Bitcoin Mining Evolution: CPUs, ASICs & Merged Mining
Bitcoin (BTC) mining is one of the most rewarding but also most challenging activities in the cryptocurrency industry. Since its inception, Bitcoin has experienced a vast evolution from CPU mining (where simple retail computers were able to participate on the Bitcoin network and generate rewards) to ASIC-based and merged mining.
In this post, we will analyze the evolution of Bitcoin mining to present days and what we can expect in the upcoming years when it comes to Bitcoin mining. It all begins with the consensus algorithm.
What is Proof of Work (POW)?
Proof of Work (PoW) is the consensus algorithm that powers the Bitcoin network and other cryptocurrencies. It requires miners to compete to confirm blocks with transactions and receive rewards for the work they have performed. The chances of finding a block with transactions depend on the mining power of that particular mining pool. These chances are proportional to each mining pool’s hashing power.
When we think about blockchain networks, the higher the hashing power, the more difficult and expensive the cost of generating a 51% attack. Nowadays, Bitcoin miners receive 6.25 BTC plus fees every single time they validate a block so the incentives are indeed high in order to protect the network.
Bitcoin’s network has an important self-regulated mechanism known as difficulty adjustment. Since Bitcoin has a public pre-programmed inflation rate (deflationary), the difficulty to mine each block is correlated to the hashing power of the network at a particular time. In order to avoid a situation in which blocks are mined faster than expected (10 minutes in average per block), the difficulty is adjusted proportionally to the hashing power of the network.
Bitcoin Mining Evolution
To understand the current state of the Bitcoin mining industry and where it is headed, we need to have a closer look at how it evolved over time. Mining strategies have changed over time and so did the hardware devices needed to power mining operations.
In the early days of Bitcoin, it was possible to mine BTC with simple personal CPU power but things became much more complicated many years ago when mining difficulty was drastically increased. Nowadays, it is only possible to mine Bitcoin with ASIC miners. This is a type of specialized hardware that became very efficient to mine BTC and other virtual currencies. Furthermore, when we think about mining strategies, we should also consider merged mining and investments in renewable energies.
Let’s have a closer look at the evolution of mining along the years.
CPU Mining
The first thing you should know is that it was indeed possible to mine Bitcoin using a simple CPU 10 years ago. If you had a computer at home and you knew about Bitcoin, you could have been one of the few BTC early miners. Back then, it was possible to mine 50 BTC per block with a simple CPU.
GPU Mining
As Bitcoin’s network became more popular and bitcoin’s value increased over time, miners migrated from CPUs to GPUs. The more hashing power on the network, the more difficult to mine a block. Mining pools had no option but to adapt in order to participate in the block mining race.
Bitcoin ASICs
Let’s now move towards ASIC miners and how they have been expanding in recent years. ASIC stands for Application-Specific Integrated Circuit (ASIC). ASIC miners are specialized in Bitcoin mining and make it possible for large Bitcoin mining farms to process transactions and blocks in a very efficient way. Due to the fact that GPUs were already not efficient to mine Bitcoin, ASIC miners became the new standard long time ago.
It is worth mentioning that due to the energy they consume, miners are now focusing on creating more efficient mining farms. These mining farms highly depend on clean and renewable energy that make operations cheaper and also more efficient over time. In many cases, mining farms themselves are using their own energy sources rather than depending on the local grid.
ASIC miners are pushing for innovative ways to reduce the impact of mining activities so as to keep the network secure and protected at all times without having a negative effect on the environment.
Merged Mining Explained
Now let’s talk about a concept that is related to cryptocurrency mining. We want to make reference to merged mining and how it has been one of the major advancements in the crypto industry in recent years.
Merged mining makes it possible for miners to mine two different virtual currencies that have the same consensus protocol. The main benefit is that the miners do not lose efficiency by mining both coins at the same time. Indeed, they require the same energy and work. Hence, the miners are able to protect and profit from two different networks. Rather than mining just one of the coins, they can easily add another digital asset to their operations.
Bitcoin miners are now using RSK as a secondary mining network. In that way, they do not only protect the BTC blockchain, but they are also protecting the RSK network and receiving the rewards given by both RSK and Bitcoin.
Top Benefits of Merged Mining
Let’s now focus on the benefits of merged mining and how this could be one of the best things for Bitcoin and other digital assets. The first thing to mention about merged mining is that with the same mining hardware miners can work on two different blockchains.
This reduces the need for them to buy specialized hardware to mine two different coins. At the same time, it increases miners’ profitability over time. There is no need for them to search for tricks on how to increase their profitability, they can literally start mining two different coins and provide security to both of them.
Secondly, Bitcoin is not the only network that has benefited from miners’ work. In this case, RSK is also benefited if a miner decides to mine both BTC and RSK. In the next section, we will see the details of RSK merged mining and how Bitcoin’s miners are also securing the largest smart contract platform for the Bitcoin ecosystem.
RSK Merged Mining
RSK is the largest Bitcoin merged mining platform. Miners are able to earn around 80% of the fees of the blocks they submit to the network. This is why Bitcoin miners want to participate in the RSK blockchain and secure it as well. Through merged mining, RSK increases its hashing power massively.
Where is Bitcoin Mining Headed?
Bitcoin mining is certainly moving forward. Thanks to the large investments of crypto mining companies and other entities in the crypto industry, we know that the Bitcoin mining industry is moving towards a new type of sustainable economy.
Renewable Energies and Cryptocurrency Miners
As previously discussed, renewable energies and cryptocurrency mining are two topics that are closely related. Bitcoin mining is definitely headed towards a greener future, where most of the energy consumption comes from renewable energy sources.
The future of Bitcoin and the energy consumption of miners is closely related to clean energy and second-layer scaling solutions. With an increased number of transactions being processed by the Bitcoin network and more efficient equipment with a higher dependency on renewable energy sources, the Bitcoin ecosystem will certainly become environmentally friendly.