The traditional market of currencies sustain the value of each one of them in tangible goods, either gold in most countries or simply in their trade balance. But a few years ago, in 2009, the first crypto mining protocol called Bitcoin burst, and whose resulting currency has a value strictly based on supply and demand , without the backing of anything tangible.
These cryptocurrencies are generated by finding the solution of an equation imposed by the specific protocol – generally called cryptocurrency – and they are solved by brute force: trying solutions one after another until the correct one is found. They are protocols that benefit from the computing power of the GPUs (graphics processing unit) included in graphics cards . Each time a solution to the algorithm is found, a unit of cryptocurrency is generated, and in the case of Bitcoin, the currency is called bitcoin.
The price of bitcoin surpassed $ 5,000 in internet currency exchanges during the summer, but right now most bitcoin mining is done through specific chips called ASICs (Application Specific Integrated Circuits), and not with graphics cards. However, another cryptocurrency protocol became popular at the beginning of the year, Ethereum.
This protocol has a more complex division of the generated coins, but the main one is called ether or ether. Around March 2017, its price began to rise , with an acceleration in May and June that placed its change to around $ 400 per ether. The problem with this cryptocurrency is that special solutions cannot be used for the resolution of the algorithm because it has a strong dependence on memory, so once the ASICs were discarded, all the miners set their sights on the graphics cards in March and April.
Historically, the architecture of GPUs developed by AMD, one of two chip makers in the dedicated graphics industry, is superior in computing to competitive GPUs, Nvidia. Miners often create mining kits consisting of multiple graphics cards attached to the same motherboard using PCIe extenders, and motherboard manufacturers have been taking advantage of the Ethereum boom to release specific models for mining equipment.
With the price of ether rising, crypto miners raced to hog all available stock of graphics cards with AMD chips, so the Radeon RX 470, RX 480, RX 570 and RX 580 models literally flew off the shelves, causing a general stock-out in almost all stores around May. It even affected other competitors, such as the GeForce GTX 1060, cards all between 180 and 350 euros, but that even affected the price of more expensive ones such as the GTX 1070.
Those who have tried to switch PCs over the summer have been very disappointed to see the prices of mid-range graphics cards like the GTX 1060. Those who have tried to get hold of a RX 580, which has a power-to-price ratio – the price before it sold out — better than the GTX 1060, have had to buy a graphics card from Nvidia or wait for better times.
Difficulties and distributed systems
These cryptocurrency protocols are distributed, so that all the PCs that are mining – testing solutions for their algorithm – have all the information about what is happening on the network. Once a miner comes up with a solution to the algorithm, it will take time for the rest to give their go-ahead to validate that the resolution is legitimate. This distributed network also approves transactions between cryptocurrency wallets , which allows them to be exchanged between individuals.
One of the keys to crypto mining protocols is that as monetary units are extracted – solving the algorithm – the difficulty of extracting the following ones is modified. In addition, the protocol’s own network of equipment from time to time significantly increases the difficulty of extraction to prevent the value of the currency from being excessively degraded by an overabundance of monetary units. That leads to mining rigs losing a good percentage of their total computing power to Ethereum every three weeks.
Therefore, as time goes by, miners have to add more graphics cards to maintain the mining power of their equipment , and if it increases too much they can make the decision to resell the graphics cards and go out of business. A situation similar to the current one with Ethereum occurred in 2013 with Bitcoin and Litecoin – another popular cryptocurrency – when it could still be mined to an acceptable difficulty for graphics cards, and it also affected the availability of AMD graphics cards.
When the difficulty increases so much as to drive small investors who only use two to four graphics cards out of the mining business, the second-hand market fills with inexpensive graphics cards, in addition to that new miners stop arriving in the sector, for which lowers the demand for graphics cards. With the latest increase in difficulty of the Ethereum network, more and more RX 570 and 580 models have begun to arrive on second-hand websites such as eBay, and more will be arriving in September and October.
Demand normalization
AMD has been improving the production of its GPUs to meet the demand, and Nvidia’s graphics cards are priced that should be regularized shortly . The GTX 1060 with 3 and 6 GB of graphics memory have begun to be available in quantity, and at prices similar to those that were before May. Not all models of all graphics card builders, but a good chunk of them.
Also benefiting from more availability of mid-range graphics cards is the fact that China banned initial coin offerings (ICOs) on September 1. It is a way of financing new projects through cryptocurrencies, but that the Asian giant sometimes sees it involved in pyramid scams, among other problems it sees in ICOs. This prohibition has caused the prices of all cryptocurrencies to fall, and especially to the less relevant ones such as ether but also to bitcoin.
Therefore, the regularization of the prices of graphics cards is close. But you have to be careful, because this regularization may coincide with the Christmas season, in which those who have not changed their graphics cards during the summer could do so during the end of the year, perhaps also taking advantage of offers such as those on Black Friday. It will not impact the price as much as what has happened during the spring and summer, but you have to be clear to choose a good time to buy a graphics card at a reasonable price.
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