The Evolution of Bitcoin Mining From Satoshi to Till Now

As the world continues to embrace cryptocurrencies, so too do they evolve. Evolution affects many of their processes and functions.  Bitcoin, your premier digital asset, isn’t exempt from these changes. One important process where it has undergone tremendous change is in Bitcoin (BTC) Mining.

So what is Bitcoin Mining? What’s its importance? How has Bitcoin Mining evolved with time, and what’s its future? Well, this article takes you through the evolution of Bitcoin mining. The process will help you understand what it entails and its importance to the crypto’s sustenance. First things first, though, let’s understand what BTC mining is all about.

What’s Bitcoin Mining?

Just like fiat currencies, cryptocurrencies have a way of replenishing their supply. For Bitcoin, this happens through a process known as mining.

Bitcoin Mining is the process of creating new and more BTC. It involves verifying and posting onto the Blockchain (BC) of all transactions done in BTC. To do so, miners compete for the honors of adding the next block of transactions on the BC by solving complex mathematical equations.

• Ten Minute Blocks

BTC’s inventor Satoshi Nakamoto designed it to mimic a rare commodity, for instance, gold. He achieved that by including cryptographic proofs in them.  Now Cracking the code in these proofs is exhausting, which makes creating a new BTC difficult.

Additionally, Satoshi designed the BTC network to create new blocks every ten minutes. It’s during that period that miners compete in solving complex mathematical questions. 

• BTC Block Rewards

The first to solve it gets to post the transactions on the BC and earns BTC for their effort.  Thus new coins get into circulation, boosting the available supply. Earnings from the verification of new blocks are known as Block Rewards.

To solve the equation, the miners rely on:

• Transactions in the last 10 minutes
• The previous block’s hash
• The nonce
• Any other information relevant to the transactions

• BTC Halving

The equations progressively get tougher requiring higher hashing power and electricity to crack. As a result, mining releases lesser BTC per Block, ensuring its scarcity.

Again, the block reward halves after every 2,160 verified blocks. That is every four years starting from 2012. This halving will continue till the year 2140, when we’ll run out of BTC to mine.

So, What’s the Importance of Bitcoin Mining?

As stated in the introduction, mining is crucial to the sustenance of the Bitcoin economy. Here are the reasons why it remains essential:

1. It enables the release of new BTC coins to the market through the mining reward.
2. Mining helps to verify transactions, therefore, preventing the possibility of double-spending.
3. Mining enhances the BTC network’s security by impeding the possibility of a 51% attack.
4. It helps the coin attain true decentralization.

How Has Bitcoin Mining Evolved With Time?

BTC’s Proof Of Work Consensus means that mining progressively gets challenging and less profitable. To sustain a successful mining venture, you’d therefore need better equipment time after time.

While you’d have found it easy to mine BTC using your PC a decade ago, things are different today.  Now you need specialized computers and chips for you to hack it in your mining venture. 

Stages in The Evolution Of Bitcoin Mining

Looking at the history of BTC’s mining equipment reveals four stages of mining evolution. Here’s a rundown of each one of them.

• CPU Mining

Satoshi Nakamoto premiered CPU mining, also known as the first generation miners, in January 2009. Since BTC hadn’t caught on, it was easy to mine blocks using a regular multicore CPU computer.

Then, the crypto’s low demand required lower hashing rates and lesser energy to verify transactions. The entry of new miners changed the situation, though. Soon CPU mining couldn’t cope with the rising demand for BTC and became obsolete.

• GPU Mining

The exit of CPUs gave rise to the second generation of miners, the Graphic Processing Units (GPUs). However, BTC’s growing value increased its mining difficulty and meant that you required a computer with better functionality. 

The gaming industry had developed GPUs for their applications. But they proved capable of handling many mathematical operations at a go. Despite being twice as costly as CPUs, they found their application in mining because they’ve got an output six times better.

• FPGA Mining

As was the case with CPUs, GPUs also fell out of favor. They couldn’t match up with the BTC’s ballooning hashing requirements. So in 2011, the third generation of miners powered by Field-Programmable Gate Arrays (FPGAs) entered the market.

The FPGAs proved to be more energy-efficient than GPUs.  They consume a fifth of the energy that the latter requires. Nevertheless, they, too, didn’t last long.

• ASIC Mining

FGPAs’ exit ushered in the fourth and current generation miner using Application-Specific Integrated  Circuits (ASIC) technology. ASICs have remained popular due to their high energy efficiency.

China’s Canaan Creatives produced the first ASICs for BTC mining in 2013. As they come pre-designed for BTC mining, they’re highly optimized for that function. Consequently, their efficiency outmatches that of their predecessors.

Chip Size and Efficiency

Other players have since Canaan Creatives developed ASICs further. Examples include Bitmain and MicroBT. Part of their advancement has seen a reduction in chip size. From an initial 130 nm in 2013, the latest models sport a 7 nm chip.

 

Chip size affects ASIC efficiency. The bigger the chip size, the more energy it requires for its functions. ASICs have revolutionized mining. According to Josh Metnick, CEO of mining consultancy firm Navier, the speed of ASIC devices today was a billion times that of an average CPU in 2009.

GPU Vs. ASICs Mining Which  One is Profitable?

Both ASICs and GPUs have their pros and cons. So choosing one device over the other is purely a personal decision. Whereas GPUs have broader functionality, ASICs are BTC mining-specific.

• ASICs Consume Less Power Than GPUs

Generally, though, ASICs seem to edge when it comes to profitability. First, they consume less power compared to their counterparts. Second, since overhead costs, including power, impact profitability, their lesser energy demands make them a better pick.

• It’s Cheaper To set up ASICs compared to GPU Rigs

Secondly, ASICs are easy and cheap to set up. GPUs require setting up rigs for them to be profitable. You’d spend more to set up a rig than to acquire one ASIC.

• You Earn More Per Day Using ASICs

Another area where these two differ is in their rates of earnings per day. Calculations on a mining calculator such as Nicehash show that ASIC devices help you earn about seven times more per day than what you’d do using a GPU.

• ASICS Wear Out Faster

GPUs have better lifespans, and ASIC wears out faster. So, on average, you’d have to replace your hardware annually. In contrast, GPUs can serve you for 2-3 years before requiring replacement. So on that score, you’ll spend more using ASICs, which eats into your profitability.

What’s The Future of Bitcoin Mining?

Competition for BTC mining rewards has indeed spurred evolution. However, as BTC mining continues to grow in difficulty, it’s fair to expect change at some point in the future. 

As we advance, it’s not clear where BTC mining will evolve to. What’s certain is that there’s been a reduction in efforts to further cut ASIC sizes since 2015. Consequently, the opinion suggests that competition in  BTC mining will shift from emphasizing hardware and equipment to other areas giving them a competitive advantage. That’s unless there’s a radical shift in technology.

Final Thoughts

As it is part of an evolving cryptocurrency ecosystem, Bitcoin isn’t immune to change.  One area where it has experienced significant change is in its mining. From Satoshi to date, the evolution of Bitcoin mining has gone through four generations. At the moment, efforts to further transform this necessary process have slowed. That said, there’s reason to believe that change could come in the future.