Many respected economists recognize that the emergence of cryptocurrencies could be the starting point for a radical transformation of the entire global financial system. But financial technology is not the only area where Bitcoin has created a stimulus for development and improvement. Another direction is bitcoin mining, which we know as mining.
In fact, the evolution of mining devices in just a few years is astounding. In fact, the &lquot;monetary&rquot; industry created a new class of computing machines in just three years and went from a long outdated 130nm process to the cutting edge of modern electronics.
In the first part of this article, we will discuss the evolution of mining technology from the launch of the Bitcoin system to the mass production of customized devices.
While more than half of Bitcoin’s existence has been mining on general purpose computers, we will not dwell on the details of that process. I don’t think you’ll be interested in reviews of the most common processors and graphics cards.
But the history of rapid development of ASIC-mainers, fierce competition, rapid enrichment and bankruptcy of manufacturers, development of enthusiasts and squeezing all opportunities from new and old iron is really fascinating, even for those who once participated in it and now, in the noise of fans or murmur of the cooler, continues to mine new coins.
Start at. Mining on processors
It’s not hard to guess who became the very first miner in Bitcoin history. Of course, it was the creator (or creators) of the cryptocurrency – Satoshi (Satoshi) Nakamoto. It is widely believed in the community that Satoshi has been mining alone for a long time and has more than a million BTC in his wallets.
However, it is very difficult to substantiate this opinion with facts. The only proof is that all these coins have not yet come into motion. But there could be many reasons for this.
Let’s use only the known facts. Between the creation of the genesis block on January 3, 2009, and the publication of the first Bitcoin v0.1 client, only 15 blocks were mined, from 0 to 14. Thus, the “guaranteed” Satoshi premine is only 750 BTC. From there he could compete with other miners.
These people are now called “early adopters. Most of them are unknown to the community.. The first transaction in the Bitcoin network took place 3 days later, on January 12, 2009, between Satoshi and Hal Finney for 10 BTC. A total of 5 transactions totaling 32 BTC were made on the same day from this address, which indisputably belongs to Satoshi.
From the technical point of view, Bitcoin mining on processors is not of interest – it is a usual hash calculation operation using the SHA256 algorithm, which is performed in many other cases not related to cryptocurrency.
Satoshi probably didn’t anticipate how quickly the mining industry would grow. It was mining on PC processors, the most massive chips in the world, that was supposed to make Bitcoin truly decentralized. The only vulnerability here is in front of botnets, which can force tens of thousands of users’ computers to mine a single wallet.
While cryptocurrency has been fun for geeks, mining on CPUs has not been very popular. The first change in Bitcoin’s complexity, showing that several hundred processors are already mining, happened almost a year after the genesis block was created, on December 30, 2009.
The largest increase in complexity in a single recount, a fourfold increase, occurred on July 16, 2010 in block 68544. This was due to the publication of Bitcoin on July 11 on the popular geek website Slashdot. In just a few days, the number of Bitcoin users, and thus miners, increased many times over.
Farmers’ competition. Mining on video cards
By the summer of 2010, Bitcoin’s popularity and exchange rate had risen so high that mining started to bring in real income, albeit a modest one. In July, the price of 1 BTC was about 10 cents, that is, mining one block brings about $ 5. Mining began to move to the commercial arena – which means that competition couldn’t help but lead to a technology race.
On July 18, ArtForz launched the first-ever GPU mining farm and produced the first block, using the parallel processing capabilities of the OpenCL driver. Thus began the era of industrial mining.
The transition to video cards was a huge leap compared to the “classic” CPU – not only did one video card count several dozen times more hashes than the CPU, up to 4 video cards could be installed on one cheap motherboard even then, and later up to 6, with a limit of 8 GPUs (one dual-processor card counts as two GPUs). A computer with even two processors in the minimum configuration costs almost as much as a farm of several top graphics cards. Thus, graphics cards immediately overshadowed processors.
But for a while, GPU mining software remained out of reach for the masses. It was only in September 2010 that a CUDA-based miner was published for nVidia cards, and in October – for ATI Radeon based on OpenCL.
