Since the creation of the first cryptocurrency more than a decade ago, many people have often been skeptical about their legitimacy, and some have even dismissed it as fraud. But by 2020, this paradigm seemed to have shifted. What has emerged is a shared recognition that Bitcoin (BTC) and other digital assets are here to stay and that they will play a key role in the future of global finance.
This is not a far-fetched vision reserved for crypto-anarchists – financial actors who have traditionally been wary of cryptocurrencies are now expressing confidence in their disruptive potential. JPMorgan and Goldman Sachs, for example, recently reversed their initial opposition to cryptocurrencies and became some of the latest banking services and offers for the digital asset market.
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As optimism and appreciation for the long-term potential of cryptocurrencies continues to grow, the opportunities for revenue expansion among players within the ecosystem will increase. Bitcoin miners, for example, increased their top figures by about 50% on a month-on-month basis in November, as Bitcoin prices rose more than 60% to above $ 18,000 during the same period. Yet, in a very competitive environment, success is largely limited to a few leaders in the industry, while for many it has remained elusive.
For miners, access to highly advanced mining equipment – one that boasts the highest level of power and cost efficiency and the fastest processing speed – remains the most important factor in ensuring a competitive advantage.
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The crypto-mining industry has undergone a series of significant transformations to reach today’s advanced technical state. In the early days, mining was done with simple computers without any complicated or powerful devices. General central processing units, or CPUs, were all that was needed to produce Bitcoin. This led to a rapid expansion of the Bitcoin network, as the allure of easy money resulted in an influx of new entrants – so much so that this first generation of miners was unable to keep up with demand. , and made it obsolete within a year.
Graphics processing units were subsequently introduced and made Bitcoin mining more efficient and profitable. The combination of multiple GPUs became a common sight as miners wanted to further improve their mining performance and capability and maximize profits. Despite these advances, the second generation of miners did not stand the test of time due to their high energy consumption and lack of long-term efficiency.
In 2011, field-programmed gate arrangements, or FPGAs, emerged as the next logical step in progression. They were fast, very energy efficient, offered better performance and easier cooling than their predecessors. Nevertheless, FPGA miners were short-lived and eventually replaced by ASICs, which to this day are the dominant technology for the Bitcoin mining industry. ASICs are designed, built and optimized for the sole purpose of mining, and are recognized for their superior harmonization of power consumption, performance and cost – about a million times more energy efficient and 50 million times faster in Bitcoin mining than the CPUs which was used in 2009.
The way forward
Indeed, crypto-mining has come a long way. Apart from performance-related developments, there have also been significant improvements to the environmental aspect of the technology, such as higher energy efficiency and faster hash rates. With a growing emphasis on sustainability, this is a trend that is likely to continue as disk design providers seek to develop innovative solutions to meet this growing demand.
Two main development areas come to mind. First, the redevelopment of current mining hardware to use less energy radically; and, secondly, the reprogramming of current mining chips to enable the use of hybrid energy for optimal cost performance.
Redevelopment of current mining hardware. There are already several concepts in the market that are being researched and that are being carefully tested – one of which is the use of photonic chips to run computers. In theory, the technology appears to be promising, with two to three orders of magnitude better energy efficiency than current electronic processors. In reality, however, it does not remain crucial whether the power savings are achievable, especially if Bitcoin scale. Until then, ASICs and their continuous improvements will dominate the crypto-mining space and lead to the cost of energy efficiency in crypto-mining.
Reprogramming of current mining chips. Contrary to popular belief, the crypto-mining industry is a relatively green industry. As of December 2019, Bitcoin is powered by more than 70% of renewable electricity. Although the benefits of using renewable energy are undeniable, the truth is that renewable energy is a diverse source of energy and is not always reliable for Bitcoin miners who have a constant energy need. On the contrary, fossil fuel-based power generally serves as a more stable source of energy. To find a wider balance between the sustainability of the industry and sustainability, a hybrid model can be adopted, whereby renewable energy is mainly used as an energy source, with power sources based on fossil fuels during production shortages. It involves the redesign and reprogramming of the current mining chips to allow the ease of interaction between the two variants of energy sources, without interrupting the mining processes.
As cryptocurrencies continue to rise prominently, the influx of competition from new providers who want a slice of the pie will also increase. Healthy competition can be positive in that it can lead to more innovation that leads to greater efficiency and maturity in the industry. However, to take full advantage of the growth of the emerging cryptocurrency market, current disk designers will need to invest further in research and development, particularly in the areas of energy optimization and power performance.
The views, thoughts and opinions expressed here are the author’s own and do not necessarily reflect the views and opinions of Cointelegraph.
Nangeng Zhang, also known as NG, is the founder, chairman and CEO of Canaan Inc., a leading provider of supercomputer solutions. While specializing in the field of supercomputers, NG explored the potential of application-specific integrated circuit design and consequently launched the world’s first digital cryptocurrency miner based on ASIC chips and catalyzed the era of ASIC mining.