Core Scientific’s Relationship With NVIDIA Explained


10 min read
Core Scientific’s Relationship With NVIDIA Explained

Over the past few weeks, the debate over ProgPoW has been heating up — with proponents and opponents on both sides weighing in.

In particular, a company named, Core Scientific, has found itself in the mix, despite not publicly laying any claim to ProgPoW.

Where Did Core Scientific Come From?

Many have honed in on Core Scientific because, up until 48 hours ago, the creator of ProgPoW, Kristy-Leigh Minehan, was their CTO (Chief Technology Officer).

Kristy-Leigh Minehan’s LinkedIn Page

Publishing under the pseudonym, ‘IfDefElse’ (a name that’s actually supposed to represent three distinct entities: ‘if’, ‘def’, and ‘else’), Kristy-Leigh released ProgPoW in first half of 2018 (May).

What is ProgPoW (Super Brief)

A true explanation of ProgPoW would be a lengthy research report in itself, but to keep it brief — ProgPoW is a proposed change to Ethereum’s consensus algorithm that would modify its current one (ethash) in such a way to where creating ASICs would become exponentially more difficult than it is now, favoring GPU mining in its stead.

So Why the Controversy?

Many individuals in the Ethereum community (and outside of it) have cited various qualms/concerns with the algorithm’s creator, Kristy-Leigh Minehan — asserting that she has numerous conflicts of interest that are worthy of intense scrutiny before accepting ProgPoW at face value.

Without going through the laundry list of issues that have been raised, one specific concern that we’re going to focus on is the potential conflict of interest lies in her prior role as CTO of Core Scientific.

What’s the Issue With Her Being the CTO of Core Scientific?

The issue that many have with Core Scientific is the fact that it is essentially a massive, GPU-based mining company that successfully raised over $100 million in an offering last Fall.

As stated on their website, their mining facilities are enormous:

Below is a YouTube video showing the expansive facilities of Core Scientific:

Thus, the concern is that this initiative (ProgPoW) by Kristy-Leigh Minehan may not have been created and proposed in an altruistic manner.

Given the expansiveness of Core Scientific’s operations, its logical to assume that they could benefit significantly from certain tweaks in Ethereum’s mining algorithm since it is clear that they run a massive, GPU-mining operation.

Core Scientific’s Relationship With NVIDIA

Deeper than Core Scientific’s involvement in GPU-based crypto mining is their relationship with NVIDIA, a well-known, massive GPU manufacturer.

Below is a quick look at their company information (publicly traded):

NVIDIA DGX-Ready Data Center Program

The ‘DGX-Ready Data Center Program’ was created and launched by NVIDIA in January 2019 in a bid to forge partnerships with entities possessing large data centers.

Core Scientific, in specific, was one of NVIDIA’s first partners (they have only selected 9 total, thus far).

What is This Partnership?

According to NVIDIA’s website and press releases:

“Developed to meet the demands of AI and analytics, NVIDIA® DGX™ Systems are built on the revolutionary NVIDIA Volta™ GPU platform. Combined with innovative GPU-optimized software and simplified management tools, these fully-integrated solutions deliver groundbreaking performance and results.”

Obviously, from the description above (among other things), many have theorized that Core Scientific, with the help of NVIDIA would be able to leverage the latter’s vast economies of scale/machine learning/artificial intelligence tech to effectively create a GPU that is so much more advanced than what consumers generally have access to that it could potentially defeat, if not undermine the purpose of ‘bricking’ ASIC miners in the first place.

Gaining Insight on How NVIDIA Does Business

There are countless additional details from the information provided that will be addressed in future write-ups concerning ProgPoW.

Instead, this article will peer into the business habits and practices of a company like NVIDIA.

Bombshell Report on NVIDIA’s Shady Business Practices

In early 2018, Forbes published an article titled, ‘Report Alleges New NVIDIA Program Engages in Monopolistic, Anti-Consumer Practices’, that summarized major bombshell findings by well-established computing company, ‘HardOCP’.

‘HardOCP’ is a long-standing, extremely credible and well-respected brand in the computer parts space. To date, they have been in existence for over 20 years, which makes it a unique rarity in an online world that has spent just slightly longer in the mainstream.

The report, titled, ‘GeForce Partner Program Impacts Consumer Choice’, was written by the head editor of ‘HardOCP’, Kyle Bennett and it outlines some of the less than savory, underhanded business tactics and maneuvers by NVIDIA through interviews with various partners in the program.

Transparency

The beginning of the article does note that AMD (a competing GPU manufacturer) prompted the investigation by reaching out to contact the publication.

