The Blockchain Bonanza

CRYPTOCURRENCIES have been big news for several months, with prices on many graphics cards shooting into the stratosphere—for a while, it was almost impossible to find AMD’s RX 570 or 580 at anything resembling a reasonable price. The cause: cryptocurrenc

This isn’t the first time we’ve seen GPU prices and availability affected by cryptocurrencies—in summer 2011, there was a rush to buy AMD’s HD 5870, and in late 2013/early 2014, the same thing happened with the R9 290/290X. It’s also unlikely to be the last we hear of GPU-based cryptocurrency mining, as both AMD and Nvidia CEOs have mentioned the influence of “coin miners” on the GPU market, and several partner companies have released dedicated mining cards (a GPU without video outputs).

However, where GPUs were once useful for mining Bitcoin directly, then used for other options such as Litecoin and Dogecoin, today the algorithms used by Bitcoin and Litecoin have transitioned to ASICs— Application Specific Integrated Circuits designed purely for blockchain related solutions. But that doesn’t mean graphics cards are out of the picture, as new algorithms have sprung up that are currently best run on GPUs. Two prominent examples are Ethereum and Zcash, the former of which is largely to blame for the shortage of AMD GPUs.

Ethereum isn’t new—it officially launched July 30, 2015. Like other cryptocurrencies, initial pricing was guesswork, with no one knowing if it would succeed. ETH prices remained below $10 during 2015, first breaking into double digits in March 2016, but that was nothing compared to what happened in 2017. First, there was a surge from single digits back into double digits in January, followed by record highs of up to $50 in March—then April and May happened, with ETH rocketing up to a high of around $400.

Suddenly everyone wanted in on the action, and in May a single RX 580 graphics card could earn over $5 per day from mining Ethereum—so it could pay for itself in under a month. Inventory disappeared, with prices hitting $600 and more on auction sites. Nvidia cards weren’t unscathed, as Zcash and other coins provided similarly insane returns, though the GTX 1080/1080 Ti mostly avoided going out of stock.

As the dust continues to settle, we’re still waiting for GPU prices to return to normal—“normal” being prices at or below the original MSRPs. AMD’s Radeon RX 570 4GB is nominally supposed to start at $170, and the RX 580 8GB at $240, but the last time we saw those prices was in April. Similarly, the GTX 1070 is supposed to start at $380, and in March/April we saw prices fall to $350, but combined with increased demand for GDDR5, we’ve witnessed higher graphics card prices on virtually all products.

The question many still have is whether GPU mining is worthwhile at these prices. The short answer: Probably not. The longer answer: It’s a gamble, but right now, on a daily basis, most cards generate more potential money (in digital currencies) than they use in power, making them profitable.

I ran some tests of currentgen cards, to see what returns are possible, using a cost of $0.10 per kWh. You can see the approximate time to break even for a complete mining rig above. This is only an estimate, however, as prices and the difficulty of mining remain volatile.

It could take more than twice as long as shown, and if hardware breaks, which is a possibility when running gaming GPUs at full load 24/7, you might never break even. But if you’re an optimist, even the current prices of over $300 for Ethereum and $4,400 for Bitcoin (at the time of writing) are undervalued.

That hope of striking it rich is why many continue to invest in PC hardware—and why it’s called “mining,” in reference to gold rushes. Don’t be surprised if, like the gold rush, the biggest winners are the companies that supply the hardware, rather than the miners. Jarred Walton has been a PC and gaming enthusiast for over 30 years.