ASIC stands for Application Specific Integrated Circuit. In the context of cryptocurrency, the application that that they are built for is mining.
At present, the only cryptocurrencies ASICs are relevant for is bitcoin, the original cryptocurrency. This is because bitcoin has gotten so difficult to mine that specialized hardware is now necessary to have a chance of making a profit.
Bitcoin Mining Evolution
When the software for mining bitcoins was released in 2009, bitcoins could be mined with an ordinary CPU, found on any computer. But bitcoin and its blockchain are designed so that a steady supply of bitcoins is released every 2 weeks.
And this is done by adjusting the network difficulty. Essentially the more miners that tried to mine Bitcoins the more difficult it became to do so.
CPUs were replaced with Graphic Processing Units (GPU). These are a type of video card found in gaming computers. These units are far superior to CPUs and are acceptable for mining the vast majority of cryptocurrencies, such as Ethereum.
GPUs were then replaced with Field Programmable Gate Arrays (FPGAs) before even these were replaced with the most powerful bitcoin mining hardware on the market – Application Specific Integrated Circuits (ASICs).
What are ASICs?
ASICs are designed for one thing and one thing only. You cannot use an ASIC for anything else except its intended purpose, in this case mining bitcoins. It is a trade-off, in that the ASIC will fulfill its purpose faster and more efficiently than anything else, but can’t do anything else.
The bitcoin hardware market is currently dominated by a Chinese company called Bitmain, who develop a series of rigs called the Antminers. The 3 best Antminers are the R4, the S9 and the T9. In order to understand what ASICs do, you need to become familiar with two terms. The first is hash rate, and the second is efficiency.
The Hash Rate
The way that bitcoin mining works is that miners solve cryptographic puzzles in order to process transactions on the blockchain. They do this by generating a solution to the puzzle in the form of a hash.
Bitcoin currently uses Secure Hash Algorithm 256 (SHA 256) to secure its blockchain. What this means is that bitcoin ASICs are specifically designed to crack SHA 256 encryption by generating as many hash form solutions to the problems as possible.
Currently it is measured in trillions of hashes per second. One tera hash is equal to one trillion hashes per second. If you are operating with a measly billion hashes per second like the old days, you won’t earn much. So, the biggest characteristic of an ASIC is its raw power, which is its hash rate.
Currently the most popular bitcoin ASIC on the market is the Antminer S9, which has a processing power of 14 tera hash per second. While this is dominant on the market, 2018 is going to see a range of new models ranging from 14 to 22 tera hash per second.
It could well be an interesting year for bitcoin mining, but unfortunately one that could well see governmental forces and huge corporations running the show. Individual miners simply do not have the resources to compete in such an industry.
So, the ASIC rig essentially mines for bitcoins by performing trillions of computations per second to try and guess the solution. The second most important term in understanding bitcoin ASICs is the efficiency.
Such tremendous hashing power consumes enormous amounts of energy which can bankrupt people, quite literally. A machine can have 20% more power but be 5 times less efficient than another. The efficiency of bitcoin miners is measured in joules per giga hash per second.
Again, the Antminer S9 is the best in the market in terms of efficiency. Its efficiency is .098 joules per giga hash per second, which is amazingly efficient in comparison to other present ASIC models.
This is due to the smaller 16 nanometer technology employed by the Chinese manufacturer Bitmain, which drastically increases the efficiency of the machine.
The two main concepts you need to understand about ASIC miners are hash rate and efficiency, as these two variables will determine how profitable your mining operation will be. It is now only profitable to mine bitcoin when you are running a large mining operation.
And when running a long-term, large mining operation with multiple ASICs, it is best to go with the S9s, the premium models. Even though they will be more expensive, they will be worth it in the long run.
The S9s currently retail above $2,000 and the price of ASICs can change rapidly. For those who are interested in mining at home, Antminer R4 is the best option. Another great option is the Antminer T9.
Other ASIC Essentials
There may be another element which is important to the profitability of ASICs. This element is not well known and is the reliability of the machine. In this regard, Antminer T9 is far superior to the S9.
The T9s are far more reliable and come with a 180 day warranty as opposed to the 90 day warranty supplied with the S9. If you are running a large operation, then reliability might trump the hash rate in many instances.
The hash rate of Antminer T9 is currently 12 tera hash per second, and their efficiency runs at .126 J/GS, as opposed to the .098 J/GS of the S9. But the added advantage of reliability might just win out depending on your particular setup.
The T9 chips run at a greater voltage which means greater reliability but less efficiency. It is important to keep in mind that mining rigs generate huge amounts of heat and are very noisy, aside from Antminer R4.
It is also important to understand that mining difficulty gets harder over time. This metric is called the network difficulty.
The difficulty of mining bitcoins is adjusted every 2016 blocks (or 2 weeks) to maintain a steady flow of bitcoins. You also need to work out the cost of electricity in your area. One of the reasons that bitcoin mining is so popular in China is because of the cost of electricity, which is very low in this area.
Who Runs the ASIC Market?
Another thing to keep in mind is that the market is dominated by the Chinese company, Bitmain, who produce the Antminer series. For those who have not done business with Chinese companies, let’s just say there are some cultural differences.
Your miner will break down but don’t expect them to do much about it. Their hash boards are known to fail. And there is nothing that ordinary consumers can do as they dominate the market.
But for how long remains to be seen. The Russians are entering the race with what will be the best machine on the market, if the claims match the reality.
Russian Miner Coin has stated they are releasing the Sunrise S11i, which will provide an incredible 22.6 tera hash per second using only 2.3 kilowatts of power. The machines are available for pre-order and retail at $1,600, which is cheaper than Bitmain’s Antminer S9. The company was co-founded by Vladimir Putin’s technological advisor, Dmitry Marinichev.
Another Chinese manufacturer is also planning to enter the race. Halong Mining have an up and coming product called the Dragon Mint 16 T Miner.
It is expected to ship in March 2018 and boasts an impressive 16 tera hash of power. It is also said to be 30% cooler than the S9. Pre-orders are available, and payment can be made in bitcoin.
Other groups are also entering the bitcoin mining industry. Samsung are reported to be manufacturing ASIC chips for the purpose of bitcoin mining. And many Japanese firms are entering the race, Japan being the most cryptocurrency-friendly country in the world.
GMO Group intends to join the mining industry and has stated it will be using cutting edge 7 nanometer technology. This could potentially result in an ultra-efficient mining rig that will be far more productive and cheap.
Another Japanese financial firm, SBI Group, have been investing heavily in all things cryptocurrency and particularly in bitcoin mining hardware. 2018 is going to be a big year for bitcoin mining.
ASIC Mining Summary
ASICs are machines designed specifically to mine bitcoins and are the only profitable pieces of equipment right now. The most important items to consider when purchasing equipment are the hash rate and the efficiency of the machine. Next, you have to see what the price of the electricity is in your area.
After this, you need to input all of the data into an online bitcoin profitability calculator to see if it is profitable for you. This calculator will give you a current indication as to profitability.
At present, the bitcoin mining hardware industry is dominated by a Chinese firm called Bitmain. But this is not going to be the case for very long.