WSJ - The Computer Part People Are Hoarding - Feb 9 2018

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WSJ - The Computer Part People Are Hoarding - Feb 9 2018

Postby tcphillips » Fri Feb 09, 2018 5:34 pm

The Computer Part People Are Hoarding: ‘I Felt Like I Was Buying Drugs’

The race to create cryptocurrencies is driving up cost of one specific type of hardware that’s also prized by PC gamers
Gamers are facing competition for computer-graphics cards.

By Sarah E. Needleman
Feb. 9, 2018 12:04 p.m. ET

Three months into a seemingly futile search, James Liska finally spotted a reasonably priced computer-graphics card online. By the time he clicked “buy,” it was gone.
He blames those cryptocurrency enthusiasts.

“This has been far more frustrating than I ever imagined,” said the 30-year-old videogame player who lives in Washington, D.C. He wanted the card for a computer he is building. He recently saw a card that normally sells for $800 offered for resale at $2,000.

Graphics cards, usually a plentiful and ordinary PC commodity, produce the kind of rich visuals gamers love. Now there’s a new kind of buyer: People who need them to run software capable of creating virtual currencies—an act known as “mining.” That’s giving gamers a different kind of competition.

Sarah Kaiser was looking to build a new PC, a skill she learned from her mother, but couldn’t find a card.

“Miners have made what was once a fun hobby into hell,” the 28-year-old said.

Her six-month quest turned up a tip: A computer-parts store near her Somerville, Mass., home would sell one of its exorbitantly priced cards for the manufacturer-recommended cost—only if the customer also bought other supplies that typically go into assembling a new gaming PC. Miners stand out because they usually try to buy more than one card at a time.

“I felt pretty lucky,” said Ms. Kaiser, who plunked down around $1,500 for a bundle of items, including the card she wanted for $600.

While most people buy computers off the shelf, some, especially gamers, build PCs from scratch, customizing them to their liking. Videogames today are so detailed and fast that players need top-notch graphics capabilities, so the cards are key.

Then people got into “mining”—which in many cases just so happens to require running software on a PC with high-end graphics capabilities. While gamers can get by with one card, miners prefer several, 5 or 6 per computer. All of a sudden, the market started getting low on cards.

The rapid rise in the value of bitcoin—it reached nearly $20,000 in December and gained about 2,000% for 2017, before coming back to earth this year—inspired people not only to invest in virtual currencies but also “mine” them. Since generating bitcoin requires more computing might than PCs can manage, less-demanding kinds of virtual currency, such as one called ether, have started catching on.

As of Friday morning, bitcoin had a total market value of $143 billion, according to the research firm CoinDesk Inc., while ether had a value of $81.67 billion.

Lately, people mining ether and other cryptocurrencies have hunted graphics cards nearly to retailing extinction.
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Tom Nguyen lost count of how many graphics cards he has bought over the past year for mining. The 27-year-old, who lives near Hartford, Conn., said he made multiple hourslong treks to electronics stores in New York and Boston, and scoured the web to score his bounty.

“I’m not doing anything wrong,” said Mr. Nguyen, who said he took flak from gamers and miners alike over photos he posted on social media showing off his haul. “I’m using my electricity, my time and my effort to allow the cryptocurrency world to thrive.”

Laura Augustine hit pause on her IT consulting business to mine ether as a stay-at-home mom. The Nanaimo, British Columbia, resident said she spent $20,000 to soup up five PCs with six high-end cards each. “They’re like turkeys modified to be all breast,” she said. “I call them my GMO PCs.”
Laura Augustine calls herself ‘Mining Mom.’

Ms. Augustine said she has been teaching other stay-at-home moms to mine and would build a sixth PC—if she could find more graphics cards. Her supplier stopped returning her calls.

Miners are facing other shopping hurdles. When Eiron Roffey called a local electronics store in Calgary, Alberta, looking for a card, the employee who answered demanded to know why. Stunned, Mr. Roffey professed his love of “World of Warcraft,” a longtime favorite of PC gamers.

