Nvidia: Caught between two worlds

The graphics card manufacturer Nvidia has blossomed into the unexpected star of the crypto scene, which seems to be taking its core customers increasingly badly. Why the stock could be a good protection against the current correction.

Somewhere where the gaming and crypto scene intersects, Nvidia sits – wedged between tree and bark. The Californian graphics card manufacturer can’t really please anyone: crypto miners have been buying every available graphics card from the market for months, which drives prices into excess – the actual core customers get nothing. Attempts to convert the graphics cards against mining, sometimes on the software side, sometimes on the hardware side, also fail. Investors do not blame the company, however: The share price can celebrate one record after the other, and it seems unimpressed by the current miner crash.

When Nvidia presented the current RTX 30 series in September 2020, the gaming scene was very happy. They should be much cheaper, while significantly exceeding the performance of the previous 20 series – ray tracing and 8K gaming thanks to up to 24 gigabytes of VRAM and over 10,000 CUDA. And all of this for prices starting at 499 euros. For the players: inside it all sounded too good to be true. Meanwhile the scene knows: that was it too. Although the graphics cards actually do what they promise, their enormous performance at relatively low prices attracted a clientele that Nvidia had not hoped for: crypto miners. Once again, it must be said. Because it wasn’t just last fall that they had the idea of ​​misusing gaming graphics cards for calculating hash values. Thanks to the new generation of graphics cards, however, it’s worth it again. This knowledge got around in the crypto space, which in turn led to enormous demand while supply remained constant – exploding prices were the result. And so a large part of the currently most powerful graphics cards in the world eke out an existence in the mining rigs of (predominantly) ETH miners. A state that has brought Nvidia rising share prices for years. And still pissed off the company.

Nvidia: mining instead of gambling

Founded in 1993 by IT specialists Jen-Hsun Huang, Curtis Priem and Chris Malachowsky, the first few years in the company’s history were not crowned with great success. That has changed since 1999 at the latest, when the Californian company founded the most successful GPU series of all time with the GeForce 256 graphics card. Ten years before the first Satoshis see the light of day, hundreds of thousands of gamers are using this first GeForce graphics card to penetrate the sphere of (pixelated) virtual worlds – looking through tube screens into the first iterations of Deus Ex, Counter-Strike, The Sims and Hitman.

Also in 1999, the then six-year-old company entered the trading floor and was listed on the NASDAQ technology exchange – at a rate of 12 US dollars per share at the time. Thanks to cooperation with Sony, which equips its consoles with graphics chips from Nvidia, and a general boom in the gaming sector, the company sold its 100 millionth graphics chip in 2002. At that time nobody thought of possibilities outside the world of polygons. That should change in 2010 when Laszlo Hanyecz came up with a groundbreaking idea.

As an enthusiastic bitcoiner from the very beginning, Hanyecz wants to tease more mining power out of his home MacBook at a time when the crypto scene is limited to a manageable computer nerds who use their CPUs to mine the coins that were practically worthless at the time. He has the idea of ​​using the GPU instead of the CPU. In an interview with the American BTC Magazine he describes his thought process: “GPUs, what they’re good at is that they can do a lot of things in parallel, but they have to be very simple things and they have to be the same things.” With graphics chips you can “add 10 to 1,000 different numbers at the same time”, according to the IT specialist. Although regular CPUs are much more flexible, they can do a lot of different, even more complex, things, but they always have to be tackled one after the other. So he concluded that “the mining problem was perfect for GPUs”.

And he was right, because his 2010 MacBook, equipped with an Nvidia GeForce 320 chip, was actually able, thanks to its new code, to mine significantly more blocks in a shorter time with less energy consumption than was possible with CPUs: GPU- Mining was born. Although Hanyecz is now better known for having spent 10,000 BTC on two pizzas – and thus making the first purchase using BTC – his GPU brainstorm may have had a significantly greater impact on the crypto space.

GPU farming grabs gamers

The early crypto days are now numbered. If Hanyecz had kept his BTC, he would be a multi-billionaire today, and even a MacBook is nowhere near enough to profitably mine BTC. Much of the hashpower is now generated in gigantic mining farms in places around the world that have cheap electricity (and benevolent politics). In order to mine BTC at home, crypto enthusiasts have had to switch to other coins for years.

And this is where ETH – and, once again, Nvidia – comes in. At the current ETH rate of around 2,700 US dollars, a single GeForce RTX 3090 can generate more than 10 US dollars a day – including the electricity price. At a price of 1,399 US dollars (RRP), the purchase is worthwhile after 140 days (data: minerstat.com). The problem: The reputation of money has attracted so many miners that the graphics cards are practically always sold out on regular channels. In the case of middlemen, miners and gamblers often have to pay a multiple of the recommended retail price.

No wonder that this displeases the players. And although Nvidia has been writing course records for years thanks to the miners, the company proves that it does not lose sight of its core customers of gamers. The company tries again and again to provide its graphics cards with software and even hardware updates that should make it impossible to use them for mining. Because this approach has so far remained unsuccessful, Nvidia is now offering the Nvidia CMP chip series, which was specially developed for miners.

This means that more than ten years after Laszlo Hanyecz used them for GPU mining, the GeForce series graphics chips could ultimately belong to those for whom the Californian company once designed them: the gamers.