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Oct 31 2008, Satoshi Nakamoto published a whitepaper on the cryptography mailing list at metzdowd.com describing a digital cryptocurrency, titled " Bitcoin: A Peer-to-Peer Electronic Cash System ".
The paper describes the way to build a purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without having to establish trust. Soon, on Jan 9 2009, Nakamoto released version 0.1 of the bitcoin software and launched the network by defining the genesis block of bitcoin, the first "Bitcoin Mining" ever.
PoW Mining
Bitcoin uses POW as a consensus mechanism. Instead of having a central authority issuer, new bitcoins enter into circulation by sophisticated hardware solving extremely complex computational math problems. The process is called Bitcoin Mining.
Mining is structured as a race between miners, who compete to solve computationally intensive puzzles and become the first on the network to successfully validate a new block and pocket the reward. The solution to the puzzle is the block's corresponding hash value. The probability that a participant will be the one to discover the solution is related to the one's portion of the total mining power on the network.
Bitcoin network is designed to self-adjust in order to maintain a consistent 10-minute block verification time. And a consistent factor that affects how long it takes to mine one bitcoin is what is referred to as the network’s hashing difficulty, which automatically adapts to network's total hashrate.
Nowadays, the most common unit used to measure mining power is TH/s, TeraHash per second, 10^12 calculations per second.
Real World Mining
At first, bitcoin miners chose Intel or AMD CPU products as mining rigs. However, since CPU mining is a compute-intensive application, it is no longer profitable or even loss-making for CPU mining with an increase in the number of miners and the performance of mining rigs.
Around 2012/2013, miners started to use GPU or FPGA mining rigs. Shortly after, in mid 2013, a large number of ASIC mining rigs launched. From July 2013, network-wide total hashrate surged due to the large number of ASIC mining rigs put into operation. Based on the average hashrate in July 2013, all CPU mining rigs were unable to generate positive revenue, and FPGA mining rigs were close to zero return.
Estimation based on the average hashrate in September 2013, all small ASIC mining rigs developed for individuals generated almost zero positive returns. Majority of the hashrate was dominated by clustered ASIC mining rigs with 5 TH/s or more. Mining individually was squeezed out of the mining community due to insufficient revenue. Some miners gathered money to build mining sites and installed massive mining rigs in places where cheap electricity was available.
The same story repeated in the upcoming 8 years, leading to centralisation of hashrate we witness today. Current mining landscape is made of up the following 4 stakeholders: mining rigs manufacturers, big miners, mining farms and mining pools.
Last modified 4mo ago
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