The first cryptocurrency pool in history, Bitcoin.cz, known as Slush’s pool, opened on September 18. It still works, and its creator, the Czech programmer Marek Palatinus, is still an active member of the community. In early January 2011, the pool gained 10 Gx/s capacity, now seemingly ridiculous. But back then the complexity of mining Bitcoin barely exceeded 10,000 – only 5 million times less than it is now!
On February 9, 2011, Bitcoin on MtGox was trading at par with the dollar, and passed the $20 mark within a few months without stopping.. Extraction of one block now brought $1,000, and the daily production was almost $150,000.
Feeling the easy money, miners around the world rushed to buy up video cards. The competition was growing, the complexity continued to carry upward, reaching 1,000,000 by mid-June. However, the hacking of MtGox, and then some other services, caused an exodus of Bitcoin users and a decline in mining capacity that lasted into the fall.
On August 23, 2011, the first block was mined by the decentralized pool – P2Pool. Unfortunately, due to the complex setup and instability of mining, most miners still prefer centralized services, and p2pool leads a miserable existence, very rarely mining more than 1 block per day.
On October 7, 2011, Litecoin was launched – first Bitcoin fork based on alternative hashing algorithm. It was designed to stop the glut of video cards and give a chance for mining on CPUs. Ironically, 2 years later LTC became a haven for video card miners, fleeing the invasion of ASICs. We’ll talk about that in another article.
For almost three years, graphics cards have ruled the mining industry. November 28, 2012 was the first halving of the reward for the block – from 50 to 25 BTC. But it did not stop the gradual increase in complexity. At the beginning of 2013, despite a slight correction, it was hovering around 3,000,000. However… it was just preparation for another jump.
Smaller, cooler, more powerful. FPGAs come and go
As early as 2011, some enthusiasts began to realize that video card farms were consuming too much power, requiring constant attention and additional expense. They started looking for a solution that could cut costs.
At the time, the most obvious solution was FPGA chips, which were less versatile than CPUs, but more energy efficient.. It was much easier to parallelize them on the same board, and the power and cooling requirements were noticeably reduced. The final device was quite expensive, but much more compact and stable than a video card farm. And the gain in energy consumption was thousands of percent.
And yet, graphics cards remained the most mainstream solution, cheap and available. There were few people willing to pay several thousand dollars for a device with very limited use. FPGA miners were short-lived and remained a niche product that did not play a significant role in mass mining. But these findings then came in handy for ASIC-mainer manufacturers, because the layout of boards, devices and software were very similar.
Two FPGA miner manufacturers have made much more significant contributions to history in the recent past:
- Swedish KnC Miner, founded in September 2012, with its KnC Mars at 6 Gx/s
- American Butterfly Labs with two devices: the BitForce SHA256 Single with an 832 Mh/s hash rate and the Mini Rig with a 25 Gh/s hash rate.
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At the time, it was very powerful hardware, only consuming 20 watts per GHz-roughly 20 to 30 times less than a video card farm of the same size.. But it cost accordingly: $6,000 for the Mars and $15,000 for the Mini Rig.. The number of devices released has not been published.
All other manufacturers failed to recoup the cost, much less develop new chips. Over time, they all closed.. The payback of FPGA miners raised many questions, but those who got them before the beginning of 2013, had all chances if not for super profits, then for a decent profit.
The advent of. The first ASIC miners
Unlike FPGAs, which are mass-produced and used for a wide variety of tasks, ASIC (Application Specific Integrated Cirquit) chips can only perform the one task for which they were designed. But they do it much better than any general purpose processor – the difference in performance of otherwise similar devices can be tens of times greater.
There is a downside to this: just designing and manufacturing a prototype ASIC chip using current technology costs several million dollars. This is a long and time-consuming process, the positive result of which is not guaranteed by anyone. In addition to the chip itself, the developer has to do everything from the motherboard, the “strapping” and cooling system to the software, and then do all the testing.
The most forward-thinking vendors started developing custom chips as soon as the first FPGAs went into production, which was summer-autumn 2012. And the most enterprising decided that there was no need to take all the risk – it could perfectly well be paid by the buyers.. This is how pre-orders for ASIC miners appeared.
The first publicly known three ASIC creators were two Chinese companies, ASICminer and Avalon, and one American company, BFL (Butterfly Labs).