“Obviously, I lied,” the 36-year-old finance professional said. “I felt like I was buying drugs.”

For many buyers, graphics cards can only be found on sites such as Amazon and eBay, where sellers charge double or more than the usual $300 to $800 retail price.Advanced Micro Devices Inc.’s Radeon RX Vega 64 went on sale in August for $599. Last quarter, its average retail price shot up to $1,200, according to Jon Peddie Research.

Sterling Henderson is now on his third month hunting for an affordable card. He thinks miners will get what’s coming to them.

“I see the bubble burst being right around the corner,” said the 28-year-old gamer from Brookville, Ohio. “When one person buys 10 graphics cards, they know what they’re doing to gamers.”

On AMD’s quarterly conference call, Chief Executive Lisa Su said cryptocurrency-related sales made up a third of sequential growth in its computing and graphics division, or $46 million. Nvidia Corp. said on an earnings call with analysts Thursday that strong demand in the cryptocurrency market contributed to record low inventory for its graphics cards.

Stores worry, though, miners might not stick around as customers forever.

“Our bread and butter is the gaming segment,” said Raymond McEachern, a corporate sales associate for Memory Express, the store Mr. Roffey called. “We can’t let miners come in and buy all our stock.”

Some gamers have gone over to the dark side. Justin and Tiffany Kelly took up mining after learning they could be making money when not playing games such as “StarCraft” and “PlayerUnknown’s Battlegrounds.”

They bought 46 graphic cards at once from an online retailer about five months ago, right before prices shot up. Each cost $529 and now go for around $1,300 a pop. The computers drew on so much power, the couple hired an electrician to rewire the house.

They have pulled in between $5,000 and $7,000 a month from mining, just enough to pay for the initial investment in cards, though electricity bills are about an extra $700 monthly, said Mr. Kelly, a welder and mechanic.

Mr. Kelly, 28, thinks gamers shouldn’t begrudge the cryptocurrency enthusiasts. “Instead of hating,” he said, “gamers should join them.”

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Re: WSJ - The Computer Part People Are Hoarding - Feb 9 2018

Postby v00d00 » Sun Feb 11, 2018 9:37 pm

tcphillips wrote:They bought 46 graphic cards at once from an online retailer about five months ago, right before prices shot up. Each cost $529 and now go for around $1,300 a pop. The computers drew on so much power, the couple hired an electrician to rewire the house.

Thats when you know you have a problem. When you have to hire an electrician to rewire your house. Or you bought 46 graphics cards in pursuit of something that nowadays is closer to a pipedream.

Its a little late to be jumping on the mining bandwagon. if you were mining four years ago, then you probably made enough to make it worthwhile nowadays, but people who mine now, forget about it. But each to their own regarding hobbies.

But if you buy 46 graphics cards, or need rewiring, you should maybe look to a therapist. Also look into alternative power generation and streamlining your mining setup in regards power usage to amount of coin produced. At some point governments will actively target miners and this might include higher electricity charges and taxes for people undertaking such tasks.
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Re: WSJ - The Computer Part People Are Hoarding - Feb 9 2018

Postby kiore » Mon Feb 12, 2018 1:12 am

I had an upgrade to a GTX 1080ti planned as a xmas present to myself and watched in alarm as prices went up and up to over double the October price, and even cards that were earlier models were listed at prices higher than their release price. I managed to get one in January at the October price directly from the manufacturer by being on a wait list on my 4th attempt. Already those extreme prices are sliding back down and it may be that resale sites will soon be flooded with 'barely used' ex mining GPUs. Yes I know 5-6 years ago I could have mined pretty easily what in January would have been a small fortune, but know I would have cashed in way back anyway, a bit like if I had only known what the lottery numbers were before they were drawn kind of thing.

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Re: WSJ - The Computer Part People Are Hoarding - Feb 9 2018

Postby rwh202 » Mon Feb 12, 2018 7:38 am

v00d00 wrote:Thats when you know you have a problem. When you have to hire an electrician to rewire your house. Or you bought 46 graphics cards in pursuit of something that nowadays is closer to a pipedream.

