Cryptocurrency craze subsides, mining companies turn to provide high-performance computing services for AI

News on May 11, last September, when the Ethereum blockchain no longer used the proof-of-work algorithm to verify transactions, the cryptocurrency market’s response to high-performance dedicated processors Demand disappeared almost overnight. Cryptocurrency miners that use or host graphics processing units (GPUs) are finding the cryptocurrency space increasingly difficult, and a key component of their once-thriving business is gone. Now, miners like Hive Blockchain and Hut 8 are looking for opportunities to repurpose their GPU processors into the booming artificial intelligence industry.

Jaime Leverton, CEO of Bitcoin mining company Hut 8, said in an interview: “If you can shift some of the investment in GPU mining equipment infrastructure to new areas, That makes sense."

GPU device infrastructure designed specifically to accelerate graphics rendering requires ongoing maintenance and investment that not all users are prepared for. As a result, Hut 8 and several other mining companies are using these chips to provide high-performance computing (HPC) services to customers in various industries. Nowadays, the booming and much-hyped field of artificial intelligence requires a lot of computing power and is also the transformation opportunity that mining companies have been looking for.

Hut 8 said that after just one year of operation, the HPC business generated approximately $16.9 million in revenue in 2022, accounting for approximately 11% of total revenue, in part due to the role of artificial intelligence customers promotion effect.

Hive Blockchain purchased $66 million worth of GPUs from Nvidia in early 2021. The company said it aims to increase HPC business revenue 10 times to $10 million by 2024 and 20 times by 2025. Analysts currently expect Hive Blockchain’s total revenue to reach approximately $98 million in 2024.

Not all cryptocurrency mining companies can effectively utilize the surplus of expensive processors on hand around the artificial intelligence craze. According to Bitpro Consulting, a consulting firm that provides brokerage services to mining companies, 5% to 15% of existing GPUs targeted at the cryptocurrency field can be repurposed for related fields such as artificial intelligence, computer vision, and generative graphic design.

In addition, the transformation to provide high-performance computing services in the field of artificial intelligence requires the acquisition of hardware, and labor costs will also increase significantly. However, many mining companies are currently struggling in the cryptocurrency field. Core Scientific, the listed Bitcoin miner with the largest computing power, declared bankruptcy last year, and many mining companies also warned of the adverse situation of tight internal liquidity. But Bitpro Consulting estimates that switching to artificial intelligence may be an opportunity to make up for the $15 billion that mining companies have burned through processors.

At the peak of the cryptocurrency craze in the past few years, a few Ethereum mining companies even began to snap up high-end processors. At that time, the price of Ethereum soared, and in November 2021, the price of Ethereum even hit a high of $4,870. Mining companies were willing to spend more money to buy high-end chips, thereby obtaining more economic benefits. But these companies soon discovered that they had bet not only on the price direction of Ethereum, but also on the availability of high-end processors in the cryptocurrency space.

In September 2022, Ethereum successfully completed the transition to the proof-of-stake algorithm, and chip computing power is no longer necessary. Not long ago, Ethereum hit a low of $880 after a series of thunderstorms in the crypto industry. Ethan Vera, chief operating officer of Luxor Technologies, a bitcoin mining products and services company, said that cryptocurrency miners may have difficulty competing with major data service providers such as Microsoft Azure or Amazon Web Services. To compete, after all, these platforms already offer a variety of tools and support staff to AI customers. But he said cryptocurrency miners’ experience in energy management may provide an advantage because artificial intelligence is as energy-intensive an industry as cryptocurrency mining.

“In order to compete in the high-performance computing space, miners need to find the competitive advantage they learned in mining,” Vera said. “For those miners that can successfully shift parts of their operations to high-performance computing, AI will be quite profitable. But it will certainly not be a cakewalk. Only the most skilled and tenacious miners will be able to truly do it. at this point."

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