The creators of the first ASICs, from left to right: Sam Cole (KnC Miner), Josh Zerlan (Butterfly Labs), FriedCat (ASICminer) [presumably] and Yifu Guo (Avalon)
In the photo you can see four people – probably the most famous during the “ASIC revolution”. It was made in Singapore in August 2013, and it is truly unique – this company has never come together again. Remember these names and faces. With these people, wholesale and retail, hundreds if not thousands of ASIC-miner buyers have dreamed of having a heart-to-heart talk.
But let’s talk about each of the manufacturers in order.
ASICminer
This company with a catchy name was founded on July 18, 2012, by three Chinese citizens. She collected investments through public forums, but not from the first people she met.
ASICminer’s approach to customers was quite different from that of other manufacturers. They did not trade retail for a long time, but focused on large depositors who got their share of the stock. On the open market, these stocks began to sell only after the major investors got their slice of the profits. Representatives of the company answered absolutely all questions, including those regarding in-depth technical issues.
The identity of the main founder and mastermind of ASICminer is still unknown – in the community he is known only by nickname “FriedCat”.. He may not be Chinese, although he has managed to settle down and build a business in that country.. The company’s employees don’t give their boss away.
In early 2013, ASICminer developed a chip using the 130nm process, long obsolete in consumer electronics. It was chosen because of its relatively low cost – a total of $150,000 was spent on the development of a completely new ASIC.
The first generation ASICminer miners were implemented as Blade Block Erupter boards with the then good characteristics: 10Gh/s hash rate and about 100W power consumption. The power efficiency was twice as good as the latest FPGAs, despite the crude manufacturing process.
Block Erupter boards could be installed in multiple chassis, compatible with standard 19″ server racks. ASICminer was the first company to open a special data center for mining.
In the spring of 2013, it installed its first batch of devices, which sold out in 1 hour at a price of $12,500 by the company’s shareholders. Their total performance was up to 40 Tx/s, while as of January 1, 2013, the hash rate of the entire Bitcoin network was about 25 Tx/s. This datacenter has been the absolute leader in Bitcoin mining for several months, outpacing the largest pools.
Blade Block Erupter v.2 was on sale in April for $7,500 on the open market. The miner was successful, so the company decided to improve the ASIC and in the summer began large-scale sales ASICminer Cube at a price of $ 7,000. Its specifications are 30-37 Gx/s and 430 watts.
Along with the Blade Block Erupter came a portable version – the USB Block Erupter with a single chip in a flash drive-like casing. The keychain with 330 Mh/s power was initially sold for 1 BTC and at the beginning the demand was great – dozens of them were bought and connected via USB-hubs in huge clusters. However, the idea was unsuccessful, miners were rapidly becoming cheaper – in a few months their price collapsed by 30-40 times. Now you can buy such a curious device on Ebay for a few dollars. This souvenir is also good for learning how ASIC chips work and circuit design.
By the end of the summer of 2013, ASICminer was forced to retreat under the onslaught of competitors – its chips quickly became obsolete, and the development of new ones was slow. Stocks were falling.. The firm was able to return to the market only a year later, but soon closed permanently after the mysterious disappearance of the Roast Cat with a large sum of money. He was never found.<br
Avalon Project
Avalon sounds dignified, doesn’t it? That’s right, it’s a company with a lot to be proud of.. It was founded by Yifu Guo in September 2012.
Even though Yifu is pure Chinese, the association of his company with King Arthur’s fairytale city suggests that he was familiar with European culture and counted primarily on European and American customers.
The Avalon team began chip development at the same time as its competitors, but only produced limited batches at high prices. So-called “batches” from Avalon stirred up rumors and legends in the community. The first ASIC miners were produced using 110nm process technology, with a default hash rate of 60-65 Gh/s (82-88 Gh/s in overclocking) and a power consumption of about 700W.
The first generation was released in three batches:
- The first batch of 300 devices sold at the very start, in 2012, for $1,300, when the idea seemed too bold and the start of pre-sales did not generate much excitement. Buyers received miners in February-March 2013. They paid for themselves in a matter of days and began to bring in a net profit. The owners of the first batch from Avalon really went gold, and their example became a lure for buyers of the next batches. But they were much less fortunate.
