On November 14, 2018, quantitative trading firm Susquehanna published a report on the state of the digital currency mining sector. More specifically, the report focused on the Ethereum network and its steep decline in profitability.
No Profitable GPU Mining on the Ethereum Network
According to the report, Susquehanna found that profits from participating as a miner on the Ethereum network have drastically decreased. Additionally, the trading house is predicting no profits for Ethereum miners who used GPUs to power their mining activities.
Susquehanna’s analysis concluded that at-home GPU mining for Ethereum’s ether (ETH) using GPUs (graphics processing units) is currently not profitable and that GPU miners cannot compete with their ASICS mining counterparts. Profits are done from $150 per month last summer to an estimated zero dollars for November.
Moreover, Ethereum’s hashrate has fallen to 236 terahashes a second. This is a new low and in comparison to its high of 297 TH/s, which it achieved in August, representíng a substantial 25 percent decline.
Chipmakers Also Affected
On November 15, 2018, American chipmaker NVIDIA published its periodic earnings report. The latest Q3 2018 earnings report revealed a drastic drop in chip sales. The technology company found that graphics processing units (GPU) sales were much less compared to the same period in last year’s cryptocurrency boom.
Towards the middle of 2018, in May, NVIDIA had intimated that sales derived from the digital currency sector constituted a somewhat significant portion of their revenue for the first quarter of 2017. Crypto miners accounted for 9 percent of the chipmaker’s profits for Q1 2017.
Thus, the latest findings represented in the Q3 report showcase a significant turning in the tide for the technology company in a relatively short time. NVIDIA revealed that it was holding inventory worth about $70 million after demand for units of the graphics cards continued to fall. Moreover, this somewhat affected the company’s gross margin, which also fell by 1.8 percent to 60.4 percent in Q3.
NVIDIA is not the only company feeling the burn. Taipei-based manufacturer Gigabyte Technology Co, Ltd has also revealed its pessimistic outlook for the cryptocurrency ming sector for the year 2018.
Gigabyte reduced its projected earnings for the latter half of 2018 following low demand and the resulting low sales. A report on Taipei Times on July 2, 2018, reiterated the company’s stance on the state of the digital mining industry, saying it was feeling the effect of the lack of demand bolstered by the fall in the value of many significant cryptocurrencies.
Through its parent company, Capital Investment Gigabyte stated:
“The prices of major cryptocurrencies have plunged after peaking in early 2018 leading to persistently lower demand for cryptocurrency mining and for Gigabyte graphics card shipments, which decreased somewhat since the beginning of the second quarter.”
The Taiwanese company posted profits of several hundred million dollars in 2017, but its revenues have been consistently dropping since March 2018. Gigabyte’s profit came to about NT$5 billion ($163.9 million) in April and May 2018, which when compared to March 2018’s NT$8.5 billion ($261 million), was a $100 million decrease.
The plummeting profits posted by the companies who create graphics cards represent a continuing decline, not just for the Ethereum network, but also in the number of individuals and other small-scale players participating in the cryptocurrency sector as miners.
Is At-Home GPU Mining Dying?
For a more detailed play-by-play of the state of the cryptocurrency sector as well as the declining mining profits, popular cryptocurrency Youtuber, Voskcoin provides further illumination.
On Sept 5th, 2018 Voskcoin explained that the 50 graphics cards contained in his mining rig were only earning him less than 10 dollars per day in September 2018. He stated that after paying electricity costs, his mining farm is “mining [him] the equivalent of a burrito and that’s with no guacamole.”
About a month later on Oct 12, Voskcoin updated his stand, taking a more decisive opinion against GPU mining as an individual home miner. Voskcoin asserted:
“GPU mining for the residential miner I don’t really think is viable anymore. In my October 2017 mining farm update, I was making one hundred and thirty-three dollars a day or five hundred and forty burritos per month just to continue that trend from last month in comparison with this month I’m not even mining twelve burritos a month.”
Following his somewhat revelation that he was no longer a GPU home miner, considering the entire channel is based on mining, Voskcoin questioned the viability of the cryptocurrency home mining business model in his latest video. On Nov 14, he proclaims that ASIC mining can still make good money, depending on the miner one possesses, whereas GPU mining is “kind of falling off.”
The state of affairs of at-home GPU mining raises major concerns about the health of the industry. It is important for cryptocurrency networks to be secured by a large network of participators to keep the networks decentralized.
When single players can acquire a large portion of the mining pool of a digital currency, such as Bitmain’s worrying 42 percent hashrate on the Bitcoin network, it can be dangerous because once the 51 percent mark is achieved, the single player acquires control of the network and this can have disastrous results.
Furthermore, the digital currency relies heavily on the philanthropic ideas of decentralization and financial sovereignty. Thus, if small-scale groups like individual home miners are unable to participate in the sector in this way, it is somewhat disappointing and a substantial departure from the original ethos of decentralized digital currencies.