Ethereum

Seemingly out of nowhere, the PC component market is currently being rocked by cryptocurrency mining. The Tech Buyer's Guru has been closely tracking PC component prices for many years, and therefore has a pretty good handle on the ups and downs over the past decade or so. We've seen RAM prices rise, fall, and rise again (they're currently at their highest point in over a year) and we've seen SSD prices plummet and then skyrocket (again, at their highest point in a year). These fluctuations were the result of simple component supply and demand patterns, largely tracking the use of NAND in smartphones, although intense competition temporarily drove SSD prices down to artificially-low (and unsustatinable) levels in mid-2016. We saw hard drive prices skyrocket after a tsunami in 2011 wiped out manufacturing facilities in Asia. We've seen what happens when popular products like the Nvidia GeForce GTX 980 in 2014 and GeForce GTX 1080 in 2016 launched at surprisingly low prices (the prices go up as retailers seek extra profit). And of course, we saw what happened in late 2013 when AMD released its powerful Hawaii-based GPUs, the R9 290 and R9 290X, at fantastic prices, only to see them skyrocket as soon as bitcoin miners got a hold of them in December 2013.

But we've never, ever seen what we're currently seeing in the market, as a second wave of cryptocurrency mining has paralyzed world components markets. Bitcoin, introduced in 2009 and now worth over $2,500 (up from virtually nothing in 2013) has become synonymous with cryptocurrency generally, but it's far from the only "coin" out there. In fact, it's hard to make a fortune on Bitcoin today, but eager "investors" are looking to a newer coin, Ethereum, to make their fortune-filled dreams come true.

First, a quick primer on what cryptocurrency is: unlike typical currency, which is backed by the good faith and credit of a government (now that things like the gold standard have been set aside), cryptocurrency derives its value from the belief held by users of the coin that it should have value. At its core, digital coins are no different than any other coin. Why, for example, was gold ever used as currency? Because humans ascribed value to it, and critically, more value to it than other objects we might find, like quartz or wood. Considered in these terms, it shouldn't be all that surprising that citizens of the world are willing to embrace a digital currency, or multiple currencies, as we're seeing today. While 2,000 years ago, people may have traded in gold, silver, and copper, today we have US dollars, Euros, and other government-backed denominations, and then cryptocurrency, which is backed by the knowledge that each "coin" is entirely unique, identified by a key identified through a complex algorithm, and therefore the holder of that coin has something of value.

GTX 1070

And that brings us to the cryptocurrency tidal wave, and how it's impacting the PC component market. Cryptocurrency is "mined" using processors, which perform calculations to identify unique strings that will identify each individual coin. What's makes Ethereum different is that its founders designed it such that only a true PC could mine it, rather than dedicated ASIC machines held by the few. In other words, it represents the true democritization of money - we can all "mine" coins in our own homes, and need not rely on heavy machinery to dig up gold or government printing presses to release currency. And all it takes is a graphics processing unit, or GPU, which anyone can in theory buy, and many people already have. The trouble this time around is that Ethereum is so universally-minable that just about every GPU in the world has suddenly taken on additional value. Hence, every video card in the $200-$400 market has sold out, with profit-seekers reselling them on the second-hand market for twice their retail value. That means that anyone building a mainstream to high-end gaming PC today, for instance, is going to have to sit back and watch this all play out, because it's unlikely they'll be able to find or afford the video card that they might have purchased for their new PC a month ago.

And the tidal wave goes further than that: because serious miners will always want to maximize profits per machine, which have a baseline power use, it's best to load up a single system with as many GPUs as will fit, and that means ultra-high-end power supplies are selling out around the world. For example, the SilverStone Strider 1200W Platinum unit, which is the type of power supply coveted by miners, is sold out through mid-July at the earliest. And while lower-end GPUs tend to be more effective for mining due to their efficiency, miners have moved on from the low-cost Radeon RX 570 and RX 580, to the mid-priced GTX 1060 and GTX 1070, and are now plowing through stocks of the GTX 1080 and GTX 1080 Ti, expensive cards which are not well-suited to mining for various technical reasons.

In order to get a better handle on what this phenomenon is all about, TBG actually embarked on ethereum mining to learn more about how it works and whether it's actually profitable. Setting up a mining PC is a bit trickier than it needs to be, in part because no single guide on the Internet lays out everything you need to know, which we suspect is by design. In a sense, publishing articles about Ethereum mining will naturally get people more excited about it, which in turn drives prices up. But you don't want to lay all your cards on the table, because if you're in the "business" of mining, the fewer the miners there are, the more coins there are left for you to mine (Ethereum is designed to have a finite number of available coins). So much for democritization! With that being said, we did get up and running mining some Ethereum (or small fractions of Etherum, as no single computer can mine a whole coin, currently worth around $310, on its own). Almost immediately upon intiating our mining, the entire Ethereum backbone collapsed due to the weight of hundreds of thousands of miners busily mining away, causing massive backlogs and delayed payments. We haven't yet seen a single cent yet, but we've certainly burned through a good number of KWh on our potent Sapphire Radeon Fury Nitro mining (ahem, video) card in the hopes of scoring a few dollars!

So what is one to make of all these shenanigans? Are they truly improving the world by enabling anyone to create "wealth"? Interestingly, a natural result of the profit-to-cost ratio of mining is that miners in countries with very low energy prices can create more wealth than miners where energy costs are high, and this doesn't necessarily track with the largest economies of the world. In particular, users of cheap hydropower, much of which is in South America, are at a distinct advantage versus those relying on coal or nuclear power. Manufacturers of GPUs and power supplies are also seeing record sales, but the biggest profits are going to retailers that are increasing prices above MSRP, as well as second-hand sellers. And as our contact at SilverStone informed us, the massive sales levels we're currently seeing can cause havoc for manufacturer inventory, as a sudden collapse of the Ethereum market would leave manufacturers with an oversupply of expensive products, particularly if they choose to ramp up production to meet current mining demand.

As always, we'll be documenting the PC component market closely in our DIY PC Buyer's Guides, many of which have been thrown completely off their budget targets due to the limited inventory and high prices of GPUs, and to a certain extent power supplies as well. As a website dedicated to providing sound tech buying advice, we'd be remiss if we didn't at least mention that now probably is not the best time to buy a mid-range PC!