Graphics card mining world: Graphics card manufacturers may become a new force, opportunities and risks coexist

He remembers that in 2017, graphics cards were often out of stock and prices soared. He had to explain to dissatisfied customers: "The graphics cards were all bought by miners for mining."

The direct reason for the shortage of graphics cards in 2017 was the surge in Ethereum: that year, Ethereum rose from less than $10 at the beginning of the year to $1,400 at the end of the year, a 140-fold increase.

Ethereum is highly dependent on graphics cards for mining, which has made graphics cards the new favorite of miners again after they were eliminated by the Bitcoin mining industry in 2014.

Like Ethereum, other currencies that rely on graphics card mining include Monero, Dash, and ZEC. They also emerged in the bull market of 2017, which exacerbated the shortage of graphics card supply.

In the face of profit-seeking miners, the main consumer group of high-end graphics cards in the past - gamers - were completely defeated. The graphics card circle began to be filled with all kinds of bizarre legends.

"The most famous one was that a big miner drove a truck to block the gate of the graphics card factory, holding boxes of cash and demanding to take the goods." Lao Zhang said, "The price offered by the big miner was half higher than that of the channel dealer, and the graphics card manufacturer had no choice but to give in. "

However, most high-end graphics cards on the market are still in the hands of graphics card manufacturers and distributors. It has long been an open secret in the industry that they "personally" mine.

"More than half of the graphics card dealers in Huaqiangbei tried to mine on their own," recalled Hou Beichuan, who runs a graphics card business in Huaqiangbei. After graphics card mining became popular, he also invested in the research and development and production of graphics card mining machines.

At first, Hou Beichuan only wanted to do business with familiar customers. But as the price of the currency rose, more and more new customers came to him, and the prices he quoted became higher and higher. He "could not resist the temptation" and took many orders.

"At the end of 2017, when the price of bitcoin was at its highest, many new customers came to us and ordered dozens of mining machines at once," Hou Beichuan recalled. "Most of them spoke with a Sichuan accent and paid first and received the goods later. They were very straightforward."

The miners quickly pushed up the price of graphics cards. "That year, the GTX1060 6G graphics card was sold for as high as 2,800 yuan, a 60% increase from before," Zhang recalled.

A chain reaction ensued, with some gamers soon revealing that the brand new graphics cards they bought in physical stores or even on e-commerce platforms such as JD.com showed signs of use.

Some people suspect that graphics card manufacturers have joined the mining ranks and are even selling graphics cards that have been used for mining under new names.

After that, JD.com quickly closed the seven-day no-reason return service for graphics cards to prevent people from returning them after buying them for mining. However, what gamers are most worried about - graphics card manufacturers mining - seems to have become a reality this year.

Earlier this year, the Hong Kong-listed company, Panasonic Corporation (HK.01263), which specializes in the design, development and manufacturing of graphics cards, was reported by the media to be about to enter the mining industry.

The company is the owner of the well-known graphics card brands "Zotec" and "Sapphire", and also produces graphics cards based on chips from the two major GPU giants - NVIDIA and AMD.

In January this year, the Panasonic Group announced on its official account that its wholly-owned subsidiary "Panasonic Wealth" and its partners have established a joint venture in mainland China to engage in projects such as server leasing, cloud computing and deep learning.

But according to media reports such as Planet Daily, the cloud computing business of the Panasonic Group is actually graphics cards.

Relying on their own graphics card production and supply capabilities, graphics card manufacturers may become an important force in the graphics card mining circle.

In his opinion, compared with the mining mechanism of Bitcoin, the scale of graphics card mining is smaller and the capital threshold is lower. But because of this, in the face of industry cycles, the impact on graphics card miners is more obvious.

"They have limited financial resources and are prone to chasing rising and falling prices, which leads to a stampede effect," said Sun Yuan. "Many people rushed into the market, and when the price of coins fell, they hurriedly sold their mining machines to cash in, and most of them suffered heavy losses."

Similar to Bitcoin, the cyclical changes in currency prices are still an important factor affecting graphics card mining.

"When the price was at its highest, Ethereum mining could pay for itself in three months," Hou Beichuan said. "When it was at its lowest, it would take two years to pay for itself."

But in the eyes of many graphics card miners, although the capital threshold is low and there is no need for mining machine manufacturers to develop dedicated chips, the requirements for graphics card mining in terms of technology, operation and maintenance are higher than those of Bitcoin mining.

"Bitcoin mining has mature mining machines and fool-proof management software," said Hou Beichuan. "Anyone can do it as long as they have people, funds, and cheap electricity resources."

But graphics card mining is different.

"In the early years, graphics card miners mined in 'racks', which had low heat dissipation efficiency, difficult maintenance, and also posed safety risks." Hou Beichuan said, "Later, professional graphics card mining machines continued to appear, and graphics card mining gradually got on track."

