- Application-specific integrated circuit (ASIC) miners are computers that are designed specifically to mine cryptocurrency.
- Though any cryptocurrency that operates using proof of work can be mined using ASIC miners, they’re generally used for Bitcoin mining.
- Proof of work and ASIC mining are incredibly energy intensive, leading people to look for alternatives such as proof of stake.
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In cryptocurrency mining, miners need to use computers to solve an incredibly complex puzzle. The person that solves the puzzle first is awarded cryptocurrency. The most powerful computer has the greatest chance of solving the puzzle, and so ASIC mining was created to maximize the possibility of mining.
Eventually, this became the industry standard, especially for Bitcoin, considered the gold standard for cryptocurrency. Here’s how it works.
What is ASIC mining?
Application-specific integrated circuit (ASIC) miners are computers designed for the sole purpose of mining cryptocurrencies that are created through proof of work. Under this system, whenever a new block of information needs to be verified and added to a cryptocurrency’s blockchain, it’s encoded with a complicated puzzle that a computer needs to solve. Whoever solves the problem first gets to update the blockchain with the new information and is awarded a certain amount of cryptocurrency.
Theoretically, any computer can be used to solve these puzzles. However, because proof-of-work mining is essentially a race, the people with a greater hash rate — a measure of the calculations that can be made per second — are more likely to solve the puzzle first. So ASIC miners were created to increase cryptocurrency miners’ hash rates.
Rob Chang, the founder and chief executive officer of Gryphon Digital Mining, says that ASIC miners can be used to mine all cryptocurrencies that are generated through proof of work, though general computers would suffice. However, they’re practically mandatory for Bitcoin mining because of how competitive it is. “The alternative, the more generalist machines, are no longer competitive relative to the ASICS, and so it’s just not economic for someone to [use them],” Chang says.
How does ASIC mining work?
ASIC miners are designed for one hashing algorithm, which affects which cryptocurrencies you can mine. For example, Bitcoin is mined through the SHA-256 algorithm and Ethereum is mined through ETHASH. So you’d need an ASIC miner for SHA-256 and a separate rig to mine ETHASH if you wanted to mine both.
The cost of ASIC miners rise and fall with the fluctuations in cryptocurrency prices. “That’s kind of a unique aspect that I haven’t really observed in any other industry, but because [ASIC manufacturers are] a small group with a lot of power, the manufacturers have the ability to do so at least for the time being,” he says. Chang also says they’re usually priced so that it will take you a year to break even with the money you earn from your miner.
The amount of money you make can be substantially affected by how much your power costs, given the amount of energy an ASIC miner consumes per hour. Yet, there are websites that can calculate your average profit when taking electricity costs into account. When buying an ASIC mining rig, you should also be thinking about the terahash per dollar, not the overall cost of the machine. According to Chang, ASIC miners can range from $100-$120 per terahash.
The odds of single-handedly solving a proof-of-work puzzle is incredibly small, even if you had several ASIC miners operating. The Bitcoin network has a hash rate of 190 exahash (one million terahash). So if you had an ASIC miner with an 18 terahash per second capability, you’d still only have a one in 10.56 million chance of being the first to solve the puzzle.
To increase the odds, most cryptocurrency miners join a mining pool, a group of miners who combine hash rates so they have a greater chance of solving the puzzle first. They split whatever they earn based on what they contribute to the pool based on what they contributed to the group.
Is ASIC mining worth it?
The question of whether ASIC mining is worth it or not will change depending on who you ask. As discussed earlier, cryptocurrency mining takes up an inordinate amount of energy. A 2021 report showed that annually, Bitcoin consumes 91 terawatts of power, which eclipses the power usage of the entirety of Finland at 86.1 terawatts. The power that Bitcoin alone uses — 0.5% of the world’s energy consumption — puts a heavy burden on the environment.
ASIC miners get more energy efficient in taking the same amount of energy and turning it into a greater hash rate. This theoretically lowers the amount of overall power it takes to create one Bitcoin. However, approximately every four years, the amount of Bitcoin that’s awarded for updating the blockchain is halved. It currently sits at 6.25 coins, but is expected to be reduced sometime in 2024. Though the price might restabilize to account for the production decrease, the amount of energy it will take to create one coin will double overnight.
Putting aside the serious effects that ASIC mining has on the environment, there’s an additional risk that ASIC mining will become obsolete in the future. For one, nearly 90% of all the 21 million Bitcoin that will ever exist has already been mined. Unless the cap for Bitcoin changes, all Bitcoin will be mined in the year 2140.
That isn’t necessarily to say that ASIC mining will become completely obsolete. It’s tough to speculate about the future of cryptocurrency. Even if Bitcoin mining ceases, mining operations may have shifted their focus to another coin by the time the year 2140 rolls around.
Proof of work itself may also become obsolete, which would make ASIC mining obsolete by proxy. There are new methods of generating cryptocurrency that don’t require ASIC mining, such as proof of stake. Through this method, validators need to put up coins they already hold in order to validate new blocks of information. This is the method through which Etherium 2.0 — the new version of Etherium that moves away from mining and proof of work — and Web3 will operate on.