Specifically, the report notes:

“Before we go any further, in the effort to be as transparent as possible, we need to let you know that AMD came to us and presented us with ‘this story’. AMD shopped this story with other websites as well. However, with the information that was presented to us by AMD, there was no story to be told, but it surely pointed to one that was worth looking into. There needed to be some legwork done in collecting facts and interviews.”

GeForce Partner Program (GPP)

Similar to the DGX Ready Data Center Program, the GPP:

  • Was a partnership between NVIDIA and other brands, “in order to better serve gamers”
  • Comes with a promise by NVIDIA that they will promote said brands that have been accepted as a partner
  • Promises that, “GPP partners will get early access to our latest innovations, and work closely with our engineering team to bring the newest technologies to gamers”

NVIDIA stated that their core mission was to “increase transparency” for gamers and that the ‘program isn’t exclusive’.

However, upon further investigation it appears that those claims may not have been true.

Difficulty Getting Any Information From NVIDIA GeForce Partners

Notably, despite NVIDIA claiming that the purpose for the program was to increase transparency and, “that transparency will give gamers the confidence needed to make their purchase, whichever products they choose”, ‘HardOCP’ had a difficult time finding companies that were willing to speak about the program itself on record.

In fact, according to HardOCP:

“We have contacted seven companies about their part in NVIDIA GPP and not one of the seven would talk to us on the record if they spoke to us about it at all. The ones that did speak to us have done so anonymously, in fear of losing their jobs, or having retribution placed upon them or their companies by NVIDIA. All of the people that I did interview at AIBs and at OEMs did however have the same thoughts on GPP: 1.) They think that it has terms that are likely illegal. 2.) GPP is likely going to tremendously hurt consumers’ choices. 3.) It will disrupt business with the companies that they are currently doing business with, namely AMD and Intel.”

Woah. There are some pretty serious accusations in the excerpt above.

According to ‘HardOCP’, the companies that spoke with them (on condition of anonymity), conveyed to them that they weren’t even entirely sure of the legality of the terms of their partnership with NVIDIA.

In addition to that, these entities also conferred to ‘HardOCP’ that their partnerships hurt competition in the GPU space significantly and that this partnership will disrupt business with some of the other companies that they do business with in the GPU space — namely AMD and Intel.

NVIDIA Compels Exclusivity From its Partners

The report goes on to state that documents related to the partnership itself were directly obtained and that they observed language in said documents that stated that partners must, “Have its ‘Gaming Brand Aligned Exclusively With GeForce’.”

The author notes that they saw this phrase in the partnership documents, physically (in-person holding said documents).

Essentially, the terms of the agreement made it so that manufacturers/entities that were partnered with NVIDIA would no longer be allowed to provide any competing GPU hardware alongside their product.

If a company chooses to leave the NVIDIA partnership program, then the following benefits would be lost:

High-effort engineering engagements

Early tech engagement

Launch partner status

Game bundling

Sales rebate programs

Social media and PR support

Marketing reports

Marketing Development Funds (MDF)

Anti-Competitive Behavior of This Nature Could Have Severe Consequences for NVIDIA

As noted by the author, several major tech companies have faced steep fines in the past for engaging in anti-competitive practices as flagrant as the ones NVIDIA is accused of in the ‘HardOCP’ report.

Below are some of the recent fines/victories for the FTC over the past few years (for anti-trust violations by major corporations):

  1. $448 million penalty against AbbVie Inc., for using “sham litigation to illegally maintain its monopoly over the testosterone replacement drug, Androgel.” (2018)
  2. $5 billion penalty against Facebook for violating users’ privacy (July 2019)
  3. Intel settled with the FTC in 2010 for an undisclosed amount

Notably, Intel was also fined $1.45 billion and $1.25 billion within the same year (2009–2010) for their antitrust violations, which harmed competition between them and AMD, specifically.

Given NVIDIA’s behaviors, it seems almost inevitable that they would engage in those same activities.

Back to the ‘HardOCP’ Report

Continuing past the clear and flagrant potential antitrust violations, the report goes on to state that, “What is disturbing is that we have been told that if a company does not participate in GPP, those companies feel as if NVIDIA would hold back allocation of GPUs from their inventories. From all we have talked to, the issue of not allocating GPU inventories to non-GPP partners have not been spelled out contractually, but is rather done on a wink and a node.”

Apart from the flagrant unethical nature of such an arrangement, NVIDIA is also putting themselves at significant risk of future enforcement action given these illicit business practices.

