DEDICATED MINERS

Guest Written by Roger Huang

Bitcoin mining went from being a hobbyist pursuit to a major financial industry in China – and it’s all thanks to ASICs. Application-Specific Integrated Circuits quickly made it impossible to mine on a personal computer, as had been the case for the first two years of Bitcoin’s existence.

China was a hub of hardware manufacturing, with Shenzhen a hotspot for the creation of smart hardware, and it was filled with entrepreneurs eager to learn about Bitcoin and to mine it.

Projects such as Pumpkin Miner – an early computer chip for mining bitcoin known as an FPGA, or field-programmable gate array – and ASICMINER, which exit-scammed, got China’s mining commoditisation off to an inauspicious start. These early efforts, however, would eventually attract entrepreneurs like Jihan Wu, who went on to co-found Bitmain, which rapidly grew into a bitcoin mining giant.

Today, two Chinese-incorporated companies, MicroBT and Bitmain, control much of the supply of ASICs. The custom chips these devices contain are designed to repeat as efficiently as possible the SHA-256 hashing algorithm that shows the Proof-of-Work needed to secure the Bitcoin network. ASICs are responsible for powering a global Bitcoin mining, all powered by custom hardware built by Chinese companies.

Mining pools, whose software smooths out bitcoin mining and gives participants a fair share of the block rewards, were started in collaboration with hardware providers such as the Bitmain-created Antpool. 

Despite China’s multi-year dominance of bitcoin mining, the country’s hashrate has declined significantly from its peak as foreign competition has ramped up. For example, Bitaxe aims to bring mining chips to ordinary users while decentralising Bitcoin mining. OCEAN is a mining pool that looks to mine blocks in a more decentralised fashion and with different logic. 

Jihan’s complex story of a business split with his original co-founder means that he is now funding Bitdeer, a new entrant, to compete against MicroBT and Bitmain. Jack Dorsey's Block company has secured the latest generation of semiconductor chips in the quest to have a US-based company provide cutting-edge bitcoin miners.