventory shortages. According to the chip manufacturing giant, Ethereum was specifically targeted this time because it offers the highest mining yield among GPU-mineable cryptocurrencies.

The chip shortage means that cryptocurrency miners, mainly Ethereum miners, may use gaming laptops to get extra computing power. After all, in the current cryptocurrency bull market, miners will try various means to make a profit. However, according to Twitter user @I_Leak_VN, Chinese Ethereum miners have bypassed the computing power limit set by Nvidia (later it was revealed that the screenshot posted by @I_Leak_VN was not Ethereum, but another blockchain), - of course, this situation is not surprising.

What’s “interesting” is that some mining experts believed that only Nvidia insiders could set hashrate limits and no one else could do it, but soon, several industry media including PC Watch, Computer Base and Hardwareluxx pointed out that the “experts” were wrong because the hashrate limit could be bypassed directly using the recently released Nvidia Beta driver.

On the other hand, Nvidia’s competitor AMD is also developing its own dedicated mining chipsets, such as the latest version of AMD Navi 12 (this chip was originally used in Apple Macbook Pro). According to PC Gamer, this graphics card does not have a video output function (Deep Chain Finance Note: Video output is a necessary function for games), which means that AMD Navi 12 is likely to be the first specific processor related to cryptocurrency mining launched by AMD, and it is specifically aimed at Ethereum miners.

These recent moves by Nvidia and AMD are indeed surprising and also indicate that chip manufacturers have begun to try to differentiate GPUs used for cryptocurrency mining from GPUs used for gaming , although not everyone thinks this is a strategy that Nvidia and AMD should follow.

Ethereum mining revenue soars

Earlier this month, Nvidia won a landmark lawsuit alleging that it had "falsely reported $1 billion in sales" during the 2017-2018 bull run. A California district court judge ultimately dismissed the lawsuit, ruling that the plaintiff could not demonstrate Nvidia's intentional behavior in its sales performance.

It is reported that the plaintiff in this case is the Ironworkers Local 580 United Fund (an employee benefit plan that invests in Nvidia stock). They accused Nvidia of misleading investors and failing to disclose that its rapid performance growth in the first half of 2018 was largely due to its mining business. The subsequent disclosure of its expected decline in revenue caused its stock price to plummet.

But now, the situation in the entire cryptocurrency market is different. Since PayPal decided to integrate its cryptocurrency business, retail investors' interest in cryptocurrencies has surged, triggering a new round of mining craze. According to a report released in early March, global GPU sales increased significantly in the fourth quarter of 2020, with shipments rising 20.5% month-on-month and 12.4% compared to the fourth quarter of 2019. According to the author of the report, market analyst Jon Peddie Research (JPR), this is largely due to the rise of the cryptocurrency mining market, especially the Ethereum network, which has played a considerable role.

In 2021, the network fees earned by Ethereum miners have more than doubled, even higher than the peak during the "DeFi boom" last summer, and some miners' income has even tripled. Some mining experts have found that at this stage, no other cryptocurrency can surpass Ethereum in mining profitability.

However, although the revenue from Ethereum mining has increased significantly, the high transaction fees have also attracted people's attention. On February 23, the average transaction fee of the Ethereum network reached $38.21. Many small transactions could not be processed at all, and even many DeFi market activities were affected. Although the Ethereum 2.0 upgrade that is underway can solve these problems, it is not enough to solve the problem immediately, so Ethereum co-founder Vitalik Buterin decided to propose temporary expansion measures. However, these optimization measures did not satisfy the miners because they were worried that their income would be greatly reduced.

On March 12, a miner proposed EIP-3368, proposing to increase the current block reward of the Ethereum network from 2 ETH to 3 ETH, and then gradually reduce it in each block until it is reduced to 1 ETH reward per block after 8,000,000 blocks (about 2 years). This proposal will help alleviate the impact on miners after Ethereum's transition to a proof-of-stake consensus network.

Jon Peddie Research (JPR) further pointed out that if the Ethereum ecosystem transitions to ETH 2.0, that is, the full implementation of the Proof of Stake consensus, miners' demand for GPUs may be completely eliminated. Of course, the whole process takes some time, and if everything goes well, the Ethereum 2.0 network will be upgraded in stages, and the last upgrade will not be until 2022.

Some people believe that after Ethereum completes the upgrade in 2022, miners may continue to use GPU mining because they can move to other proof-of-work cryptocurrencies, and new cryptocurrencies may also replace Ethereum. But the reality may not be the case. After all, the so-called "third-generation blockchains" (such as Cardano and Polkadot) have launched proof-of-stake networks, which means that blockchains based on the proof-of-work consensus mechanism will become less and less. Not only that, it is unlikely that Ethereum miners want to switch to Bitcoin, Bitcoin Cash, Litecoin or other proof-of-work cryptocurrencies because the mining algorithms of these cryptocurrencies are completely different from Ethereum.

In the long run, gamers don’t need to worry about the shortage of graphics cards. As the GPU mining landscape changes, the price of graphics cards will even get lower and lower in the future. Especially after the Ethereum 2.0 upgrade is completed, miners are likely to sell their mining machines at a discount. (Deepchain)