How mining equipment evolved: from GPU to ASIC

Gold can be extracted with a pickaxe, but it's difficult

Specialists compare the process of cryptocurrency mining with gold extraction. Of course, you can extract gold with a pickaxe as well, but in this case it is impossible to compete with high-tech gold mining companies. During the time an amateur gold prospector will find and earn 1 gram of gold, a fully equipped gold mining company will extract kilograms of yellow metal from the bowels. Almost the same situation is observed in the sphere of cryptocurrency mining.

At the initial stage, bitcoin and etherium could be mined with conventional laptops and computers that support a certain level of functionality.

This type of extraction is called CPU-Mining (central processing unit). According to experts, Intel and AMD are the most suitable processors for cryptocurrency mining. To date, the Intel processor line has a model Xeon E5-2650 with a hashpower of 129.3 kH/s, and AMD - processors FX-8120 and FX-8350, with a hashpower of 65 kH/s.

Then coins began to be extracted with the help of video cards (GPU mining). This equipment is usually used by gamers to improve the quality of graphics. "GPU chips themselves are manufactured mostly by Nvidia or AMD, and companies churning out fully assembled cards include EVGA, ASUS, XFX, and Gigabyte. Card prices range from $125 to over $750 each, depending on quality," Amanda B. Johnson, Spokesperson for DASH told Bitnewstoday.com.

The next stage of mining development was the use of FPGA, a user-programmable gate array. However, the use of FPGAs is associated with increased power consumption. Partially this problem was solved, but the cost of the cards remains high compared to GPU-cards.

Then BitSynCom LLC manufactured the first specialized chip for bitcoin production, called ASIC - Application-Specific Integrated Circuit. In view of the fact that the ASIC chip performs strictly limited functions, it stands out among other devices for mining, as it improves performance and energy efficiency of mining. The largest miners have their own warehouses filled with ASICs, or combine their computing powers with other miners into mining pools.

New versions of ASIC appear constantly. One of the latest is Antminer S9 manufactured by Bitmain. Another popular manufacturer of ASIC is Avalon. The cost of a single chip, depending on the model and characteristics, ranges from $1,000 to $5,000.

Below is a comparative chart of ASICs.

Chart - Comparison of ASIC characteristics
Source: public data

The speed and profitability of mining depends on the equipment

The speed of extraction of one coin depends on the equipment, as well as whether extraction is carried out in the pool or not. Most of the miners are part of the pool, so the amount of compensation for the production of the crypto coins is as follows: the time of the bitcoin block is 10 minutes, the reward for the block is 12.5 coins; the time of ethereum block is 15 seconds, the reward is 3 coins.

Steve Geros, a spokesperson for Blocktech Corp.'s, comments: "The profitability of mining Depends if the cryptocoin is new or not and speed of computer. For example if new ASIC is created with newer technology this will be more profitable for the people that can obtain this but for older hardware gets more difficult over time if they use difficult algorithms".

Also, the cost-effectiveness of mining is affected by the cost and volume of electricity consumed by the equipment. Jim Cerna, CEO of SV CryptoLab, believes that this is a fundamental factor: "It really depends on your energy costs. It's all about raw compute power to solve the algorithm and mine a coin. These machines use a lot of electricity. Having said that, BitCoin at $16,000+ can be pretty profitable to mine."

What is mining difficulty and how does it grow?

Mining difficulty is an indicator that reflects how difficult it is to find a hash that is below the target proposed by the system (that is, how difficult it is to solve a mathematical problem). As can be seen from the figure below, in 2017 the difficulty of bitcoin mining increased almost sixfold.

Pic. 1 Bitcoin mining difficulty
Source: blockchain.info

As can be seen from Picture 2, the difficulty of ethereum mining throughout the entire 2017 increased as well. However, on October 16, mining difficulty of the second most popular cryptocurrency fell sharply by half. Specialists note that this was due to the implementation of changes in blockchain by Byzantium.

Pic. 2 Ethereum mining difficulty
Source: blockchain.info

The difficulty of mining will continue to increase. However, popularity of cryptocurrencies will be mostly defined by how the market of mining equipment will develop.