Back in the day people could just start mining on their desktop, even if it wasn’t all that powerful, and perhaps even make a bit of money.

How far behind us are those halcyon days of Bitcoin…

The great nemesis

Technology has been improving at a an increasingly steady pace over the years and internet technology seems to be in the fast lane. But Bitcoin mining technology has been moving at a breakneck pace that has left many dizzy and wishing they had started mining “six months ago back when the easy money was still there.”

They’ve been saying that every six months for years now. I think we can safely presume they’ll be saying it again in another six months.

But why has the technology been changing so rapidly? The answer is simple.

The cost of electricity.

For mining to work the value of the block reward needs to be greater than the cost of the electricity that was expended to solve the hash. This difference has fluctuated significantly with the value of bitcoin but the blocks get more and more difficult and thus more and more electricity is needed to solve them. And even as the value of Bitcoin has increased, the cost of the electricity (or rather the amount of electricity) needed to solve a block has well outstripped it.

This has lead to an efficiency arms race.

The early days

In the early days, back when crpytomining was something of a wild west of hobbyists and nerds, you could just use the CPU on your desktop to efficiently mine bitcoins. Perhaps this wasn’t immediately profitable but you ended up with a lot of coins per kilowatt and with the upward trajectory of the currency, it became very profitable post factum.

The problem with CPU mining is that the CPU as a chip is not very well designed for the kind of processes that are undertaken to solve hashes. And solving hashes is how you get the block reward which is how you get that sweet, sweet coin. There were some stopgaps that made mining more efficient for a while, like Beowulf clusters and other scaled mining solutions using the CPU, but these were just that. Stopgaps.

Alas as the hashes got more difficult, the cost became too great.

The GPU Evolution

Luckily there was another class of powerful chips available to the public that worked much faster and more efficiently. The GPU. This is the Graphics Processing Unit of your computer and is generally used for rendering graphics but can also be used for many other things that require similar computational tasks. Like bitcoin mining.

It was quickly discovered that solving blocks with GPUs was far faster and more efficient than using CPUs. This is where you started to see Bitcoin mining rigs that were little more than gaming rigs with less powerful CPUs and less LEDs.

SLI and CrossFire setups that were once the domain of hardcore gamers with their parents’ money to blow were now profitable mining machines pumping out bitcoins are previously unimaginable rates.

But alas the old nemesis the cost of electricity caught up once again and soon GPU mining, even with insane SLI setups, were no longer profitable.

The ASIC revolution

Enter the white knight of the mining world: The Application Specific Integrated Circuit or ASIC. The name really says it all here. It is a circuit that is specifically designed to perform one single function and that is it! In this case the chip was optimized in every conceivable way to be the most efficient hash-solving crpyocurrency-mining machine possible.

These are chips that aren’t useful for anything other than mining but while they aren’t a jack of all trades, they are master of one. And that one makes boatloads of money when applied to the right cryptocurrency.

Understandably, ASICs rule the roost right now insofar as what chips are used for bitcoin and cryptocurrency mining, but that is not to say that the old nemesis of electricity cost is leaving them alone.

Far from it.

The future

As the cost per block reward has continued to increase and while technology is at a bit of a bottleneck insofar as further optimization, new techniques have been developed to keep individuals in the game.

The biggest development is pool mining.

This is where you and your rig work together with others’ rigs to mine as a team. Should someone on the team solve the hash, the reward is split proportional to how much each rig contributed insofar as solving hashes. It doesn’t matter if you actually solve the hash, all that matters is how much effort you expended in comparison to the rest of the team.

Pooling in this way has kept the little guys in the game even as solving a block gets harder and harder.

But to be competitive even in a pool, you’d better be using ASICs.