Is GPU Mining Dead?

Industry analysis of the ailing cryptocurrenty mining sector.

    • B2B, Finance
    • 07-11-2018

Recent quarterly sales figures released by AMD reveal a significant downward trend in GPU sales which has many commentators claiming that GPU crypto mining is in a death spiral. So what’s the truth?

ASIC Domination

There’s no doubt that mining with GPUs isn’t anywhere near as profitable as it once was.

ASIC hardware now dominates to such a degree that block-chain difficulty levels have sky-rocketed, while returns squeezed from GPUs have slipped between the basement floorboards.

The major problem for home-based GPU miners is that the big manufacturers keep producing ASICs for an ever-increasing number of crypto currencies.

Understandably, the fear is that ASICs will eventually muscle small-scale miners out of the game completely. Some even contend that it’s happened already. But all hope is not lost…yet.

Scenario Apocalypto

The increasingly centralized nature of ASIC manufacturing is the cause of a great deal of consternation within the crypto mining sector.

One of the main concerns relates to the dreaded 51% attack; an end-of-days type scenario in which a miner, a group of miners, or dominant ASIC manufacturer controls the majority of a network’s hash-rate.

This kind of paranoia abounds when it comes to ASIC hardware. Many believe that companies like Bitmain might ‘backdoor’ their own hardware (take them over remotely), using them to seize majority control of a network’s hashing power and then perform dastardly deeds such as reversing transactions and double spending coins.

Quite why any company would want to instigate such an attack, thereby sacrificing its only revenue stream, while undermining its entire business operation in the process, clearly hasn’t been properly thought out.

But it’s a potential scenario that has got people worried. And it isn’t just those sporting tin-foil hats either because 51% attacks have already been attempted, albeit without success.

To guard against these insidious incursions and to further the ideals of decentralisation, creators of emerging crypto currencies are often proud to proclaim that their particular mintage is ‘ASIC-resistant’.

Efforts to create ‘ASIC-resistant’ crypto currencies are rooted in the egalitarian ideals of decentralization, in which consumer-grade GPUs and even CPUs remain the legitimate mining tools of choice.

Some contend that ASIC-resistance is merely a term to describe a crypto currency that cannot YET be mined by ASIC hardware. Defeatist? Maybe.

But currencies such as Bitcoin Gold and Scrypt were both designed to resist ASICS and eventually succumbed. Despite the naysayers, there remain plenty of idealists who believe that full ASIC-resistance is an attainable goal, and that GPU mining can still be relevant for the foreseeable future.

The MTP Optimists

In June, the people at ZCoin announced the introduction of a new algorithm that blocked the use of ASICs. Called the Merkle Tree Proof (MTP), it was launched in response to repeated attacks on the ZCoin network.

MTP is a proof-of-work algorithm developed by Alex Biryukov and Dmitry Kovratovich of Equihash fame. Its proponents are convinced that it will encourage more egalitarian (that word again) mining processes, by establishing the same price/cost for a single computation unit on all platforms.

This means that no single device can gain an advantage over another. In theory then, GPU mining could benefit. As ZCoin’s, Reuben Yap stated in a recent article:

“ASIC resistance is akin to an arms race, a battle between algorithm designers and ASIC designers. MTP is a Proof of Work (PoW) algorithm which fights cryptocurrency mining centralization that results from ASICs…”

He added.

“An ASIC resistant Proof of Work algorithm (such as MTP) means that the advantage that an ASIC usually gains over widely available commodity hardware, such as CPUs and GPUs, is limited. (It also) discourages ASIC developments, allowing those with…GPUs and CPUs to mine coins on a more or less even playing field.”

Music to the ears of GPU miners the world-over? Time will tell. However, there’s another Anti-ASIC measure which can help to level the playing field. It’s called the hard-fork.

The Hard Fork

Crypto-phraseology is replete with kooky, dramatic and occasionally moronic terms that describe either mining equipment or previously obscure processes that have suddenly gone mainstream – and so it goes with hard-forks.

Yes, hard-forks. There are also soft forks but we won’t go into that here.

A hard-fork is basically a significant change made to a cryptocurrency’s blockchain protocol, rendering previously blocks/transactions valid or invalid.

It requires all miners to either upgrade to the new protocol or to carry on with the existing one, hence the term ‘fork’.

Hard forks are unleashed for a number of reasons including security upgrades, to improve functionality and to, uh, ‘brick out’ ASIC miners. The most recent ASIC forking was performed by SiaCoin with the express intention of blocking Bitmain’s ASIC miners on their network.

By ‘Bricking out’ Bitmain ASICs while protecting their own, SiaCoin’s rather discerning gambit illustrated one of the major flaws with ASIC miners – they’re not terribly versatile.

While there’s certainly no disputing their processing power, ASICs are designed to work on one algorithm. Conversely, GPU miners can be used to mine a wide range of cryptocurrencies.

It follows then that crypto-creators have some hope in their not yet forlorn quest for equitability. It also means that GPU mining is still an option.

We Need to Talk About Bitmain

As illustrated by Siacon’s hard-fork and the MTP initiative, numerous movers and shakers within the sector view companies like Bitmain as they would a maladjusted tiger: with suspicion and fear.

There’s no doubt that a lot of these Chinese manufacturers have serious public image problems.

Much of this is because of their domination of the sector, which runs counter to the very tenets upon which blockchain technology was developed.

Although their aggressive tactics guarantee profits in the short to medium term, they also play directly into the hands of decentralization zealots.

They ensure that the likes of Rueben Yap, Alex Biryukov and Dmitry Kovratovich will continue their struggles to find new ways of keeping low to medium-budget players in the game.

And that has to be good news for GPU miners.

So, is GPU Mining Dead?

The answer, plain and simple, is no. There’s no disputing the current domination of ASIC miners. But it’s not as if GPU development is static.

NVIDIA continues to make serious strides within the industry. Then you’ve got Acorn’s mining accelerator card which is slated for release in the very near future.

What’s more, talk of GPU mining profitability invariably focuses on Bitcoin and other major currencies – but what about alt-coins? Finger-wagging kill-joys will say, ‘ah yes, but what’s the point in mining for coins which don’t provide an immediate return?’

The answer depends entirely on your budget, strategy and outlook. Plenty of miners are speculators at heart, willing to put time and effort into mining for alt-coins that won’t offer an immediate return on their investment.

Given the increasing prevalence of position trading (buy and hold) tactics in crypto-land, this seems like a fairly reasonable strategy – provided you’re in a financial position to do so of course.

The volatility of the crypto market as well as the crypto mining sector also means that it’s too early to throw in the towel just yet.