According to Nvidia’s CTO Michael Kagan, ChatGPT would be more useful than crypto assets.
During a recent interview with the Guardian, Kagan stated that cryptocurrencies bring nothing useful to the company.
Nvidia is one of the world’s largest manufacturers of video cards, and until a few months ago many were purchased to mine Ethereum.
However, from September 2022, Ethereum mining has been eliminated because with the switch from Proof-of-Work (PoW) to Proof-of-Stake (PoS) mining is no longer required to validate transactions, and the reward for validation now goes to the stakers and no longer to the miners.
Bitcoin, on the other hand, can still be mined with PoW, but not with graphics cards, which are too underpowered.
So with Ethereum’s move to PoS, the demand for graphics cards was reduced, to the extent that perhaps not coincidentally between August and October 2022, Nvidia’s stock on the Nasdaq lost 42% in just under two months.
It is worth mentioning that in the months that followed, it recovered tremendously, so much so that by mid-December it had already recouped all its losses, and in 2023 it even returned close to its highs.
Video cards can still be used for mining PoW-based cryptocurrencies, except for Bitcoin, but the biggest ones are Dogecoin, Litecoin and Monero, as well as Ethereum PoW and Bitcoin Cash. It is enough to think that adding together the market capitalization of all these five cryptocurrencies together does not reach half that of Bitcoin alone, and only slightly exceeds that of Ethereum.
So for video card manufacturers, Ethereum’s move to PoS may have caused a significant drop in demand.
Moreover, the relationship of these companies with crypto mining has always been problematic, so much so that Nvidia itself released software in 2021 that limited the ability to use its graphics cards for Ethereum mining specifically. The goal was to limit demand as much as possible to preferred customers, namely artificial intelligence researchers and gamers.
Michael Kagan’s words: ChatGPT is better than crypto
In the interview with the Guardian, Nvidia’s CTO said that there are better ways to use computing power than crypto mining, and one of them is artificial intelligence, such as that used for the ChatGPT chatbot.
After all, the first version of ChatGPT was trained on a supercomputer consisting of about 10,000 Nvidia graphics cards.
Kagan said that many (Ethereum) miners in the past bought large quantities of Nvidia graphics cards because “it’s the best,” but then Ethereum eventually collapsed because it brought nothing of value to the company.
It is worth noting that Ethereum’s market value has risen over the years, so much so that the current level is lower only than the level touched during the 2021 speculative bubble.
Ethereum has been around since 2015, and the current price of ETH is lower only than what it touched between March 2021 and May 2022 due to the speculative bubble.
Evidently Kagan has a distorted idea of what happened to the crypto market, and in particular the Ethereum market.
For example, before the 2023 rebound, the stock market price of Nvidia shares was lower than it was between June 2021 and June 2022, i.e., at the height of the speculative bubble. However, it is worth noting that while Nvidia’s stock in 2023 is returning close to the highs, ETH on the other hand is still at -63% from the ATH.
Kagan also revealed that with ChatGPT now everyone can create their own machine or program, because all they have to do is tell it what to do.
However, the Guardian article points out that in the past Michael Kagan himself had founded a company involved in high-frequency trading, which was later acquired by Nvidia itself, pointing out that high-frequency trading is not that different from buying and selling cryptocurrencies.
Now Kagan calls the world of high-frequency trading “crazy,” but it has certainly benefited him enormously in the past.
In this regard, he stated:
“I never believed that [crypto] is something that will do something good for humanity. You know, people do crazy things, but they buy your stuff, you sell them stuff. But you don’t redirect the company to support whatever it is.”