Bitcoin is almost mined out. Is there still a market for mining chips?

There are 21 million bitcoins in total. As of January 13, 2018, 16.8 million bitcoins have been mined worldwide, which means 4.2 million bitcoins are waiting to be mined. At present, most people believe that as time goes by, the number of bitcoins mined will gradually decrease, and the price of bitcoin will become higher and higher.

What is Bitcoin?

Bitcoin is a P2P digital currency. It can be used to cash out and can be exchanged for currencies in most countries. Users can use Bitcoin to purchase virtual items, such as clothes, hats, and equipment in online games. As long as someone accepts it, Bitcoin can also be used to purchase items in real life.

At 12:00 noon on January 24, 2017, Huobi, Bitcoin China and OKCoin began to charge transaction service fees. The service fee is charged at a fixed rate of 0.2% of the transaction amount, and the fee rates for active and passive transactions are the same.

The essence of Bitcoin is actually a special solution generated by a bunch of complex algorithms. A special solution refers to a set of infinite (actually Bitcoin is finite) solutions that can be obtained from a set of equations. And each special solution can solve the equation and is unique. To use the RMB as an analogy, Bitcoin is the serial number of the RMB. If you know the serial number on a banknote, you own the banknote.

How to trade?

How to buy: Users can buy Bitcoins, and they can also use computers to perform a large number of calculations according to algorithms to "mine" Bitcoins. When users "mine" Bitcoins, they need to use computers to search for 64-bit numbers, and then compete with other gold diggers through repeated decryption to provide the required numbers for the Bitcoin network. If the user's computer successfully creates a set of numbers, then they will get 25 Bitcoins.

Transaction method: Bitcoin is electronic cash similar to email. Both parties need a "Bitcoin wallet" similar to an email address and a "Bitcoin address" similar to an email address. Just like sending and receiving emails, the remitter pays the Bitcoin directly to the recipient through a computer or smartphone according to the recipient's address.

Consumption method: Many websites targeting technology players have begun to accept Bitcoin transactions. Including websites such as Mtgox and BTCChina, as well as some Taobao stores, which can even accept Bitcoin exchange for US dollars, euros and other services. There is no doubt that Bitcoin has become a real circulating currency, rather than a virtual currency like Tencent Q coins. There are already special Bitcoin third-party payment companies abroad, similar to Alipay in China, which can provide API interface services.

Payment case: While being chased by investors, Bitcoin has been accepted by some merchants in reality. A restaurant in Beijing has opened Bitcoin payment. The restaurant, located in Chaoyang Joy City, said that it began accepting Bitcoin payments at the end of November 2013. When consumers finish their meals, they can complete the payment by transferring a certain amount of Bitcoin to the store's account. The whole process is similar to bank transfer. The restaurant once settled a meal fee of 650 yuan with 0.13 Bitcoins.

How does mining generate Bitcoin?

The mining process is to continuously seek special solutions to this set of equations through huge amounts of computing. This set of equations is designed to have only 21 million special solutions, so the upper limit of Bitcoin is 21 million.

Looking back at the history of mining, Bitcoin mining has gone through the following five eras: CPU mining → GPU mining → FPGA mining → ASIC mining → large-scale cluster mining

As mining chips are upgraded, the mining speed changes are: CPU (20MHash/s) → GPU (400MHash/s) → FPGA (25GHash/s) → ASIC (3.5THash/s) → large-scale cluster mining (3.5THash/s*X)

If you start to try mining, you need to prepare a mining machine, a computer with Internet access, an AUC, a Raspberry Pi, a power supply and various connecting cables, etc. The connection order of various devices is network cable -> Raspberry Pi -> MicroUSB cable -> AUC -> 4PIN connecting cable -> mining machine and power supply.

Figure: A mining machine working diagram

The functions of various devices are as follows:

Mining machine: Here we take Canaan Creative’s latest mining machine A6 as an example. A6 has 80 chips and the computing power of a single machine is over 3.5T/s.

Raspberry Pi (controller): Mining only requires simple and efficient numerical calculations, and the program for the operation of the mining machine is written in the small Raspberry Pi.

Raspberry Pi can control about 60 mining machines.

AUC: Converter, and each AUC can also connect multiple mining machines in series.

Power supply: Power on.

Connect all these devices, turn on the power, change the IP segment of the Raspberry Pi to be consistent with the IP segment of the router, set up the miner, and then connect to the mining pool to start mining. If you need to deploy multiple mining machines, you will also need transformers and other equipment.

Figure: Model of 60 mining machines

The current mining era has long been an era of large-scale cluster mining. The mining scenes you see are often like this - large-scale cluster mines.

Figure: Mining farm map (tens of thousands of mining machines)

There are many factors that affect mining revenue, such as the performance and power consumption of mining machines, the computing power and difficulty of the entire network, the deployment and operation and maintenance capabilities of mining farms, the availability of cheap electricity resources, and the direction of currency prices and policies.

