Mark’s presentation at Mining Disrupt Live
GPU Mining Is Here To Stay – video transcript
Good morning, I’m Mark from Bitpro. I’d like to spend some time talking about GPU mining and where it fits in in the broader context of the mining industry.
Like many of you here, mining was my gateway drug into crypto. I started out as a hobbyist in 2014, and by 2017 as crypto and mining exploded, Bitpro was a full time business building and managing mining farms.
And then 2018 happened. New builds ground to a halt, and mining farms big and small started shutting down. As the need for services to build mining farms dried up, we saw the need for assistance in converting this valuable hardware into liquid capital. Since then we’ve helped hundreds of miners big and small gracefully exit GPU mining or turn over their aging hardware, and we will continue to work servicing the GPU mining sector for as long as it exists.
And a lot of people would have you believe that in the near future that GPU mining will no longer exist – we couldn’t disagree more with this, and that’s what I’d like to talk about today.
I am an unashamed supporter of Proof of work, and I always will be.
I do not believe Proof of stake is an adequate replacement for Proof of work.
Bitcoin is the king of Proof of work, but Ethereum is entrenched at this point as the BTC alternative, and Ethereum mining remains dominated by GPUs.
But for miners, the elephant in the room is the long-awaited transition to Proof of stake, which will supposedly kill Proof of work on Ethereum for good. Or so everyone says. I don’t believe things will actually work out that way.
So why is that?
- As a crypto, Ethereum’s success must depend on it being legitimately decentralized. Because if it’s not, as a currency it’s just another fiat and a bad one at that.
- And as a platform it’s just a slow, expensive alternative to a token platform on AWS.
So in the long run, it’s either decentralized….or its dead.
For it to be reasonably considered decentralized, by definition it would have to prove that no one faction has total control or has the proof of worker to completely eliminate other stakeholders – miners.
Proof of stake is now years overdue, and it is reasonable to assume that the current roadmap will take 2-3x longer than expected.
Where does this leave miners?
The current roadmap taken at face value leaves several years of fruitful mining, and many more if it continues to be delayed.
The longer Proof of stake takes, the more decentralized Ethereum will become, and the more likely that we end up with a hybrid system where Proof of work never goes away.
So I believe a hybrid system is the most likely future. Why? Proof of stake is an extremely risky transition.
The most prevalent application on Ethereum is DeFi, which does not require the throughput of Proof of stake. Finance is by its nature a conservative business. Proof of work has proven reliability and DeFi is going to cautiously side with Proof of work until proof of stake has years of proven reliability.
From a miner’s standpoint, it’s an existential threat. Corporations like Nvidia and large GPU miners are not going to be complicit in their own destruction and walk away from an extremely valuable market. As this existential threat becomes a more clear and present danger, the knives will come out and things will get contentious – we already saw a foreshadowing of this with the ProgPoW debates. That was nothing compared to what is coming.
From an investors standpoint – they’re just in it for the money. All things being equal, they’d prefer more scarcity. But the only real cost to Proof of work is a small inflation from newly minted Ethereum. The current inflation is less than five percent a year, which is less than the typical daily volatility of Ether. In other words, the actual cost for miners is just noise in the graph.
Developers believe their new toy will work, and it very well might. But there are likely to be a few voices of reason suggesting not to throw out the old system entirely.
So because there will be resistance from multiple stakeholders, a high likelihood of conflict if its pushed forward and the actual cost to the system is low – if the system is meaningfully decentralized enough to succeed anyway, abandonment of Proof of work is unlikely.
So if Proof of work isn’t going anywhere, why should a miner choose GPUs over ASICs?
This is a topic all of its own, but in a nutshell:
- ETHash has proven to be extremely ASIC resistant. If it was possible to produce an ASIC that makes GPUs obsolete, we would have seen it by now, just like we have with every other coin.
- GPUs have alternative sources of income such as machine learning that are proliferating, and likely to continue proliferating in the future.
- Even in the worst-case scenario – as general-purpose hardware, its residual value is relative to demand from multiple sources.
So if Ethereum mining is probably safe long term – where does this head in the short term?
Ethereum will remain the only meaningful Proof of work for large GPU miners. No other coin can support industrial-scale miners. Alternatives like ravencoin output a small fraction of the revenue that Ethereum does. These coins cant support the scale of the current GPU mining industry on their own.
That being said, certain classes of hardware are in near term danger.
The 4GB DAG will completely take E3s and 4GB GPU offline by EOY. It is difficult to measure the impact accurately, but this will take 30-60% of the current hashrate offline.
This will be a massive boon to everyone else.
And there’s no nice way to say it, but 4GB ASICs will become worthless.
Now 4GB GPUs can in theory mine other coins, but there isn’t really a viable business model for any large miner to continue mining with 4GB cards – too many cards are fighting over too small a pie. We’ve spoken with a lot of miners and this seems to be everyone’s plan A – and I do not expect this to work out well for anyone. 0You’re all going to drive each other into the ground fighting over table scraps from RVN. And once miners realize this, the market price for 4GB GPUs will crash from a glut of supply. So smart miners will want to get ahead of this.
The good news is that there’s still a few months left before the rug gets pulled out from under 4GB hardware. But a critical distinction is that there will be no demand from other miners, because they can’t use 4GB cards either.
So this is a major challenge, and that’s where Bitpro comes in.
We specialize in large scale GPU mining liquidation.
We are far and away the #1 retailer of used GPU hardware – almost by an order of magnitude. Anyone who bought a used GPU in the past 2 years was roughly ten times more likely to have bought it from us than anyone else. Almost all of our hardware is sourced from GPU miners.
We are the channel that makes it viable to realistically factor in the resale value of GPUs into your ROI equation.
A major point of distinction – we are NOT brokers or middlemen.
We provide end to end service with minimal risk.
For large transactions, we will come on-site, disassemble and pack the hardware for transport, and pay in full on the spot.
No more playing telephone through brokers to flaky buyers and sellers, no more escrow headaches and above all, no need to even contemplate the nightmare of dealing with thousands of eCommerce consumers in order to get a decent price.
Our wholesale prices are fair and derived from long term supply and demand in the broader retail market, not the narrow and volatile mining market.
We are highly unselective – we will purchase older hardware, obsolete hardware, even damaged hardware. For example, if you’ve got lots of GPU with dead fans, that’s no problem for us. We are interested not only in purchasing the GPUs but all of the associated equipment such as MBs, CPUs, RAM, PSUs – pretty much anything.
For miners who are staying in the GPU mining business, we can also be a source of high-quality, inexpensive pre-owned hardware – and it can be acquired in direct trade for your older, obsolete hardware
In conclusion:
Regardless of what the roadmaps or Vitalik himself says – we believe Ethereum and GPU mining is here to stay.
GPUs provide a lower-risk alternative to ASICs as they retain their value even in the worst case scenario for mining.
And Bitpro is the solution that makes including that resale value in your ROI equation viable at scale.
We look forward to hearing from anyone with GPU hardware that you’re looking to sell or turn over. Connect with us here at mining disrupt, or find us at bitproit.com or just google Bitpro – we’re not hard to find. Thank you for your time.