One of the most overlooked fundamentals of bitcoin is driving not just digital currencies, but the functionality of technology.
Even if you don’t know much about bitcoin, or simply spend your time dedicated to your Bitvavo dashboard, carefully studying market trends and learning to decipher complicated graphs- you’ve surely heard of bitcoin mining. However, this core fundamental of the bitcoin network is often overlooked by most enthusiasts, despite its health being crucial for network function. But mining isn’t just important for those who dabble in bitcoin, it’s also becoming a main driver for innovations in computer hardware and processor form and function.
Processors are the main unit of almost any computing device. They are the specialized electronic circuitry that exists within your computer, executing all of the commands that create the computer programs we interact with daily. So while these little boards of soldered circuitry have become an integral part of our everyday lives- what do we really know about them? And how is bitcoin shaping the way they are made?
How Bitcoin Mining Works
What was once a fairly lucrative process, bitcoin mining has now become nearly cost prohibitive to anyone that is new to the arena, or lacks access to cheap and elaborate electronics. Despite this being the case, bitcoin mining is still an essential part of bitcoin, and here’s how it all works.
Bitcoin miners’ function as verifiers of all the transactions that occur across the bitcoin network. Bitcoin transactions use a complicated mathematical process (known as cryptography) to ensure that each transaction is authentic and unduplicated. Miners use shared computing power to solve the thousands of equations that are put to the network daily. Depending on the time it takes to solve these equations, the network can make them harder- requiring more computing power, or easier- requiring less. \Not only does the difficulty of equations regularly change, but miners also compete amongst each other to mine “blocks”. Blocks are 1 MB chucks of verified transactions. Once a block has been mined, the miner is given a reward of freshly minted bitcoins. However, not all miners will receive their “block reward”, instead only the first miner to find the answer to the equation is rewarded. So, some may mine far more than 1 MB before they are the first to arrive at the correct conclusion and get the rewards.
In the early days of bitcoin, there were few transactions that needed to be processed, and likewise, there were few miners. Which made it a great way to build up stores of bitcoin, even if you only had a small processor. Most early miners used simple CPUs (Central Processing Unit) in order to mine. These processors are the same ones that are found in most household computers and even smartphones. Block rewards were also bigger. The value of rewards that miners enjoy for their efforts gets reduced by half roughly once every four years. This “halving” coupled with the alteration of difficulty keeps many new miners from entering into the arena, it has also bolstered the drive to create better hardware and “mining clouds”, or group mining efforts. Which is why many miners that are active today use ASICs (Application-Specific Integrated Circuits).
So, as you can see, having a super powerful computer can help miners create a better scenario for generating revenue. Not just in that they process data much faster, but better hardware also helps cut electricity costs, as the computer itself requires less energy. AS any hardware system computes data, electricity is used not just to power the computer, but also to keep the machine from overheating. As computers that are under near constant workload generate a ton of heat. To the point where it is suggested that any serious miner have a good source of reliable, renewable energy, or use their hardware in colder regions in order to generate heat for households. And no… we’re not kidding.
What is an ASIC?
The latest hardware available was essentially tailor made for bitcoin miners. These machines called application-specific integrated circuits were a step above anything that had ever been created before it. Where the original CPUs were just repurposed of “ramped up” once they became outdated for mining, ASICs were the first processors to actually be made specifically for mining bitcoins and the demand the process creates. First created in 2013, ASICs were optimized only to mine bitcoin, making them out perform any other processor on the market.
Since 2013, many optimizations to the functional structure of ASICs have been made- with a concentrated effort on making them smaller. This type of dedicated design and continued innovation of tailor-made technology is becoming vogue for many types of computing systems- not just bitcoin itself. So in the future we could see more purpose built processors creating a focused efficiency for all types of gadgets. Which means the future of both bitcoin mining and home electronics is in the hands of ASIC.