Will Proof Of Stake Mean The End Of The GPU Shortage And A GPU Price Drop?

Proof Of Stake is a new method of cryptocurrency authentication which could assist in bringing an end to the GPU shortage and help usher in a GPU price drop. Ethereum will be the first major cryptocurrency to adopt Proof Of Stake (or POS for short), and we may see further take-up of the technology in the future by other coins. Read below to find out more!

Why Has Crypto Mining Led To A GPU Shortage?

Up until now, the whole international cryptocurrency market has been based upon a form of authentication called Proof Of Work: this is what enables each transaction to take place in a decentralized way, without the need for a third-party organization to verify it and charge a fee to do so.

Every person in the world with an active crypto mining rig connected to the internet is constantly engaged in computations that decrypt the hash functions associated with each transaction, verifying the blockchain and allowing the transaction to take place whilst also keeping it secure.

Unfortunately, such computations require a large amount of processing power, and GPUs are particularly well-suited for this. Hence, as knowledge of crypto mining and the money that can be made from it has spread, particularly as cryptocurrencies have hit record valuations, demand for mining-ready graphics cards has skyrocketed. Supply has struggled to meet demand, particularly with COVID impacting supply chains, so for the humble gamer uninterested in crypto mining, finding a graphics card to purchase has been a difficult task. With miners willing to pay a premium for GPUs to power their lucrative enterprises (in those countries where electricity is cheap at least, like China) the market prices for graphics cards have risen dramatically.

Proof Of Work vs Proof Of Stake

The downsides of Proof Of Work crypto mining have been well-publicized – the energy drain of Bitcoin mining alone over one year uses more energy than the entirety of Argentina in the same period, and the negative environmental consequences of this are a big drawback for the widespread adoption of crypto.

A new method of authentication however, which does not rely upon mining, is soon to be introduced for Ethereum. Proof Of Stake relies on utilizing the network of existing Ethereum owners to decrypt the block for each transaction – the more coins a person owns the more mining power will be attributed to them. Although the mechanics of how this works are somewhat complex, the end result is that the whole decryption process is much more energy-efficient. In fact it is estimated that on the Proof Of Stake system, Ethereum will become approximately 2000 times more energy efficient (seeing a power reduction of around 99.95%). Far far fewer miners will be needed for Proof Of Stake to work and therefore far fewer graphics cards.

Will Proof Of Stake Lead To GPU Price Drops?

There is little doubt that the adoption of Proof Of Stake by Ethereum will lead to downward demand for graphics cards and therefore a drop in GPU prices, at least initially, the question is how by how much and for how long?

As Ethereum is the second biggest cryptocurrency in the world, and the second most popular for mining, after Bitcoin of course, there must be an impact when POS is rolled out. For it to be a lasting impact however depends on whether it is adopted by other coins. It is uncertain whether or not Bitcoin will follow suit – there are skeptics who believe POS to be less secure than POW, and that it essentially undermines one of the biggest plus points of blockchain. Additionally, for the great many altcoins starting out aiming to be the next big cryptocurrency, POS is simply not an option as it is predicated on there being a great number of people already holding a great number of coins to work – a coin will first have to get sufficiently popular for this to be the case.

As there are always new coins cropping up, it seems likely that many miners will just shift to these ones and continue using the POW mining method – so continuing to need more GPUs and keeping demand high.

Nevertheless, there are various other factors that are currently putting downward pressure on GPU prices, so whether or not Proof Of Stake turns out to be the silver bullet to end the GPU shortage, there are reasons for us gamers to be optimistic!