![]() Note that the revenue impact doesn't only fall on Nvidia, but the timing of Nvidia's fiscal Q2 lined up better with the fall in Ethereum mining capacity and likely release of cards into the used card market. In my spreadsheet calculations, it was easy to calculate the used card effect simply by allowing the change in mining pool cards to go negative, with a negative net revenue for the cards: During the Fiscal Q2 conference call, Nvidia specifically claimed that this would be their normal average Gaming segment revenue without crypto. ![]() This turned out to account very well for Nvidia's fiscal Q2 results, if we assume that a normal quarterly revenue in Nvidia's Gaming segment is about $2.5 billion. ![]() If I assumed that these cards were comparable to current generation Nvidia and AMD ( AMD) cards, then it was reasonable to assume that every used card sold was a lost new card sale. This implied that a substantial number of graphics cards were being removed from the pool. However, starting in mid-May, the Ethereum mining pool hash rate, a measure of mining capacity, started to decline, as shown in the following chart from BitInfoCharts: It worked fine as long as the pool was still growing. The problem with the model was that it only accounted for sales into the Ethereum mining pool when the pool was adding capacity, i.e., adding new cards to the pool. I had published an article detailing the model in July. Probably, the vast majority of cards will go on the used card market and be sold on venues such as eBay.Ĭorrecting the Ethereum hash rate model to account for used graphics card salesįollowing Nvidia's revised guidance for its fiscal 2023 Q2, I realized that I needed to revise my model of Ethereum-related sales of graphics cards. This currency will continue to use proof-of-work, but it's unclear whether mining this will be profitable. Some miners may go to work on a "hard fork" of Ethereum, in effect, a secession of the currency into a new one called EthereumPOW. Ethereum claims this will reduce energy consumption by 99.95%. In the new proof-of-stake approach, the artificial difficulty is removed, so that hardware requirements can be met by almost any computer, ending the need for graphics card processing and the attendant energy consumption. But the encryption process was made artificially difficult, requiring millions of high end graphics cards in the mining pool to process a block in a reasonable period of time. Mining was really just transaction processing, in which a number of Ethereum transactions would be bundled into a block and encrypted. This is shown below in this diagram from the Ethereum Foundation : The transition of Ethereum to proof-of-stake was called the Merge because it involved combining the parallel block chain that was already using proof-of-stake experimentally with the main block chain that was using traditional mining, called proof-of-work. This will depress demand for new graphics cards just when Nvidia ( NASDAQ: NVDA ) is set to announce its next-generation GeForce 40 series.Įthereum completes its transition to proof-of-stake, ending lucrative and energy consuming "mining" The millions of high-end graphics cards that are used for this will no longer be needed for the new "proof-of-stake" approach, so that most of these will likely find their way into the used card market. The Ethereum Foundation, which manages the Ether cryptocurrency, has announced completion of what it calls the Merge, whereby validation of new blocks of transactions no longer takes place by "mining". Vzphotos/iStock Editorial via Getty Images
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