How Bitcoin Mining is Affecting the Tech Industry

I was at a local PC parts shop the other day to find parts for a gaming rig I wanted to build. The cost of the Graphics Processing Unit (GPU) I wanted to buy had risen so much that I decided to buy a lower end GPU. This made me ponder if the price increase was due to the recent surge in the number of people mining Bitcoin and Altcoins. With that, let us begin.

Such backstory, so wow.

How Bitcoin and Most Altcoins are Mined

Before we discuss how it affects the tech industry, let us first discuss how they are related. In simple terms, "mining" is when users called as miners use hardware and specialized software to solve complex math problems that validate a bitcoin transaction. The more powerful the device they use, the faster they are able to solve those problems. The most common method of mining is by using GPU since they carry a ton of computational capabilities.

(rare image of a crypto miner at work)

How it Affects the Tech Industry

Now that we've discussed how mining is related to technology, let us discuss how it has impacted the tech industry:

a) Increased the prices of high-end GPUs

Here the price chart of low-mid ranged GPUs that are not commonly used in mining:

Charts are courtesy of pcpartpicker.com

The prices remain relatively stable despite the ever-present factor of inflation. Let us compare that with the 2 most commonly used GPUs for mining:

You can see a very significant price jump. The reason for this is fairly simple, price is determined by the ratio of demand and supply. The higher the demand and the lower the supply, the higher the price. In fact, the RX 580s and 570s are out of stock almost everywhere.

b) Forced tech companies to create mining specific technology

With the growing demand for powerful GPUs, tech companies are launching GPUs that are optimized to perform mining tasks. NVIDIA is launching Mining P106 while AMD is launching MINING RX 470.

c) Increase in the stock prices of tech companies

Charts are from tradingview.com

Stock prices of NVIDIA and AMD have risen significantly. On hindsight, this might seem like a good thing, higher stock prices means the companies have more money they can use to create better products. But let's fast forward months or years from now when the prices of cryptocurrencies eventually drop, cause what comes up must always come down.

When this happens and mining isn't as profitable as before, both miners and suppliers will be left with GPUs that they bought at inflated prices. These overpriced devices will be resold by the thousands. This influx will drive prices down to a more justifiable level. This, in turn, will have a negative effect on tech companies. This will not only reduce their stock prices but it will also lead to a decreased demand for their latest products. Think about it, who would buy new overpriced tech when they can buy old powerful tech at bargain prices.

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