Bitcoin is not mined with picks and shovels, but with purpose-built equipment known as miners.
Bitcoin mining is done by verifying and adding records of bitcoin transactions worldwide onto a public ledger known as the blockchain. As each new block is validated, it is added to the previous blocks in a series like a chain, hence the term, blockchain.
The miner who successfully validates the block ahead of other miners is rewarded with bitcoin. The amount of bitcoin received by the miner consists of the block reward as well as the sum of bitcoin transaction fees within that block. For a detailed explanation of the bitcoin mining process, see How Bitcoin Mining Works.
In the beginning when bitcoin had little or no value, and hence low adoption, the number of transactions taking place worldwide every minute was low. One could easily use a built-in graphics card or graphics processing unit (GPU) in a laptop or desktop PC to mine for bitcoin.
As the value of bitcoin increased over the years:
- worldwide adoption increased leading to exponential increase in the number of transactions
- more people got involved with mining and connected their miners to the system
- the hashrate capacities of the GPUs became inadequate
(due to increasing transactions and bitcoin mining difficulty – see below)
- the need for much higher computing power became necessary
It is important to note that for item 4, the use of higher computing power led to increased power consumption and electricity cost, and continuous cooling was also required to prevent overheating.
The decreasing supply of bitcoin and increasing number of miners also meant that bitcoin was getting harder and more expensive to mine, and would only be worthwhile and profitable if utility costs and overheads were kept to a minimum, after subtracting hardware costs and mining pool fees.
From experience of power and required cooling (from 24/7 air-conditioning) expenses based on domestic electricity tariffs for most parts of the world, it is now no longer profitable to run a DIY bitcoin mining operation from home since around 2013 and 2014.
With yearly declining mining profitability, only a bitcoin mining farm housed in a building with its own efficient power grid and cooling can make the cut and seem worthwhile these days, since the last few years.
Also, GPUs are no longer adequate for mining bitcoin anymore due to their comparatively lower hashrates compared to more current state-of-the-art mining equipment, which runs at much higher hashrates at greater power efficiencies.
So, what is a bitcoin mining hardware and what does it look like?
Bitcoin Mining Hardware
While bitcoin was once possible to be mined using a computer’s built-in CPU and GPU, the transaction volume and mining difficulty since the last few years was such that mining activity was only viable and worthwhile with purpose-built hardware known as miners.
Such miners were also known as ASIC miners, or Application Specific Integrated Chip miners – which meant they were built and designed for only one specific purpose – bitcoin mining.
In 2016 and 2017, the most efficient and capable miner available is the AntMiner S9, which is designed with 16nm chips for high efficiency and quick heat dissipation. Having the AntMiner S9 served three main purposes:
- the higher hashrate gave a competitive edge over other (older) miners in use around the world
- a better power efficiency meant lower power consumption and lower utility bills
- a faster heat dissipation meant lower cooling load requirements and lower utility bills
In comparison with previous ASIC miners from Bitmain and corresponding specifications, the advantages of the fastest and most efficient miner can quickly be deduced:
|BITMAIN MODEL:||AntMiner S5||AntMiner S7||AntMiner S9|
|YEAR RELEASED:||December 2014||August 2015||May 2016|
|HASHRATE:||1.155 TH/s||4.73 TH/s ±5%||13.5 TH/s ±7%|
|POWER CONSUMPTION:||589 W||1293 W||1323 W|
|POWER EFFICIENCY:||0.51 W/GH||0.27 W/GH||0.098 W/GH|
|ASIC DIMENSION:||28 nm||28 nm||16 nm|
|PRICE:||US$530.00 (used)||US$1,190.00 (used)||US$3,850.00 (new)|
Note that there are also other models by Bitmain prior to the three shown above – the AntMiner S1 (180 GH/s), AntMiner S2 (1000 GH/s), AntMiner S3 (450 GH/s), AntMiner S4 (2 TH/s) etc. There are newer models with more efficient chipsets now that are fast superseding the S9.
Read How Bitcoin Mining Works for more information about the processes involved in bitcoin mining and why it is important for the bitcoin economy.