Price wars between GPU makers are something to look forward to each year, as that's typically when you get the best bang for your buck. Such an optimal time to buy new graphics cards usually comes when both AMD and NVIDIA have launched a new graphics card lineup, each. AMD tends to launch its lineup first, followed by NVIDIA, which then begins a cycle of proactive and reactive price-cuts between the two, which churns up the $300 price-performance sweet-spot so well, that a purchase from that segment usually sets your PC up for the following three years. 2013-14 saw a major disruption to this cycle, Litecoin mining. Litecoin miners will hurt more than help brand AMD Radeon, here's why.Litecoin miners are buying up AMD Radeon GPUs. The reason being, that GPUs based on the Graphics CoreNext architecture are exceptionally good at processing P2P currency hash workloads, the only way just about anyone with a computer can create real money by putting their CPU or GPU to work. CPUs simply won't cut it with such processing loads anymore, despite being multi-core and equipped with AES-NI instruction sets.

GPUs can inherently handle parallelized workloads better, and it just so happens that investing in AMD Radeon GPUs is profitable for Litecoin miners, because they pay for themselves, and go on to generate revenue, when deployed in a good enough scale. Graphics CoreNext is the only GPU architecture that restores competitiveness of GPUs against ASICs, chips purpose-built to handle peer-to-peer currency validation hash processing.

Litecoin, like Bitcoin, is a peer-to-peer currency. It's decentralized, in that there's no central bank or monetary authority. The U.S. Federal Reserve governs the U.S. Dollar, for example. A triad of HSBC, Standard Chartered, and Bank of China issues the Hong Kong Dollar; Euro by the European Central Bank, and most countries have constitutional bodies set up to handle their currencies. Every transaction using a currency, including buying soda from a vending machine using loose change, is vouched for by its central bank. Litecoin doesn't have that, and so it relies on a distributed computing network to validate each transaction, and the integrity of each unit of the currency, with the wallet it's part of.

Unlike older distributed computing ventures like Folding@Home and WCG, which continue to draw people to donate some of their CPU/GPU time for charitable causes like processing scientific problems; the Bitcoin and Litecoin networks pay people who participate in their computing networks. They're paid in, well, Bitcoins and Litecoins, respectively. The beauty of it all? Not only can you pay for some goods and services with these currencies, but also exchange them for your everyday currency. They convert to U.S. Dollar, and you probably can convert a U.S. Dollar to any other currency on the planet.

The faster you process P2P currency validation loads, the more load is directed toward you, and the more you earn. Performance per Dollar immediately becomes the king here. Litecoin.info compiled an exhaustive list of AMD and NVIDIA GPUs, sorted by their Litecoin Hash processing performance. You'll note how at reference clock-speeds, NVIDIA's GeForce GTX Titan crunches just 320 kH/s (kilo-hash per second), while a Radeon R9 290X, at reference base-clock speeds, yields over three times that, at 980 kH/s. The GeForce GTX 780 Ti in the comparison yields 430 kH/s, but its clock speeds are not mentioned, and so you can't take its numbers at face-value. Even for a moment if we assume that the $650 GTX 780 Ti is running at reference speeds, you can still work out a huge price-performance gap between it and the $550 R9 290X. This, we believe, has led to some North American retailers getting opportunistic, who inflated the retail price of the R9 290X to prices close to $700, and the R9 290 (non-X), close to $500, from the $399 MSRP it launched with.

These hikes in prices of AMD Radeon R9 series products needn't be in reaction to a hike in demand, and retailers have the luxury of assuming that anyone who is buying a Graphics CoreNext-based GPU is doing so for Litecoin/Bitcoin. And so we find the argument that Litecoin mining has caused a shortage in AMD Radeon inventories, which is responsible for the price hike, absolute horse poo. More so, because AMD's chips not just destroy NVIDIA's, but also go up against some purpose-built ASIC boards, on the cost-performance metric.

Yet another reason we believe that the hike in AMD Radeon prices is not a result of inventory shortage, is because of pricing in other markets. Retailers in the EU apparently have healthy inventories of AMD Radeon, or at least the unaffected prices of graphics cards there seem to suggest that, if we were to believe the short-supply argument. We don't think Europeans aren't enamored by P2P currency, or the art of making money, but that European retailers aren't getting cocky about pricing their AMD Radeon inventory to end users, at least not yet. Eventually, bad pricing of AMD Radeon may catch up in Europe.

That brings us to the operational portion of this OP-ED. How the P2P currency craze hurts AMD more than helps it. AMD isn't manufacturing "Hawaii" silicon on a war footing. There are no indications that the company is scaling up supply to the "demand." The inflation in AMD Radeon prices appears to be backed more by the chips' huge price-performance advantage over NVIDIA at P2P currency processing, rather than short-supply. Whoever is into Litecoin processing, is apparently willing to cough up $700 for an R9 290X.

What this does, is it makes AMD Radeon prohibitively expensive for the target market of AMD Radeon, gamers and PC enthusiasts. Price-performance gaps between AMD and NVIDIA are tight and mangled; when it comes to the stuff Radeon and GeForce are actually designed for, to render 3D graphics for games. Fewer gamers and enthusiasts will buy AMD Radeon from here on out, as a result of the Litecoin craze. In the worst case scenario, this could give NVIDIA the opportunity to arbitrarily raise prices of GeForce GTX products slightly, while still maintaining higher price-performance at gaming, if not P2P currency processing.

Here's what AMD could try, to wriggle itself out of this mess - fight fire with fire, and build low-cost, limited edition AMD Stream GPGPU boards based on the Graphics CoreNext architecture, which offer higher price-performance ratios (at P2P currency processing) than even its own Radeon R9 series graphics cards. Those AMD Stream boards could be based on chips that are purpose-built for P2P currency processing loads, don't come with too much memory, and lack unnecessary components, so they could be sold at relatively low prices, and beat Radeon R9 series at price-performance. Again, there are two price-performance ratios at play here, one at P2P currency processing, and one at gaming, and the former is holding the latter hostage, in the current scenario. If AMD succeeds in making Radeon R9 series unappealing to the P2P currency community, it will restore the brand to its original target audience, the gamers.

AMD spent the better part of the past five years in building some impressive game developer relations, who developed and optimized their games for AMD Radeon. The company risks harming those efforts, if it gives in to the Litecoin craze. It may cut some profit by catering to the craze with Radeon R9 in the short term, but those profits will inevitably be at the expense of brand-Radeon in the long term. Time for some hard thinking.