The mining rack used by graphics card miners, with graphics cards directly exposed to the outside

Hou Beichuan showed a graphics card mining machine he designed. This mining machine has a rectangular shape, is equipped with a high-power power supply of up to 1700W, and supports 8 graphics cards to mine at the same time.

A common graphics card mining machine on the market

"Our graphics card mining machines, even the graphics cards are customized for mining," Hou Beichuan introduced.

He explained that traditional graphics cards are mostly designed for gamers - generally a computer only needs one graphics card, and the graphics card has its own fan to improve the heat dissipation effect. But graphics card miners often have 6 to 8 graphics cards, and if each graphics card has its own fan, they will only interfere with each other and destroy the heat dissipation effect.

"So we contacted the graphics card manufacturer and customized a batch of graphics cards without fans." Hou Beichuan said, "We then installed high-power fans on the side of the mining machine to achieve better heat dissipation."

However, the GPU mining machine still faces many technical problems. "For example, the GPU mining machine uses screws to fix the GPU to the chassis, which is easy to loosen during transportation." GPU miner Lao Zhao told Yiben Blockchain, "Therefore, the GPU mining machine is not suitable for transportation."

Compared to Bitcoin miners who "follow the price of electricity", GPU miners prefer a stable power supply. However, many mining farms are not willing to host GPU mining machines.

"Graphics card mining machines occupy a large area and have low power. Mining farms charge fees based on electricity costs, so graphics card mining machines are not popular." Lao Zhao said, "In addition, the operation and maintenance of graphics card mining machines are also very difficult."

"Some graphics card miners will switch between multiple currencies and choose the one with the highest return. This requires miners to have convenient batch management software." Lao Zhao said, "Therefore, the hosting fee for graphics card miners is much higher than that for Bitcoin miners."

To this day, Ethereum is still the most popular currency among graphics card miners. However, according to Ethereum's development roadmap, Ethereum will abandon the PoW mining mechanism and gradually turn to PoS.

In fact, a similar scenario has already occurred in graphics card mining.

In mid-2018, many miners using 1063 graphics cards (3G memory version of GTX 1060 graphics cards) suddenly found that the computing power of their mining machines had returned to zero for unknown reasons.

This is related to Ethereum's DAG file. According to Ethereum's mining mechanism, the graphics card's video memory will be written into the DAG file. As Ethereum continues to develop, the size of this DAG file is also increasing. As of press time, the size of Ethereum's DAG file has reached 3.05G.

This means that all graphics cards with 3G memory are no longer able to participate in Ethereum mining, and a number of miners have been eliminated.

Hou Beichuan is very optimistic about the technological evolution of Ethereum. "If Ethereum neither welcomes a large number of DApps nor abandons GPU miners and completely switches to PoS, then it will be a dead end," he said. In his opinion, Ethereum will not abandon GPU miners in the short term.

In addition, another crisis of graphics card mining comes from ASIC mining machines. Nowadays, major mining machine manufacturers are looking for opportunities to launch ASIC mining machines for new currencies. Once the latter have a crushing power on graphics cards, a large number of graphics card miners will be ruthlessly eliminated by the market.

"In the long run, it is inevitable that ASIC mining machines will replace GPU mining machines," miner Sun Liang told Yiben Blockchain. "Many miners also hope that ASIC mining machines can reduce the operation and maintenance costs of Ethereum mining."

However, in the field of Ethereum mining, the performance of ASIC mining machine manufacturers is not satisfactory.

As early as April last year, Bitmain released the Antminer E3 mining machine for Ethereum's Ethash algorithm. However, its performance was mediocre and had little advantage over graphics card mining. Now, the Antminer official website has removed this product.

Canaan Creative announced last year that it was developing an Ethereum ASIC mining machine and planned to release it in April this year. However, there has been no new news about the mining machine since then.

Several graphics card miners told Yiben Blockchain that, to this day, the Ethereum mining circle has only heard of ASIC mining machines but has never seen them.

Despite the uncertain prospects, many miners believe that graphics card mining is still a market with both opportunities and risks.

“Historically, there have been many opportunities for ‘huge profits’ in graphics card mining,” Lao Zhao said. “The emergence of Grin at the end of last year was one of them.”

In the early days of Grin, many well-informed miners participated in Grin mining. In the early days, the price of Grin was over 100 yuan, and many miners made a lot of profit.

Not only Grin, many small currencies have experienced similar situations in a short period of time.

However, faced with the temptation of small currencies, most miners remain unmoved.

“Graphics card miners can indeed switch mining currencies freely, but the cost is very high.” Hou Beichuan said, “There are technical barriers to switching mining currencies in batches.”

He also said that different currencies have different requirements for graphics cards: some currencies have high mining efficiency with A cards, while others have high mining efficiency with N cards, and "blind switching may be counterproductive."

What miners are most worried about is encountering air coins.

"For miners, stability comes first," said Sun Liang. "After all, we are just miners, and we never speculate in cryptocurrencies."