Cryptocurrency has seen a big boom in recent times with bitcoin and altcoins leading the bandwagon of popularity on which investors want to ride. Whether be individual retail investors, or a group of investors in the form of a financial institution, all of them want to leverage the benefit out of demand and supply cycles, to buy and sell at right times. To meet the circulation of such a demand-supply cycle, cryptocurrencies are mined by Bitcoin miners to bring fresh volume to play, with bitcoin mining being the frontrunner.

To understand where Bitcoin is possibly heading towards, let us look at how the journey of Bitcoin has been so far. 

How does the Bitcoin block chain work?

Bitcoin is the first ever cryptocurrency in the decentralized arena, based upon Proof of Work (PoW) consensus algorithm, with roots dating back in 2009. It is generated through an automated computation process, popularly known as mining, as opposed to a Government or a financial institution issuing the same. Unlike traditional diamond, platinum, gold, silver, or other precious metals mining, Bitcoin mining occurs through a distributed network of nodes or computers whose job is to identify and verify bitcoin transactions.

To put things in perspective, Bitcoin mining simply means a race between miners to solve math problems, and rewarded with bitcoins in return. The one who solves these mathematical equations the fastest, is allowed to record the transactions on a block, which completes the mining process. The answer to math problems is the hash number associated with that target block that needs to be determined, whether the same number or nearest to that.

This makes it evident, higher the computing power, faster the ability of miners to crack puzzles, more probabilities of getting rewarded. Bitcoin’s mining mechanism is so designed a block is mined every 10 minutes. Furthermore, the difficulty level of mathematical puzzles, also known as hash rate, automatically adjusts to the overall computing power operating in the network.

If the total computing power in the network is high, the difficulty level of mathematical equations increases, while it decreases if the total computing power is low on the network.

Looking Back At The History of Bitcoin

It was Jan 3, 2009 when an anonymous person going by the name Satoshi Nakamoto mined the first ever genesis block for Bitcoin using a simple Central Processing Unit (CPU). Today the scenario is way different then what it used to be a decade back. Nowadays, one needs specialized hardware equipment to mine cryptocurrencies, as it is no longer possible to mine it using a desktop CPU with too many miners on the network involved in mining.

The transition took place from a low end CPU to a GPU, FPGA, and best ASIC miners as of recently.

• CPU Mining

Simplest of all, mining via CPU is where it all started when Satoshi Nakamoto mined the first set of 50 bitcoins. CPU mining was not just accessible by all, but also cheapest as anybody could practically mine it using mere graphics cards on desktop without spending anything for specialized hardware equipment and yet the rewards were highest. If you have seen US TV Series The Big Bang, it shows the popularity of bitcoin to its greatest heights and how an old notebook was used to mine due to the fact that mining costs were negligible compared to the returns as one could have easily mined about 100 bitcoins within a week on an average.

• GPU Mining

With mining gaining momentum and craze, it was just not possible anymore to mine using CPUs. Hence, the era arrived to get in place specialized Graphics Processing Unit (GPU) computing power in just one graphics card, capable of delivering computing power of so many CPUs put together. This resulted in so many of them switching to a GPU setup.

• FPGA Mining

The next era was that of Field Programmable Gate Arrays (FPGA) going one step ahead of GPUs. The first ever FPGA miner was created by Pumpkin Zhang from China, also known as Pumpkin Miner. Due to the fact it required absolute high consumption of power, it took 6 months for it to phase out of the market.

• ASIC Mining

2012 was the year when the first ever ASIC miner got released with the name of Butterfly Miner. It delivered 200 times more computing power than GPU mining with the same amount of power consumption, leading to ASIC miners becoming instantly popular. The chip does go  through an ongoing innovation with sizes starting from 110nm going down to 55nm, 28nm, all the way to 14 nm.

2013 was the time when Nangeng Zhang came up with a brand new and most profitable ASIC miner, also called “AvalonMiner.” Later, Canaan Creative was formed, a full fledged mining company into production of mining chips. This was the same year when another well known company Bitmain got established.

Bitmain launched the 1st generation Antminer, a year later in 2014. Following that, the flagship product Antminer S9 launched with in-built 189 chips. The mining hardware industry went through a number of ups and downs over the course of years with a lot of miners coming to play.

• Mining Pool

The concept of a mining pool was already established in 2010 with Slush Pool, the first ever Bitcoin mining pool coming into existence that very year. Mining pools allow for the consolidation of computing power of so many miners in the network, letting the individual computing power to multiply, and so does multiply the probabilities of mine blocks. The rewards at the end are shared by the pool members, and the participation fee from each miner during the process.

As per Blockchain, computing power in the Bitcoin network increased an astonishing 100 times from 2011 to 2018, while increasing tenfold between 2018 to 2020. In fact, even the computing power reached an incredible 156 tera hashes per second (TS/s), capable of handling 15.6 billion operations every second. Professional mining pools gained instant popularity due to the fact that it was getting absolutely increasingly inefficient attempting to mine from personal computers.

• Cloud Mining

Quite recently, large enterprises are building their own mining farms or mining plants in countries, wherein the cost of electricity is exceedingly low. With more and more mining farms taking shape, the scenario of arms race is taking place between organizations, to build mining plants possible. This led to a few ASIC miners to mine with ease.

Since past five years, 70% mining power of entire mining power for Bitcoin network comes from alone China itself. This has made cloud mining play a decisive role for global miners to outperform as it allows retail miners to leverage the cloud computing power of cloud mining service providers without actually setting up a mining rig or owning mining hardware equipment. The only thing required is users paying out a rental fee for renting out the computing power resources.

Quantum Computers – Is it the future of bitcoin mining?

Quantum computers, as discovered by computer experts and scientists predict that Quantum Computers have the capacity to monopolize the bitcoin mining market, as it is capable  of giving way more security than one might expect in addition to an enormous computing power. But, as of now, quantum computers have yet to go miles with mass adoption and large scale applications, due to its design being unrealistic for mining and quite expensive to set up. All such factors do raise doubts whether mining using quantum computing is going to be unquestionably effective or not.

To wind up our discussion, as per a study conducted by Blockchain.com, world’s top five mining pools in no particular order are AntPool, ViaBTC, Poolin, F2pool, and Huobi Pool.