Yeah, my electrician had trouble understanding why I wanted a separate 30A supply in the study...

Seeing as folding has been the most profitable use for Nvidia GPU the last year or so, the project's not done too bad out of the bubble. Even when it bursts, there should be a glut of cheap GPUs for the 'regular' folders to snap up.
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Re: WSJ - The Computer Part People Are Hoarding - Feb 9 2018

Postby tcphillips » Tue Feb 13, 2018 12:18 pm

My experience was a lot like kiore's. I said to myself, "Self, it's time to upgrade to a 1080ti and consign one of the older cards to Einstein@Home or MilkyWay@Home." Then I started shopping and saw that the prices were stratospheric. Couldn't figure it out. A little research, and this WSJ article came out. I'm sitting tight for the moment. Let's just say I got the wind knocked out of me.

I considered mining at one point a couple years back, but made the conscious decision to continue with F@H.
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Re: WSJ - The Computer Part People Are Hoarding - Feb 9 2018

Postby foldy » Tue Feb 13, 2018 2:48 pm

The NVidia prices are also high because the high demand cannot be satisfied because NVidia is already switching production to the next gen gtx 2080. So if you wait till summer then you can get a cheaper used gtx 1080ti or cheaper new gtx 2080 with same performance.
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Re: WSJ - The Computer Part People Are Hoarding - Feb 9 2018

Postby toTOW » Thu Feb 15, 2018 10:43 pm

The lack of competition from AMD doesn't help to get the NV prices down too ... :(
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Re: WSJ - The Computer Part People Are Hoarding - Feb 9 2018

Postby csvanefalk » Sun Feb 18, 2018 8:51 am

On the flipside, the market is very soon going to flood with cheap, used high-end GPUs as the crypto mining craze rapidly comes to a halt.
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WSJ - 2018 2 21 - The Rise of Bitcoin Factories:

Postby tcphillips » Wed Feb 21, 2018 12:59 pm

Remarkable phenomenon...and again I now know why the prices of video cards are through the roof...
Re: Hosting services - back during the California gold rush, the only guy making money was the guy selling shovels to the miners (so to speak.)

WSJ - 2018 2 21 -- The Rise of Bitcoin Factories: Mining for the Masses
As more people jump into bitcoin mining, companies like Bcause look to provide the infrastructure, security and electricity

By Stephanie Yang | Photographs by Parker Michels-Boyce for The Wall Street Journal
Feb. 21, 2018 5:30 a.m. ET

Michael Poteat, an engineering student at Old Dominion University in Norfolk, Va., decided to start mining bitcoin four months ago.
Using some of his bitcoin holdings, he purchased 20 “mining rigs,” computing boxes that solve complex equations to generate new coins.
But while running one rig, he kept tripping the circuit breaker in his home. So the 20-year-old looked into leasing commercial space but struggled to find a large-enough place without neighbors who would mind the noise.
As the dramatic surge in bitcoin’s price lures both individuals and corporations to try their hand at mining cryptocurrencies, many people are facing similar problems to Mr. Poteat. That’s giving rise to “hosting” or “colocation” services that make mining easier for the masses by providing ready infrastructure, security and electricity.

In February, Mr. Poteat moved his equipment into a data center run by Bcause , a five-year-old company that is laying out plans to build the largest bitcoin mining operation in North America.
Workers help unload mining rigs dropped off by Michael Poteat (left) at the Bcause facility on Feb. 2. Bcause is aiming to build the largest bitcoin-mining operation in North America.

“It’s just difficult as an individual to handle all the logistics,” Mr. Poteat said.

Bitcoin mining can be expensive and cumbersome, requiring specialized hardware and massive amounts of power. Such challenges have long prompted miners to share space and resources. Now, companies that harbor mining equipment are fielding more requests than ever.

