The Evolution and Current State of Industrial Bitcoin Mining

Mining is the process of acquiring cryptocurrencies by utilizing computing power. This article explores Bitcoin mining, tracing its historical development, current status, and future prospects.

BTC Mining: The History of Its Development

BTC mining dates back to 2009, when the first block was mined on the Bitcoin network. At that time, the block reward was 50 BTC. Initially, mining relied on CPU power. However, as the network evolved, CPUs became insufficient for effective cryptocurrency mining due to the increasing complexity of the computational processes.

In 2010, graphics processing units (GPUs) began to be used for mining. The combined use of processors and video cards increased the hash rate. By 2011, some users began constructing GPU farms with multiple graphics cards to mine more productively. This approach minimized the loss of mining efficiency as complexity increased and further improved the hash rate.

The use of field-programmable gate arrays (FPGAs) for BTC mining was the shortest-lived method compared to others. These devices cost 1.5 times more than video cards and could not be resold after use. As a result, they remained an unpopular solution, relevant for only one to two years. Despite their low power consumption and high hash rate, they did not achieve widespread adoption.

The first ASIC mining devices appeared in 2012, changing the entire industry by enabling a qualitatively different level of hash rate. These devices are specialized for a single task, making them incredibly efficient.

In 2011, miners gradually began to expand their operations and joined together to form mining pools. Starting in 2018, the capacity of even a small farm was no longer sufficient to generate significant profits. Consequently, consolidation into mining pools accelerated, and large companies specializing in industrial-scale mining began to emerge in the market.

The Development of Industrial BTC Mining

Home mining was eventually replaced by industrial-scale Bitcoin mining due to the constantly growing network difficulty and competition among miners. Companies producing ASIC miners emerged as the market’s response to consumer demand.

Two of the first suppliers of industrial mining hardware, which still hold a substantial share of this market, are:

1. Bitmain: This Chinese company is considered an industrial giant. Founded in 2013, it has produced equipment for almost all possible algorithms. The Antminer series is regarded as the best ASIC miners for the BTC hashing algorithm (SHA-256) on the market.
2. Canaan Creative: Another Chinese company that became active in 2013. Canaan Creative produces the Avalon miner series. These devices use chips that increase durability and a special cooling system named Airform Cooling. Models in this series are considered among the best in terms of efficiency.

In 2018, these two companies held nearly 90% of the ASIC miner manufacturer market, with Bitmain holding 70%. Although there are no more recent studies on market distribution, other companies have become more prominent over the past four years:

• Innosilicon Technology Ltd
• ASICminer Co
• Advanced Micro Devices Inc
• Bitfury Group Ltd
• Cynosure Technologies Co. Ltd
• Shenzhen MicroBT Electronics Technology Co. Ltd
• Cynosure Technologies Co. Ltd. and others

Hardware from these companies is gradually gaining market share from Bitmain, but they are still not as widely known, despite their devices having comparable performance indicators.

The Biggest Bitcoin Mining Companies

Crypto mining has become industrialized in recent years as large businesses have entered the field. As of Q1 2022, the largest companies specializing in industrial mining include:

• Riot Blockchain Inc. (RIOT)
• Hive Blockchain Technologies Ltd. (HIVE)
• Marathon Digital Holdings Inc. (MARA)
• BIT Mining Ltd. (BTCM)
• Canaan Inc. (CAN)
• Bit Digital Inc. (BTBT)
• Hut 8 Mining Corp. (HUT)
• Bitfarms Ltd. (BITF), etc.

All the companies listed above are publicly traded, with their shares traded on stock exchanges; the stock tickers are provided in brackets. These firms attract multi-billion dollar investments and possess multi-billion dollar capitalizations.

Despite the scale of industrial mining, about 16% of all mined BTC blocks come from mining pools. According to BTC.com, the hash rate distribution across the largest pools in 2021 was as follows:

• F2Pool — 14.99%
• AntPool — 14.61%
• Poolin — 11.88%
• ViaBTC — 10.74%
• Binance Pool — 10.27%
• BTC.com — 9.31%
• Foundry USA — 7.01%
• SlushPool — 4.18%
• Huobi.pool — 3.98%

The remaining 9% is mined by very small pools, and the recipients of the other 4% of mined BTC are not identified. According to Blockchain.com, approximately 329,000 BTC were mined in 2021. Of those, 52,690 were mined by mining pool participants. Given the complexity of mining the first cryptocurrency, the percentage of “independent miners” is negligible—they likely account for 4% of the unidentifiable portion. Consequently, more than 80% of all Bitcoin mined in 2021 ended up in the accounts of large corporate miners.

Interestingly, almost all major mining pools are also controlled by corporations. For example, AntPool, ViaBTC, and BTC.com are owned by Bitmain.

Future Prospects

As of December 13, 2021, miners had mined more than 90% of the total BTC supply, and the mining process will gradually become more complex. However, the next Bitcoin halving is not expected until March 2024, and the last BTC is projected to be mined around 2140. Thus, industrial mining is likely to continue its development. Still, the main computing power will increasingly focus on maintaining the network, and the primary source of income will be transaction fees within the network.