Digital currencies and conversations based on them seem to be around all the time now. The values of cryptos have increased sharply over the last few years, attracting a range of new investors. Despite the fluctuations of the sector and the evolution of the latest and unknown financial elements, there are various factors that affect the stability and including the cryptocurrency semiconductor crisis, high usage of the sources of energy that were not made for mining of digital currencies, and the official stand of India to ban or regulate the use of digital currency in India. Let us discuss how bad is the semiconductor shortage.
The Cryptocurrency Semiconductor Crisis
While the investors were happy about the increase in the value of Bitcoin in recent times, this has also created the issue of abundance. All over the world, industries have been hit by the scarcity of computing chips after the induced lockdown of the Covid-19 and some of the blame must be levied on digital currency mining.
The rush for gaming and computing devices, especially those that have a better speed of processing during the induced lockdown of the Covid-19 altered the production forecasting dimension for consumer electronics, thereby the demands are being distorted for the chips creating a cryptocurrency semiconductor crisis.
For example, the global market for personal computers is predicted to have evolved over 47% year on year, which is the biggest growth in the last two decades. Along with that during the lockdown, the makers of smartphones, computing devices, and also video games equipment brands also witnessed their volume to increase. As the globe shifted to remote functioning during this time, streaming and video conferencing requirements attained the clouds. Along with that, the demand and use of the data centers also increased. With the use of semiconductor chips in all these centers, the crisis is boiling.
Simultaneously, the semiconductor sector was hit by a few crucial setbacks also. For example, the huge power outage in February in Texas, an important semiconductor hub, impacted many semiconductor fabricators that are located there. These manufacturing sections typically operate nonstop to be economically feasible; the complicated photolithographic procedure that is used to make semiconductors that cannot be paused suddenly without damaging at least some of the work that is in progress.
On the other end of the globe, developments in Malaysia and Taiwan, which together have more than 60% share in the global production of semiconductors, are having an effect on the industry also. Taiwan, which is the global chip-making hub, is encountering its worst drought in 50 years, which has impacted the production of chips. In Malaysia, an important chip packaging and testing center, worries around increasing COVID-19 cases, and lockdowns moistened the sector. Along with that, with the production of chips in Taiwan slowing down, global brands are operating to shift their regional supply chains to Malaysia.
Cryptocurrency Semiconductor Crisis: Mining And Demand
Another factor that is aiding the cryptocurrency semiconductor crisis is the mining of cryptocurrency, which has resulted in a lot of chip purchasing. For more than a year, digital currency miners have been working up a storm associated with the increasing value of famous cryptos such as BTC. As the value of digital currencies rose, so did the interest from fresher financiers to invest in the cryptocurrency. This has resulted in more attempts to mine crypto, which in turn has stressed further demand for higher processor power, and the volumes of semiconductors. There has been a Bitcoin semiconductor shortage.
Cryptocurrencies are designed by crypto-miners, who are provided with the digital currency in return for fulfilling massive volumes of computations to verify each transaction. This needs a high energy input. But miners also need highly powerful computer devices, or rigs, for the process. How quickly BTCs can be mined is directly associated with how advanced the chip cryptocurrency is within the rigs that are known as Bitcoin mining chips. While some debate that the semiconductor issue in the industry had not constructed resilience, and adaptivity to its global supply chain, the reality of digital currencies pushing the demand (or skewing the volumes of chips offtake) portrays the altering demand patterns for end-uses like mining digital currencies. The profitability for crypto mining has eaten into the semiconductors of cryptocurrency manufacturing abilities that are meant for other computing functions.
Significantly, the cryptocurrency semiconductor crisis is remodeling modern essential sectors like computers and smartphones. The launch of the latest models of computers and phones is being created by the availability of chips. In countries like India, the amount of investors in crypto has increasingly grown over the last few years and is now misrepresenting how semiconductors are utilized. Semiconductors that would have otherwise been available for other computers are not available as the components are being redirected for crypto-mining purposes.
India’s Approach On The Cryptocurrency Semiconductor Chip Crisis
Let us now discuss about semiconductor shortage India. India is the rapidly growing hub for digital currency globally, which is driven by young investors. Crypto investing is not constrained to urban spaces alone but has increasingly received acceptance across tier two and tier three states as well. Nevertheless, there remain varied barriers to the greater adoption of crypto, that includes concerns regarding privacy, liquidity, and also security.
In India, there has been a regulative tussle on the validity of crypto functions. In 2018, the RBI (Reserve Bank of India) issued orders to banks and governed financial entities to not enable users to engage in purchasing, selling, and trading of crypto. This had a chilling effect on the industry, with multiple entities looking to move their functions to friendlier sides. However, an order from the Supreme Court last year lifted the ban of RBI and allowed crypto-exchanges to operate in India again. Along with the regulatory uncertainty, a Bill was presented in February that wanted to outlaw any functions of ‘private cryptocurrencies’, and design digital currency backed by the RBI with the use of blockchain.
The concept of central banks drifting their own digital currencies is getting momentum across countries, and these new elements have their respective flaws and merits. However, it is possible for central bank digital currency and cryptocurrencies to coexist. Presently, digital currencies are treated as a different asset class and are being traded similar to objects, and it is also unviable for cryptos to be used as a currency due to its high fluctuations. But there are more use cases being constructed such as non-fungible tokens, utility tokens, credit tokens, and other forms for DeFi (decentralized finance) with blockchain as the security technology.
The Bottom Line
With the Covid-19 lockdown and the effect of getting used to working remotely, the use of semiconductor chips has increased to a great extent. The smartphone and computer manufacturing companies have started to use semiconductors that have created a cryptocurrency semiconductor crisis, which needs to be addressed immediately because the use of crypto in the last few years has also increased and these semiconductors are important to conduct the process of mining.