NVIDIA Fails to Address Any of the Claims in the Report

In the concluding segment, the author goes on to let the reader know that:

“At publication time, NVIDIA has not returned our request for the list of companies that will be involved in its GeForce Partner Program.”

This is pretty concerning when considering that NVIDIA pleged that their primary motivation for creating the GeForce Partner Program (GPP) was to facilitate transparency in the GPU space.

However, given their refusal to even identify who their partners are, it seems as though NVIDIA’s goals are just the opposite.

Between the staggering lack of business ethic observable in this report and the failure to maintain any level of transparency, NVIDIA is a company that seems to be vehemently opposed to conducting business in a transparent, fair, or legal manner.

NVIDIA Potentially Under Reported Approximately $1.35 Billion in Ethereum Mining Revenue

Staying in line with the theme of fraudulent behavior, no more than a year after the ‘HardOCP’ report had been published, there were reports that surfaced in February 2019 that an RBC analyst published in one of their investor notes that they believe NVIDIA’s mining revenue was under reported by approximately $1.35 billion.

If true, this is a very significant error in reporting that is tantamount to outright fraud.

Why Would NVIDIA Under Report How Much Revenue They Made Via Crypto Mining?

Some reading this piece may wonder to themselves, ‘Why would NVIDIA fudge the numbers on the cryptcurrency mining operation so that it appears they made $600 million vs. $1.95B+? Wouldn’t more money be inherently favorable for investors?’

The answer is no.

Why?

As we all know, the cryptocurrency craze of 2017 led to a major boom in GPU sales by manufacturers trying to keep up with the sudden, spontaneous demand.

One of the ways that GPU manufacturers kept up was by producing significantly more GPU miners than they otherwise would have.

The issue with this, though, is that the cryptocurrency space plunged into a major bear market throughout 2018, resulting in a significant decrease in GPU sales for all GPU manufacturers, and most mining companies, in general.

Thus, there was fear among many investors that NVIDIA had overextended itself in the cryptocurrency mining space vs. selling GPUs to gamers and other non-blockchain related users.

So in response, it appears NVIDIA grossly under reported their numbers in order to assuage investor concerns and salvage their stock price.

Notably, this is pure fraud in every sense of the word.

Going Back to Core Scientific, Kristy-Leigh and Ethereum

Given what we learned above, Kristy’s affinity for NVIDIA makes much more sense in retrospect.

Specifically, Kristy-Leigh has created numerous mining software products and implementations that are designed to be catered to NVIDIA miners vs. AMDs.

For instance, Kristy-Leigh’s ‘Ethlargement Pill’ software was a GPU mining enhancement (designed to optimize the mining process for NVIDIA GPUs on the Ethereum blockchain.

With this complementary mining software package, Kristy was able to substantially ‘buff’ NVIDIA GPU miners, in terms of hashrate and efficiency (this upgrade was not available for AMD miners at all).

Above is a picture of the promotion for the project.

Below is the Bitcointalk ANN thread for Ethlargement:

Notably, the pitch to users started with, “At OhGodACompany, we believe that the Ethereum network should be enjoyed by all graphic cards, no matter the make or model.”

That statement (as well as many others), makes it abundantly clear that the purpose of the software design was to enhance NVIDIA miners specifically, without any attention given to AMDs.

Benchmark Tests (AMD vs. NVIDIA)

  1. https://wccftech.com/amd-nvidia-intel-q4-2017-gpu-market-share/
  2. https://www.jonpeddie.com/press-releases/gpu-market-declined-seasonally-in-q4-cryptocurrency-provides-smaller-offset
  3. https://www.jonpeddie.com/press-releases/global-gpu-shipments-mixed-in-q119-reports-jon-peddie-research/
  4. https://www.jonpeddie.com/reviews/amd-vs-nvidia-hash-test/

Curiously, despite the claims that this needed to be done in order to ‘level the competition’, there are numerous benchmarks in the Ethereum community that suggest that the divergence in performance between AMD and NVIDIA GPU chips on the ethash mining algorithm are nowhere near as significant as NVIDIA has tried to make it seem.

Conclusion — NVIDIA is Dishonest All Around

There’s no need to recap this. However, it should be reiterated that due to licensing requirements with the Cuda miner (not allowed to be included without the full code implemented; part of the code cannot be used), NVIDIA’s closed source code must be added to Ethereum itself.

To say that this would be a disaster is an understatement, to say the least.

In subsequent articles, psots, messages and breakdowns, we’ll get into more aspects of Ethereum, its governance, protocol, ProgPoW, politics, conflicts of interest, etc., that users should be aware of in this space forward.

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