One of the great debates for AMD and Nvidia (NVDA) over the last year or so is how much of the growth they’ve been seeing is due to growing demand among Ethereum miners. The concern is that such demand is not sustainable, but so far, Ethereum mining demand has been a boon for GPU makers, not only inflating prices but also making it difficult for some buyers to get their hands on new GPUs. This could change though as the developers of Ethereum push forward on “Proof of Stake” mining.
Bernstein analysts compiled a lengthy report on cryptocurrency-related demand for semiconductors. While bitcoin miners use ASIC-based hardware, Ethereum mining utilizes GPUs, often by AMD or Nvidia. Analysts who are bearish on the two chip makers have sounded the alarm repeatedly over crypto-related demand, warning that it isn’t sustainable, and Bernstein’s work quantifies just how much demand in this category might plunge this year.
The firm’s analysts estimate that demand for Ethereum mining GPUs could plunge as much as 30% year over year in 2018, and that assumes that both Ether prices and the margins currently enjoyed on the cryptocurrency hold steady. Of course, if Ether prices skyrocket even further, then demand for mining GPUs will likely soar even further as well.
According to Bernstein analysts, the area to watch is something called “Proof of Stake,” which the Ethereum development team is working on. At this point, the cryptocurrency operates on “Proof of Work,” which means that miners must “perform a significant amount of computation to compete to be the first to find a legitimate new block and receive Ether as rewards. “Proof of Stake,” however, runs counter to this.
Rather than extreme amounts of computational “work,” “Proof of Stake” involves selecting the creator of a new block “via various combinations of random selection and wealth.” This is what is meant by the word “stake,” rather than a competition among miners all trying to crunch volumes of numbers to find new Ether blocks.
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