Mining company Hut 8 bought chips for cryptocurrency mining (CMP) from Nvidia for $ 30 million. Will private ETH miners get these cards and how much do they need them?
According to a press release from Hut 8, the mining company has decided to expand its activities beyond mining BTC and will be mining altcoins, primarily ETH. To do this, Hut 8 bought special CMP (Cryptocurrency Mining Processor) mining chips from Nvidia for $ 30 million. Other industrial miners may follow.
The delivery of cards based on these chips is scheduled for May 2021, and the full deployment at the company’s facilities will take place in the summer. Adding Nvidia CMP will increase Hut 8’s hashrate in Ethereum by about 1.6 TH / s (that’s just 0.3% of Ethereum’s current hashrate). CMPs will be used to mine ETH and other altcoins. In February, Nvidia CEO Colette Kress said she was forecasting $ 50 million in CMP sales during the first quarter of this year. Just one deal with Hut 8 will provide 60% of the sales target.
Last month, Nvidia said it would programmatically limit the hashrate of its RTX 3060 GPUs and launch CMP chips for miners. Thus, the company decided to deal with the shortage of video cards for gamers, which are bought by miners to extract cryptocurrencies. When developing the CMP, engineers optimized the chip for maximum mining efficiency. The voltage on the cores of the chip is reduced, as well as the frequencies, but the cooling is improved. The main feature of the cards is that they lack video outputs to reduce the cost of production.
In mid-March, it became known about the start of sales of cards from Palit on the Nvidia CMP 30HX chip, which appeared on sale from the Arab retailer Microless at a price of $ 724 apiece. The efficiency of this CMP for mining ETH is 26 Mh / s with a consumption of 125 watts. This is the youngest of the chips in the line – the hashrate of the CMP 40HX is declared at 36 Mh / s with a consumption of 185 watts. The older CMP 50HX and CMP 90HX will be on sale by the summer. Moreover, CMPs are based not on the latest Ampere architecture (3000th series), but on the previous Turing (2000th series). For example, CMP 30HX corresponds to a GeForce GTX 1660 Super gaming video card, and CMP 40HX corresponds to an RTX 2070. Thus, CMPs are inferior in terms of energy efficiency to the cards of the latest series, taking into account Nvidia’s not fully implemented threats to cut the hashrate of the latter.
What chips Hut 8 purchased is still unknown. But it is obvious that the mining company got them at a much lower price, since wholesale supplies directly from the manufacturer are much cheaper.
Do private miners need CMPs?
Given the large supply of Nvidia CMPs to industrial miners, we can expect a shortage of chips when selling at retail, and their prices may even exceed the cost of full-fledged gaming cards. However, given the current situation in the ETH mining market, such a shortage could be a boon for private miners. The scarcity will save them from buying cards that could become illiquid within a year, as the final transition to PoS is not so far off.
The first phase of Ethereum 2.0 – Beacon Chain was launched last December. The launch of the signal chain marks the beginning of Ethereum’s transition from proof of work (PoW) to proof of stake (PoS). According to the developers of Consensys, the last phase of the deployment of the full functionality of ETH 2.0 – phase 2, will be activated in 2021 or in the first half of 2022. But even before that, the Ethereum network will completely switch to PoS and ETH mining in the framework of PoW will become a thing of the past. After that, a lot of video cards will splash into the market, since other altcoins will not be able to absorb such a volume of capacity while maintaining an acceptable profitability. It turns out that Nvidia with its CMPs comes to the market ready to curl up, and their customers will have to run after the already departing train.
A similar story already happened at the end of 2018, when, after the fall in cryptocurrency rates, the profitability of mining barely exceeded the cost of electricity. Compared to the beginning of the year, all video cards have dropped in price several times, and selling specialized cards for mining without video outputs has become a problem even at a low price. Gamers buy video cards after mining with great care and ask for a discount, and they don’t need cards without video outputs. The same fate can await the CMP in a year. Will they have time to pay off if they are bought at retail at inflated prices?
After the end of mining in Ethereum, some of the miners will switch to mining other altcoins, however, so far the mining of no altcoin in terms of profitability can be compared with ETH, and new promising altcoins on PoW have almost ceased to appear. Large mining companies will be able to minimize losses due to large volumes and low purchase prices. However, when buying a CMP, private miners need to factor in the continuing increase in complexity and the near-zero cost of their liquidation.
The video cards purchased for $ 700 may not even pay off by the time Ethereum switches to PoS.
As this day approaches, the secondary market will be flooded with video cards sold by private miners. Given the lack of video outputs in CMP, miners are deprived of the main market for used video cards – gamers. It will be possible to resell them only to optimistic miners at a low price.
It is now difficult to hope that the final transition to PoS will be indefinitely postponed. Users, exchanges, and DeFi services, who are tired of high commissions, are interested in it. And Ethereum is “breathing in the back” by numerous competitors. Therefore, developers also have to speed up. Last week, Sigma Prime, the developer behind Ethereum’s Lighthouse client, announced the first “merge transaction” between Ethereum 1.x and Ethereum 2.0. In response to Lighthouse’s achievement, Reddit began discussing mining and its power consumption. The opinion is becoming popular that making a profit from staking is easier and more reliable than from mining.
According to Eth2 Launchpad, Ethereum 2.0 validators are currently earning 8.2% annualized revenue, and 3.6 million ETH has already been blocked for staking. However, as the day of the merger approaches and the number of validators grows, the income of each of them will fall and over time will decline to the planned 2% per annum.