Currently, excellent mining companies have the ability to develop chips, a large amount of computing power, professional mining site deployment and operation experience, etc. In the future, resources and computing power will become increasingly concentrated in these mining companies.

Mining revenue can be calculated using the following formula:

Mining income = Bitcoin generated * coin price - mining machine cost - electricity cost - maintenance cost and labor cost - mine depreciation cost, etc.

If you are just a small miner, you only need to deduct the cost of the mining machine and electricity. You can also go to BTC123 or Bitfan and calculate the payback period and mining income through the mining income calculator.

If you purchase a product from a cloud computing platform, taking Algorithm Bao as an example: Revenue = computing power revenue - computing power cost.

What are the mining equipment companies?

Compared with the well-known CPU and GPU chips of Intel, AMD, and NVIDIA, and the mobile Soc chips of Qualcomm, Samsung, and MediaTek, ASIC, a chip designed for a specific purpose (such as mining), is much less complex and difficult to design, and the entry threshold is not high. However, since mining is a niche industry, there are not many companies involved, and these mining equipment companies are not well known to the public.

At present, the mainstream mining equipment companies are mainly the following:

1. Bitmain

Bitmain is a mining equipment manufacturer from China. The well-known Antminer is made by Bitmain. In particular, the Antminer S9 has become the most popular ASIC Bitcoin mining machine in the world. The Antminer S9 uses the self-designed BM1387 chip, 16nm process, and the power consumption per terabyte of computing power is 100 watts, which is very efficient. The Antminer S9 with 189 BM1387 chips has a computing power of up to 14TH/s, which is very powerful.

Figure: Bitfury's ASIC mining chip

2. Bitfury

The world's second largest mining equipment manufacturer, its main product is currently 16nm ASIC dedicated mining chips. Bitfury does not sell mining machines directly to consumers, but mainly sells complete sets of data center equipment to corporate users.

Image: Avalon Mining 741 mining machine

3. Canaan Creative

It is Avalon Mining from a few years ago, also a Chinese mining equipment company. Its current flagship product is the Avalon Mining 741 mining machine, which uses 88 16nm ASIC dedicated chips and has a computing power of up to 7.3TH/s.

Impact on the chip industry

Bitmain Antminer S9 uses TSMC 16nm process.

More than 50% of the cost of mining comes from electricity, so the power consumption level completely determines the profit level of mining, so mining machines are very active in using the most advanced process. The next generation of mining machines to be launched in 2018 will use TSMC's most advanced 10nm process. It can be said that TSMC's most advanced process is not only for Apple and Qualcomm mobile phone processors, which need the most computing power and power consumption, and Nvidia GPUs, but also for mining machine companies.

In 2017, TSMC's total revenue was US$30 billion, of which 16nm accounted for nearly US$8 billion. It can be seen that the US$1 billion scale of the mining machine market demand is not a small number to the overall demand, and this market is still in a stage of rapid growth.

In 2017, 14-10nm is already the most advanced process in the foundry market, and a billion USD scale is not small. In fact, TSMC alone accounts for a large share of 14-16nm.

The process has a great impact on power consumption

28nm1T 250w

16nm1T 100w

This gap is huge for the mining industry, where electricity costs account for more than half of the cost. Therefore, the cryptocurrency industry is bound to be one of the main applications that pursue the most advanced process, just like processors.

In December 2017, Samsung Electronics signed a contract with Baikal, a Russian bitcoin mining hardware manufacturer, to have Baikal produce ASIC chips specifically for mining, which are scheduled to go into mass production in January 2018 using a 14nm process.

Chinese companies Bitmain and Canaan Creative are leaders in mining hardware equipment. Both companies are TSMC customers and use TSMC's 16nm process to produce products with huge shipments. Bitmain's Antminer S9 has 189 built-in ASIC chips, and Canaan's AvalonMiner 821 also has 104 ASIC chips. The mining machine's ability to process Bitcoin hash functions is a thousand times faster than computers and GPUs. Bitmain not only sells mining equipment, but also has its own mining factories, controlling 60-70% of the global Bitcoin mining market.

The mining boom has benefited not only foundries, but also Korean outsourced assembly and testing (OSAT) companies. JECT STATS ChipPAC Korea packages Bitmain's ASIC chips, with a daily assembly volume of up to 1 million sets. It is rumored that the company is considering expanding production capacity to handle the huge demand. Other Korean assembly and testing companies Amkor and ASE are also full of orders.

Conclusion: Bitcoin mining machines are computers used to earn Bitcoin. These computers generally have professional mining chips and work by burning graphics cards, which consumes a lot of power. Currently, 80% of Bitcoin has been mined. Will the demand for Bitcoin mining machines show a decreasing trend? Then the market for mining machine chips may reach saturation after a certain period of time.