- The second batch of 600 miners went on sale in mid-February for $1,500 (in bitcoins – about 50 BTC at the time), and was sold out in a few days, despite the widespread skepticism about “asics” at the time. Here, customers were much less fortunate – the devices arrived with a long delay and had already been used.. However, they also turned out to be a good buy. A detailed review of one of them can be found in this article.
- But the third battement, also of 600 pieces, has very badly damaged the reputation of the manufacturer. First, the price went up almost 5 times – 75 BTC at an average rate of about $100. And secondly, the delay in delivery turned out to be even greater – many customers received their devices in July and even in August, when the complexity multiplied and the second-generation ASIC went to market. Most Avalon owners of the third batch lost money and blamed the manufacturer, not without reason.
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Miners from Avalon are stable, but unfortunately the manufacturer uses an unfortunate TP-Link controller, distinguished by its incompleteness and constant “freezes”.. This flaw has accompanied Avalon devices for more than a year. However, the company has not slowed down and is still in line after its transformation into Canaan Creative, although it has lost the advantages it accumulated in the beginning – now Avalon is just one of many manufacturers.<br
BFL – Butterfly Labs
BFL, aka Butterfly and Granny Labs, is one of the most controversial companies in the history of mining, and its name has become a nickname to describe an unreliable supplier that fails to. It has undoubtedly and by a significant margin secured its place as the best manufacturer of pre-orders for ASIC miners. Only it was much more difficult to get the devices ready.
Butterfly Labs was the first manufacturer to begin pre-sales of ASICs. Confidence in success was inspired by previous developments in the field of FPGA miners, which were delivered on time and worked well. In June 2012, the company offered customers such a lineup:
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- Jalapeno for $149 and 4.5GHz
- SC Single for $1,299 and a performance of 60 Gx/s
- SC MiniRig for $30,000 and a performance of 1,500 Gx/s
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On the first day, $250,000 worth of pre-orders were purchased, and the interest of “investors” has not waned for a long time thereafter. The chips were promised a 65nm process, 0.9W power efficiency at 1Gh/s and in a QFN package.
But when they got down to business, it turned out that creating an advanced ASIC was much more difficult than collecting pre-orders. Shipment dates were postponed multiple times, power efficiency changed to 5.5W per 1Gx/s, the package changed from QFN to BGA, and the SC MiniRigs capacity dropped to 500Gx/s – instead of one “box”, customers were promised 3!
The Internet was full of angry feedback, because the company does not always give reasons for the next failure of terms, and to get compensation very few lucky people. The phrase “just two more weeks” that BFL PR director Josh Zerlan tried to use to reassure customers has become a winged phrase among miners.
The first Jalapeno units appeared in reviews in late April and didn’t start arriving to customers until May 2013, with mass shipments beginning in June and July. In August, increasing complexity reduced the profitability of BFL devices to the payback line. And those at the back of the queue received orders in the last months of 2013, when BFL’s miners were only suitable as electric heaters against the competition.
In August 2013, the company announced a unique 28nm ASIC, the Monarch, made in a video card format, inserted into a regular PCI-e slot of a personal computer, but with an external power supply. The second delivery was with a USB connection. “Monarchs were sold at the following rates: 300 Gx/s for $1,497 and 600 Gx/s for $2,196.
Unlucky customers who were still waiting for their Single and MiniRig orders from a year ago were asked to convert their orders to Monarchs with a surcharge and wait another N*”just two weeks”. There aren’t many people like that anymore.. In March 2014 the supply of Monarchs did start, but in very limited quantities. Butterfly Labs no longer had the funds for mass production.
The company was sued several times by customers for delays and denial of refunds, and in late 2014 it was shut down by the FTC, the U.S. Federal Trade Commission, for several months. But in January 2015 it reopened and even issued some refunds.
Further prospects of Butterfly Labs did not inspire optimism – the trust of the community was finally lost, except for small improvements of “Monarch” there were no new developments. The BitSafe hardware wallet did not come out of the testing stage. Soon the “grandmother” of cryptocurrency mining passed away unnoticed.
But the story of mining does not end there. It continues…