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| A bitcoin mining warehouse in Sweden (10) |
Bitcoin mining is the backbone of how the cryptocurrency functions (See Bitcoin Mining: Free Money?). The currency needs incredible computing power in order to complete transactions and keep the system secure. Because Bitcoin is unregulated, this computing power comes from outside sources. As Bitcoin continues to grow, mining has turned into a giant industry. The Bitcoin currency is constantly in the news, but what does the mining behind the scenes actually look like?
Bitcoin mining may be overshadowed by the currency itself, but it is a $3-4 billion dollar industry (1). One mining company was reportedly bringing in $8 million a month from mining alone (2). This certainly does not come easy. There are nearly 350,000 Bitcoin transactions per day, which requires a lot of computing power (3). Bitcoin miners use 1,005.59 megawatt hours of electricity per day with electrical costs of $150,000 per day (4). Mining for the top two cryptocurrencies combined, Bitcoin and Ethereum, uses more electricity than the entire country of Iceland (5). So can someone mine on their computer at home?
In theory, anyone with a computer and the right software can mine. However, as the currency grows, it has become impossible to mine on an individual computer. Mining is dominated by large companies with high-tech software, the largest of these being AntPool, which dominates 16.8% of the blockchain (3). There are about fifteen companies that make up the majority of the mining community, and 60% of the mining capacity comes from China (7). Bitcoin mining today is done in giant warehouses with rows and rows of mining hardware. One company for example has 3,000 ASIC (Application-Specific Integrated Circuit) miners--the dominant technology of the day--in a remote warehouse in China that run nonstop everyday of the year (6). There is also the constant sound of fans cooling the hardware--one mining warehouse was equipped with 30 tons of air conditioning (2). So, when people read the headlines about Bitcoin prices or make a Bitcoin payment, what they do not see is the effort, investment, and computing power that go into processing each block.
From a computer science standpoint, creating better and more efficient mining machines is what will propel the industry forward. The industry began with computer CPU mining, which has become obsolete with newer options. The next development was the use of graphical processing units (GCU) for mining that can mine 80 times faster than a traditional CPU (8). Even those, however, are elementary according to today’s standards. The next improvement in mining capability was the Field Programmable Gate Array (FPGA), which improved efficiency and was the beginning of the large mining farm industry (9). Today, the norm are ASIC chips, which have one capability: to mine bitcoins, and cannot be used for anything else. These chips are 100 times faster than any previous technology while also consuming less power (9). These chips are what line the aisles in the warehouses of giant mining companies. Updates in ASIC are the future of Bitcoin mining. There are currently pushes to produce chips that are smaller (smaller than a fingertip), which would make them more efficient. The research and development on quantum computing could affect Bitcoin in the future as well, bringing computational power to dangerous levels for Bitcoin security. Bitcoin has exploded recently and with it the facilitation of the network through mining. The potential profits in mining have led to better and better development of technology that make up a massive industry.
References:
(5) https://www.digitaltrends.com/computing/bitcoin-ethereum-mining-use-significant-electrical-power/
(10) http://www.datacenterknowledge.com/archives/2014/07/10/massive-bitcoin-mines-spring-up-in-warehouses
Great read, especially timely with Bitcoin reaching its all time high yesterday at over $8,200. Wild to think of the amount of energy these miners go through, a factor that essentially puts mining out of reach for the average Joe.
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