Even as bitcoin prices have tumbled about 40% from a December peak, the amount of computing effort expended by miners, also known as the hash rate, has continued climbing. That likely indicates more miners are jumping into the network, according to market observers.
Bitcoin's hash rate measures the computing effort expended to mine new coins. (Ed - 2 14 2018 hash rates reached 27.579 million tera-hashes/second -- TCP)

Miners are rewarded with new coins and transaction fees for performing the calculations that make the bitcoin network tick. The more valuable a bitcoin is, the greater the incentive to start mining. But the more miners who participate, the more computations are needed to earn rewards.

Bcause is one of the firms that have sprung up to cater to aspiring bitcoin miners. In an old beverage warehouse in Virginia, the startup is running thousands of rigs for clients from the U.S. to Asia. It has received $5 million in Series A funding, led by Japanese financial services firm SBI Holdings Inc., and plans to raise more.

Bcause has contracts with wholesale clients to house about 60,000 mining rigs, and will serve retail clients by renting out spare machines, a process known as “cloud mining.” It has about 5,000 machines up and running and plans to outfit another site in eastern Pennsylvania.

The company was initially founded to provide bitcoin options contracts for investors trying to hedge their cryptocurrency investments. But the team decided to incorporate hosting services last year as bitcoin surged and mining became profitable again.

“The demand is overwhelming,” said Fred Grede, chief executive officer of Bcause and a former executive at the Hong Kong Exchange and Chicago Board of Trade. “That’s where the revenue is.”
Power lines run through Bcause's bitcoin mining facility. Workers at Bcause install power distribution units on shelving that will hold bitcoin-mining rigs. A Bitmain Antminer S9 computer specifically designed to mine bitcoins.

One of the most popular mining machines, known as the Antminer S9 and manufactured by Chinese firm Bitmain, is frequently sold out, forcing customers to wait months for delivery. Each rig costs about $2,300 but can go for as much as $5,000 on the secondary market.

Bcause’s retail clients can rent a Antminer S9 for about $4,800 for one year. The company declined to provide prices for institutional clients, who purchase their own machines.

Traditionally, the world’s biggest bitcoin miners have set up shop in places with low-cost electricity and cool climates to accommodate the heat given off by the mining rigs. However, the spectacular rise in bitcoin has afforded more location flexibility, miners say.

China’s crackdown on domestic mining could also lead many in the country to consider alternative areas to run their operations.

“A lot of people don’t trust going to China and putting all that investment into China,“ said Michael Adolphi, chief operating officer at Bcause. “We’ve made it economically feasible for them to bring it here.”

Still, the extreme volatility of bitcoin has some questioning how long the mining boom will last.

In mid-2014, when bitcoin fell more than 50% from the end of 2013 to about $500, mining operations were forced to consolidate, said Garrick Hileman, chief executive of research firm

“A combination of inefficient hardware and declining bitcoin price led a lot of them to close up shop,” Mr. Hileman said. The industry could experience a similar shakeout if prices start to drop again, he said.

The bitcoin price at which miners can still profitably run rigs varies depending on electricity costs, scale and the difficulty of mining. Some miners estimated the cutoff to be around $1,000 per bitcoin, though one small-scale miner pinned his exit level around $4,000.

At about $11,700 late Tuesday, miners point out bitcoin prices are still 10 times their value versus a year earlier.
(Ed note -- Total bitcoins that have been mined -- approx 17M -- TCP)

“Mining is still insanely profitable at the moment,“ said a spokesman for Genesis Mining, a cloud mining company that rents computing power to customers. ”One of the biggest challenges in the space is just building out the mining capacity to meet the demand.”

As a hosting service, Bcause says it is insulated from major price shocks, since it doesn’t invest in the mining equipment or the cryptocurrency itself.

It plans to build out a one-stop shop for trading bitcoin, with spot and derivatives exchanges, as well as a clearing house, pending regulatory approval.

David Bowman, who operates a small mining facility in Plattsburgh, N.Y., said he started selling contracts for cloud mining for the steadier revenue. However, he acknowledged the risks.

“The difficult part is the price,” said Mr. Bowman, who has 30 machines running in an office space. “The price is anyone’s guess. It’s kind of a shot in the dark sometimes.”
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