Have you noticed the shortage of high-end graphics cards? If you are not a PC gamer, then the answer is probably no. But that doesn’t mean you shouldn’t care. As digital currencies become increasingly prominent, their collective impact will continue to reach beyond the crypto economy and into our material world. The current shortage of PC graphics cards is the latest example, but it won’t be the last.

Simply put, the rise of cryptocurrency, and its effect on the market for PC graphics cards, is an issue of supply and demand; however, the explanation behind this phenomenon is slightly more nuanced. In order to understand why the price of graphic cards has increased nearly 80% in the past year, it is important to first understand how the world of cryptocurrency operates. Recently, buzzwords like “Bitcoin,” “blockchain” and “mining” have become commonplace in the spheres of business, finance and technology. But for many, the question remains: How does it all work?

Cryptocurrency 101: Buzzwords Explained

Cryptocurrency is a means of exchanging digital information to purchase goods or services without the need for a central authority, like a bank or other financial institution. It’s an attractive alternative in the post-recession economy. Instead of being backed by the Federal Reserve or the gold standard, the currency is backed by cryptography, made up of complex mathematics. Cryptocurrencies are run on a public ledger called a blockchain, a bookkeeping system in which all transactions must be validated by a peer-to-peer computer network of users.

Say that a transaction is made from person A to person B. Person A would send his or her private code to person B’s private sequence. Person B would then scan the code with his or her device in order to decode the transaction. This transaction is then broadcast to the public ledger, where it must be verified through a process called mining before it can be officially added to the blockchain.

Mining: The Crux Of The Crypto Economy

Mining is an integral part of the crypto economy since it involves the creation and exchange of currencies. Without a central authority like a bank, miners help to verify which transactions are valid and can be added to the blockchain. Mining computers collect pending transactions and turn them into cryptographic puzzles. The first miner to find the solution announces it to others in the network, who then double-check the solution. If the majority approve, the block of transactions is verified and added to the blockchain. This process simultaneously creates new currency, which is granted to the miner who first found the solution. The system is ingeniously devised to incentivize security, but it requires an immense amount of computational processing power.

Graphics Cards: The Holy Grail