For investors who have been watching the cryptocurrency movement over the past year, it’s apparent that the so-called “crypto mania” has come to an end, or at least on hold for a while. After cryptocurrency prices skyrocketed towards the close of 2017, all of the top 10 high market cap coins have now settled into more muted prices down, in some cases, nearly 80% from their all-time highs. Looking at the charts for bitcoin (BTC) and ether (ETH), it’s clear that the impressive bull run has tapered off to arguably more sustainable levels.
As with nearly everything in the economy though, industries are connected together one way or another. One of the questions many in the cryptocurrency world hadn’t considered after the decline of crypto prices is how that fall will impact other facets of the economy. That fall in cryptocurrency prices, along with an increased focus on newer consensus mechanisms that aren’t processing-intensive (like different variants of proof-of-stake over the current proof-of-work model), has led to a decline in sales of graphics processing units (GPUs) for producers like AMD and Nvidia. While mining on the Bitcoin network is dominated by ASIC miners, other cryptocurrencies are still largely mined viaGPU mining operations, though that could soon be changing.
Crypto GPU Sales Down
Nvidia, the popular GPU manufacturer known for making a variety of cards for the gaming industry and, more recently, the crypto mining industry, recently announced a “substantial decline” in revenue from cryptocurrency miners. According to the company’s CFO Commentary on Second Quarter Fiscal 2019 Results, the company was anticipating a drop in GPU sales, though the reality was more significant than they accounted for.
According to the report, “Our revenue outlook had anticipated cryptocurrency-specific products declining to approximately $100 million, while actual crypto-specific revenue was $18 million. Whereas we had previously anticipated cryptocurrency to be meaningful for the year, we are now projecting no contributions going forward.”
Competitor AMD is in a similar situation as well. After releasing second quarter earnings earlier in the summer, the chip producer noted that their quarter-over-quarter decline in revenue in the computing and graphics segment was “primarily related to lower revenue from GPU products in the blockchain market.”
Cryptocurrency prices aren’t the only factor to blame for the decline in GPU sales either. One of the topics at the center of the cryptosphere right now is about alternatives to the standard consensus mechanism known as proof-of-work (PoW). As newer methods are proposed, developed, and eventually implemented, GPU sales are likely to continue declining in the crypto-related industry.
Heavy Infrastructure Investment
Besides trading and investments made directly in the cryptocurrency world, there has been a significant amount of investment funneled into business related to the crypto industry as well. Unlike the early days of bitcoin, cryptocurrency miners are no longer individual enthusiasts running gaming PCs in their bedroom.
Nowadays, there are entire cryptocurrency mining operations being funded and built across the globe. In Montana, US, Power Block Coin LLC is investing $251 million into a new cryptocurrency mining farm where the facility will be stocked full of mining equipment, and they’re not alone.
In upstate New York, US, there’s an even larger cryptocurrency mine under construction. The new facility in Massena, NY is being built by Coinmint and is estimating up to $700 million in investment going to the mining operation. But with all this funding being put into mining farms and large-scale operations, investors in these ventures are beginning to wonder what’s to come of them in the event that they become obsolete in the crypto world or if interest in mining dies off more. Here are some of the alternatives.
Crypto Mining Alternatives
While the cryptocurrency markets are cooling down on GPU mining, there are still viable alternatives for all the hardware and infrastructure created in the industry. Looking back to the comments from Nvidia’s CFO, there’s another area that led strong growth throughout the year that aided in offsetting a decline in crypto-related GPU sales. According to the CFO commentary:
“GPU business revenue was $2.66 billion, up 40 percent from a year earlier and down 4 percent sequentially, led by record performance in Gaming, Professional Visualization, and Datacenter, offsetting a substantial decline in cryptocurrency GPUs.”
Professional visualization, video rendering, and developing AI are all areas of the tech economy that cryptocurrency farms can look to in the future. If investors are looking for a return on their investment, farm operators still have options. In fact, there are companies in the space already angling themselves for a significant shift in the coming years.
Marco Iodice is the co-founder of Leonardo Render, a blockchain-based startup working on incorporating much of the infrastructure already in place for mining to profit from large-scale, enterprise-level graphical rendering needs in the growing CGI industry. All of those mining farms can put their GPUs to work for them not mining, but as a means for graphical rendering. He sees the same thing that Nvidia saw in revenue as well and believes there are other solutions for miners, saying that:
“In 2017 we witnessed the ‘gold rush’ of GPUs with people gathering as much hardware as possible to grab some crypto, which caused the price of hardware to skyrocket along with the price of cryptocurrencies. Now that the market is down and there’s less interest in mining, many have hardware that is only worth half of the purchase value. So the best solution, in my opinion, is to keep the equipment so carefully collected and assembled and wait for a new way of using it, ideally more profitable and less volatile than crypto mining.”
Similarly, Tatau is another blockchain-based startup that’s focusing on using the infrastructure to fill other demands. Like Leonardo Render, Tatau is connecting those with computational power across the industry to put their machines to work not for mining, but for outsourcing jobs that require large amounts of computing power. In the case of Tatau, that’s being done for developing AI and the compute-intensive processes associated with it.
Regardless of what the future holds for the cryptocurrency markets, the current state is no longer supporting GPU mining at the scale that it once was. Because of that, investors need to start looking at alternate ways for these mining operations to be put to use. Significant investments were made to create the farms, now it’s up to business owners and investors to ensure the infrastructure is adaptable for the future of the crypto world.