A lot of people are talking about crypto mining these days, but do they really understand the ins and outs of this concept. In this article we will look to understand the hardware behind Proof of Work, and how it plays a key role in defining the sustainability and level of decentralization of various currencies that are available for mining today.
1. Asic Mining:
ASIC— application-specific integrated circuit— in its most basic sense is a hardware device that is built especially for highly specific digital applications. When using the term ASIC in relation to cryptocurrencies, we have to understand that that ASIC chips are designed to execute “hash algorithms” in the most cost and energy efficient manner possible.
To elaborate on the capacity of this chip, we should consider the example of a BTC ASIC which is known to possess a hash rate that is atleast a thousand times better than a regular laptop CPU.
Since ASICs are built specifically for single hash algorithms, everytime we deal with different cryptocurrencies, we need to purchase a new ASIC. As we speak, there are more than a dozen trusted hardware manufacturers that design and sell specialised ASICs for commercial use.
However, one has to bear in mind that an ASIC machine is basically a modded mining tool, and can therefore cost users anywhere between $2000-$5000 (depending upon the brand that is purchased).
With the crypto-mining market expanding at a furious rate, profit returns that once seemed achievable from this lucrative avenue have diminished to a large extent. With the mining sector full of independent as well as corporate players, ASIC mining profits have been dwindling for the past couple of months.
One can think of the ASIC mining market as one that values the acquisition of hashing power. Since there are hundreds of competitors in this field today, profits are hard to come by. In fact, according to a recent statistical study, the tera hashes per second have increased to such a level that monthly interests are now decreasing rapidly. This has made it hard to reap sustainable dividends unless one is working with large capital backing.
In addition to this, performing trillions of hashes per second also leads to serious performance issues over time. ASIC rigs which work day-in, day-out are known to become hot and lose some of their efficacy. Unless an efficient cooling system is deployed to regulate machine temperatures, one should be ready to face loud fan noise and hashing issues.
At this point, we also need to factor in one of the the most important issues associated with ASIC mining— Electricity consumption. ASIC machines are known to be power guzzlers and in countries where electricity rates are high, users should be ready for large power bills.
What Does the Term ASIC Resistant Mean?
Very often we come across cryptocurrencies that advertise themselves as being “ASIC Resistant”. But what exactly does this mean?
Well, in a basic sense currencies that are ASIC immune are ones that make use of hashing algorithms that are more complex and thus require more computer memory. As a result of this, the hardware needed to implement such coins are more structurally intricate and require more financial input.
But truth be told, ASICs can be designed to accommodate any currency as long as somebody is willing to put in the money.
2. GPU Mining:
Another method of mining that seems to be popular with crypto-enthusiasts is that of using a high performance GPU device. While not as powerful as an ASIC, GPUs— Graphic Processing Units— are known for their cost effectiveness and overall flexibility of use.
GPUs are essentially chips on a graphic card that are required to process large volumes of repetitive calculations. These processes are essential in order to render high-performance games. Higher GPU power allows for faster rendering of detailed graphics and 3d animations.
While initially conceived for boosting graphic capabilities of a computer, in recent months, companies like Nvidia have claimed that they are not able to keep up with the existing production demand since most people now use GPUs to mine Ethereum.
The demand for high-end graphic cards in particular have shot up tremendously, and the gaming industry is currently going through a massive shortage of GPUs.
As a corrective measure, many online retailers have now restricted the purchasing power of the average customer and have disallowed bulk GPU purchases. Not only that, customers who buy a fully set-up gaming rig are being provided with lucrative discounts.
How ETH Mining Relates to GPUs
Due to the simple fact that there are no ASICs available for Ethereum mining, users have to settle for the next best thing— a GPU rig. Some of the core reasons as to why no ASIC rig exists for ETH mining include:
- Ethereum makes use of a unique ETH-HASH protocol that is ASIC resistant.
- ETH utilizes a “memory hardened” framework that prevents regular miners from obtaining the token..
- Another reason for a lack of ASIC compatibility is that Ethereum does not make use of the conventional POW (Proof of Work) consensus module, but rather employs a more efficient POS (Proof of Stake) mechanism.
Which Currencies Can Be Mined With a Decent GPU?
As mentioned previously, GPUs possess substantially lower processing power than ASICs but are still capable of mining different coins. Some of the tokens that have been successfully mined through the use of standard GPUs include:
- Bitcoin Gold
3. CPU Mining
CPU as we all know stands for “Central Processing Unit”. It is the core functional unit of any computer and is the required to process all internal transactions and calculations. Simply put, all of the components that are present in our computer are basically there to support the operations of the CPU.
But How Does This Relate to Crypto Mining?
Readers will be fascinated to learn that upon its release, Bitcoin could be mined using a standard CPU. In fact, some users back in the day sourced upto 100 BTC per day using their regular laptops.
However, things have changed quite drastically since 2010, and with the advent of ASICs, regular CPUS just don't make the cut anymore.
CPUs are designed primarily for running standard binary tasks but possess the unique advantage of being ubiquitous. As a result, if a coin allows for CPU mining, it can easily be sourced through the use of a standard computer.
With that being said, it should be remembered that the hashing required for Proof of Work is a repetitive mathematical calculation. Since, CPUs have fewer arithmetic logic units to perform such memory exhaustive applications, the mining time is extremely large and the entire process can become extremely tedious.
Which Currencies Support CPU Mining?
While the list may be thin, there are still some tokens that can be mined using a regular computer. Monero is a fine example of this. Owing to its use of the CryptoNight algorithm, Monero is able to reduce its dependency on RAM.
In addition to this, the dev team behind Monero has developed something called “smart mining” that helps maximize CPU usage when it is not being actively used. What this means is that as soon as we leave our PC on idle, the CPU automatically starts mining.
Lastly, Monero also allows for CPU mining through the use of a Java based tool called ‘Coinhive’. It is a browser based app that allows users to contribute a certain portion of their CPU quota towards mining.
Other currencies that support CPU mining include: