History and Evolution of Bitcoin Mining

EARLY BITCOIN MINING HISTORY

In the early days, digital currency enthusiasts used their computers’ CPUs to mine Bitcoin.  Mining wasn’t very profitable, because the cost of hardware and power required to mine Bitcoin was actually more than the value of Bitcoin at the time.  Miners were producing hundreds of thousands of nearly worthless coins, for the sake of supporting the network, and to promote this new monetary system.  Most weren’t mining for profit, and were simply donating their computing resources to an exciting new project.  Power efficiency of a CPU was somewhere between 1 watt to 10 watts per megahash per second (W/MH/S).

EXPONENTIAL IMPROVEMENTS IN MINING EFFICIENCY

As Bitcoin’s value began to increase, and the thousands of coins produced every day became more valuable, more and more people joined the digital gold rush.  Developers modified software to take advantage of Graphics Processing Units (GPUs), and miners would build mining rigs with as many as 5 or 6 GPUs, producing as much as 3 GH/S and consuming up to 1500W.  Efficiency more than doubled to .5W/MH.  Technology companies began producing FPGA cards that were dedicated to mining Bitcoin, which were orders of magnitude more efficient (.1 to .2W/MH).  However, within a year, companies were already manufacturing the first Application Specific Integrated Circuits (ASICs).  ASICs are chips that perform a single function as efficiently as possible, and they were much more powerful and efficient than FPGAs.  The first ASICs had power efficiencies of approximately 5-6 watts per gigahash per second, or 100 times the efficiency of GPUs!  Within a month, GPU mining for Bitcoin was dead.

THE LATEST BITCOIN MINING TECHNOLOGY

At this point, there are about a dozen ASIC manufacturers, which are all selling hardware in the 0.5 – 0.8W/GHS range as of November 20 2014.  For example, both Bitmain’s Antminer S5 and Spondoolies-Tech SP20 can both achieve efficiencies around 0.5W/GHS.  In a single year, ASICs have become approximately 10X more efficient!  And the speed of innovation is still accelerating, as ASICMiner has almost completed production of their BE300S chip, which has an efficiency of somewhere between 0.2 – 0.4W/GHS, which is the most promising new development in early 2015.  Other companies, such as KNCMiner, have claimed possible efficiencies of approximately 0.07W/GH sometime in 2015.  Some expect their product to end up with an efficiency of closer to 0.1 W/GHS at the wall, but it is impossible to speculate until they tape out.  The real takeaway here is that Bitcoin mining has become an arms race, which affects both home and cloud Bitcoin miners.

 

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