- Computer chip performance has increased exponentially in the past century
- Production of Bitcoin has evolved from a process done on individual computers to a worldwide industry
- This industry is pushing technology towards efficiency plateaus in transistor production
Moore’s Law and Bitcoin
Gordon Moore, CEO and founder of Intel, made the prediction that the number of components per integrated circuit would double every two years. Coined ‘Moore’s Law’, this prediction has held strong for nearly 50 years. The doubling of speed and efficiency of integrated circuits has enabled the exponential growth in computing power and human adaptation of technology.
With this adaptation to technology, innovative solutions to previously-unknown problems have been developed. Aside from advances in digital entertainment, social media, communication, etc, technology has spurred advances in financial solutions.
Cryptocurrency and its deflationary production (the rate of bitcoins produced every hour is cut in half every four years) are an epitome of Moore’s law and technology’s progression into human society.
How and why mine for Bitcoin?
Bitcoin was initially conceived as a currency with decentralized control for production. It has arguably stayed true to this original purpose while also becoming a form of financial independence for entrepreneurs who produce Bitcoin and other cryptocurrencies.
Through a deflationary system of production where the rate of new Bitcoin added to the market is cut in half every four years, Bitcoin stimulated a large industry that is dedicated to its production. Coined ‘mining’, new bitcoins are generated in a process where computers run through an algorithm attempting to solve the “hash key” for the most recent block of data. When a computer solves for that block of data by finding the “hash key”, it is rewarded with 6.25 bitcoin. Then, all computers in the network begin working to solve for the next block.
What is hashpower?
When mining for bitcoin, the more hashes a computer is able to process, the more likely it is to solve for the hash to “win” the block.
Processing more hashes = more hashpower
As more individuals add hashpower to their own mining operations, the harder it is for other miners to win a block. The mining community started “Mining pools” to pool together their hashpower and share the rewards with pool members based on their relative proportion of added power. Individuals with smaller operations could still participate in the network at a profit and large miners improved efficiency.
This system of competition to win blocks snowballed the hashpower of the Bitcoin network exponentially. The BTC network now has more computer power than any other network in the world in terms of floating-point operations per second (FLOPS) the network can perform. To put the capability of the network’s power into perspective, the Bitcoin network is so large that it consumes more electricity annually than more than 128 nations.
The Bitcoin network consists of more computational power than any other network in the world
The beginning of BTC mining
Hardware development in Bitcoin is a prime example of Moore’s Law and the unstoppable growth in technology. Since its inception in 2008, the hardware used to mine bitcoin has progressed immensely.
Bitcoiners initially mined on CPUs on their personal computers and shortly afterwards on GPUs.
This critical phase of Bitcoin created a decentralized system of currency control. BTC started as a nascent platform used by a select-few cyber punks politicos looking for financial freedom. It did not follow the direction of a central organization. After gaining a cult following, individuals began improving the effectiveness of their hardware to mine more profitably.
A new era for mining
In 2013, Canaan Creative changed the ecosystem. It produced the first application-specific integrated circuit (ASIC) hardware for mining Bitcoin. It used 130 nanometers (nm) transistors. ASICs provided miners a significantly more efficient manner to mine for bitcoin that consumed less electricity.
Between mid 2013 and 2014, the hashrate of Bitcoin increased from less than half a PH/s (petahash per seconds), a quantification of amount of estimations a device mining for bitcoin, to over 60 PH/s. The Bitcoin network essentially saw over 12,000% growth in computational power in just one year.
Bitcoin hashrate 2013-2014 – taken from Coinwarz.com
The cryptocurrency market has continued to grow in both demand and supply of technical prowess.
In 2020, commercially available mining machines have ASICs chips with transistors sized at 7nm, effectively increasing crypto ASCI’s potential by 18 times compared to the 130nm rig from Canaan.
During this time, the Bitcoin hashrate shadowed the gains made from 2013-2014. It rose above 123 EH/s (exahash per second) in 2020, a 20,000% increase from 2014. For perspective, one PH/s is one quadrillion (1 x 10^15) hashes per second. One EH/s is one quintillion (1 x 10^18) hashes per second.
The Bitcoin network is now estimated to consume electricity at an annual rate of 56.59 Terawatts, a rate higher than Israel and Algeria’s levels of electrical use.
Computing reaching its physical limits
The ever-growing demand for access to crypto mining hardware has stimulated advancement in mining technology. The largest manufacturer of bitcoin mining equipment, Bitmain, is selling mining machines with 7nm chips.
Before delivering these rigs to consumers in May, their first wave of orders sold out well in advance.
The market continues to demand more advanced hardware. Regardless, Moore’s Law may be reaching its end due to quantum and atomic limits.
The minimum size required to effectively channel and gate electrons in a transistor is argued by many to be over one nm. Below 1nm, the ability to control atoms in a transistor falls victim to the haphazardness seen at atomic levels.
The Future of Mining Hardware
Consistent with Moore’s Law, a journey from the 7nm chips of today to 1nm would take less than six years. Electronic transistors may not see improvements after that point.
As miners look for more speed and efficiency in their hardware, size of transistors may not be the solution that manufacturers find for developing new hardware. Some say that Photon transistors may be the solution for computational technology.
Photons have larger wavelengths than electrons and would require larger transistor sizes than what is already commercially available, but their speed is significantly greater than electrons.
Until manufacturers can create chips that require less electricity without losses in hashpower, miners will likely stick to current technology. The future of mining in the next decade is uncertain. However, we are sure to experience innovations that will spur Bitcoin and other currencies further.