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GPU Revenue Signals Growth of Cryptocurrency Demand

Record sales by GPU manufactures, Nvidia and AMD, signals that consumer demand for cryptocurrency mining and thus cryptocurrency is continuing to increase.

Last week Nvidia posted first quarter revenue of $3.21 billion USD, of which $289 million USD, or 9% of total revenue, was attributed to cryptocurrency mining sales. AMD, Nvidia’s chief rival, also reported first quarter revenue of $1.65 billion USD, of which 10% were also cryptocurrency mining sales. Even more significant was the growth from the previous year, 145% from Q1 2017 for Nvidia and 40% from Q1 2017 for AMD. Nvidia’s CFO Colette Kress said that “cryptocurrency demand was again stronger than expected, but we were able to fulfill most of it with crypto-specific GPUs”.

However, both companies are moderating their forecasts for future growth. Nvidia expects the second quarter revenue to be a third of this past first quarter. AMD’s spokesperson said that they expect revenue from cryptocurrencies to be in the “mid-to-high single-digit percentage” for 2018 in total. The moderation comes from ever increasing hashrates and the increasing competition from ASIC companies such as Bitmain, which brought in nearly $4 billion USD last year.

Increasing hashrates due to increasing cryptocurrency demand

As cryptocurrency became more popular so did the demand and mining operations. As the demand growth outpaced the pre-coded supply growth of many cryptocurrencies, the price of cryptocurrencies increased due to supply and demand laws. The higher price due to the larger demand then caused higher prices for mining GPUs and eventually the development of ASIC miners and their inevitable price increases.

A common misconception is that the high prices of cryptocurrencies are derived from the hardware and electrical cost of mining said cryptocurrencies. However, this is false, and it is the opposite which is true; the significant price paid for hardware and electricity are derived from the prices of cryptocurrencies, which is derived from supply and demand laws. It is only the knowledge that mined cryptocurrencies can be sold on the market for a high price because of their high demand, that allows miners to justify the capital expenditures.

Throughout this whole process the increasing demand is increasing the hashrate of each cryptocurrency’s network. The larger hashrate increases the security of each blockchain since it becomes considerably harder to initiate a 51% attack. A virtuous circle forms since a higher hashrate grants more security and thus creates more demand among consumers looking for ways to secure their wealth.

Dash has exceptional hashrate power and thus security

Recently, the price of Dash has fallen along with most other cryptocurrencies, however, the overall hashrate of Dash has stayed within the 1.5-2.5 petahash range, even though Dash only broke through the 1 petahash threshold in November 2017. The hashrate is bolstered by the second layer masternodes, which play an important role in the Dash ecosystem. The Dash network is further supported by the fact that it is more profitable to mine Dash via ASICs and more-or-less not profitable via GPUs. Thus, ASIC miners comprise a significant portion of the Dash network hashing power. Since each ASIC miner is built to mine specific coins, this makes the switching cost larger and less likely that the Dash network will see sudden significant hashrate declines due to price drops.

The comparative strength of the Dash network that sets it apart from other coins is derived from its unique structure and incentives. The demand for Dash is increasing all over the world due to the hard work of Dash teams, many of which are funded by the Dash treasury system. The Dash masternode system ensures those with capital means have a vested interest in the growth and security of the network. In addition, Dash is able to clearly communicate its future growth plans and outlook clearly to all observers. The strong demand growth combined with well designed incentives and clear expectations communication is influencing miners to continue mining, despite price volatility, thus maintaining the hashrate and network security.

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