Evolution of Bitcoin Mining Over Years
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Evolution of Bitcoin Mining Over Years

June 25, 2020      Vandana Malik

As the influence of cryptocurrency is increasing rapidly among the people, they are getting more curious about it. Everybody wants to educate themselves more about cryptocurrencies and the concepts which are related to it. While talking about cryptocurrency, Bitcoin comes first in mind and one of the major concepts related to it is Bitcoin mining.

Bitcoin mining was first invented by Satoshi Nakamoto, the creator of Bitcoin to defend the network. Mining could be understood as a process which adds the records of transactions on the blockchain. The major purpose of Bitcoin mining is to secure the history of the overall transactions and along with this, it is a tool which introduces new Bitcoins to the network regularly. The people who conduct the whole mining process are known as miners and for introducing new Bitcoin, the miners get rewarded. Mining is done by solving some extremely complex problems and these days with some high-powered computers. Along with adding new Bitcoins, it also makes the network highly secure as it verifies all the transactions.

Mining was meant to be performed with simple computers

Bitcoin mining

It has been more than 10 years since Bitcoin mining has been introduced and it is quite evident how the procedure of mining has changed to a very great extent. Earlier, it was done using simple computers without any complex or high-powered devices. Things were quite simple back then but now the whole concept and idea of bitcoin mining have evolved way too much and people have now started using it as a medium to make money. People are always trying out different measures to make money and Bitcoin mining seems to be one of them at the present time. It has been proved that through Bitcoin mining, miners can actually gain some really high amount as the network of Bitcoin is expanding rapidly.

Bitcoin mining seems to be a great step to gain money but the electricity rate, mining hardware, Bitcoin price and some other things also played a major role in making huge profits. However, the process of Bitcoin mining is quite complex and it is not necessary that every person will be able to mine it because the success rate is quite low. Nowadays a single individual cannot mine Bitcoin on his own because of the huge cost involved with it. A lot of people has been working on mining Bitcoin and they do it with the help of a mining pool, a team which is there to mine Bitcoin generally shares the amount in which mining has been done.

Mining Difficulty

While talking about Bitcoin mining, mining difficulty is something that cannot be excluded as it comes up as one of the most important parts of Bitcoin mining. Mining Difficulty is like a value which clearly shows the difficulty behind finding a hash rate that is lower than the target which has been defined. In order to get the blocks considered as legitimate, the miners have to make sure that their hash value is below the target which has been set by the system. It has been noticed that the increasing or decreasing level of mining difficulty is based on the ease of mining that is there within the protocol. Every ten minutes, a new Bitcoin is added to the network and in order to maintain this time, mining difficulty is increased or decreased. The network also needs to completely control their hash rate because when the hash rate goes high, mining difficulty also increases and when it goes down, mining difficulty also decreases accordingly. To see it roughly, the mining difficulty needs to be set after every 2016 block in order to keep mining rates constant.

Generations of Bitcoin mining machines

As mentioned above, Bitcoin mining has evolved a lot which means that the method of mining has changed along with the machines which were used to mine Bitcoin. Earlier, mining could be done with simple computers but now as the network has grown very wide, there is a need for high-powered machines.

Here are all the different generations of Bitcoin mining machines:

  • CPUs – First Generation Miners: CPUs are the first generation miners which was used by Satoshi Nakamoto when he created Bitcoin. During that time, it was quite an easy and less complex process and there was not any need for some extra powered computers. Mining was done using the simple multi-core CPUs which used to produce Bitcoin at a rate of 50/block. This was unable to last long because the Bitcoin network grew rapidly and hence this first generation miner was unable to cope with the growing demand and because of this, it became outdated within a year.
  • GPUs – Second Generation Miners: After the CPUs, GPUs came into existence in 2010 and hence it is known as second-generation miners. As soon as GPUs were introduced for mining, the miners started switching instantly to it. The need behind introducing GPUs was because the earlier ones were unable to adjust the rapidly increasing mining difficulty. GPUs were quite affordable and it was seen that computational requirements of GPUs were quite low hence the people switched to it and mining Bitcoin became so easy and affordable with it. Even though GPUs were quite accessible for the miners and made mining an easy task, it was also not able to flourish for a longer time.
  • FGPAs – Third Generation Miners: The second generation Bitcoin miners were replaced by FGPAs in 2011, which comes under the third generation miners. One of the major points that proved FGPAs to be better than GPUs is that it consumed five times less power as compared to the earlier one. As soon as FGPAs were introduced, miners quickly switched to this one because it was developed with the latest technology and was highly energy efficient. However, it was also unable to maintain the standard and was replaced by ASICs miner which is considered to be one of the best one till date.
  • ASICs – Fourth Generation Miner: The last generation of miners belong to ASICs till date and it is the only one which is able to maintain its standard for such a long period of time. ASICs was introduced way too back in 2012 and since then, miners are relying upon it. As soon as ASICs miners were introduced, the Bitcoin miners switched instantly to them and the reason is that they are highly energy-efficient as compared to all the previous ones. Different hardware manufacturers came up with a huge variety of ASIC miners promising different things but till date ASIC miner is the one that has maintained the standard however the future is not predictable and no one knows what might be next in the mining industry.

Mining Pools and Mining Farms

Mining Pools could be understood as a joint network where different miners pool their resources in order to cut the cost of mining crypto and the total reward is distributed among all the miners as per the share. The major reason behind the creation of mining pools was the increase in mining difficulty due to which it was quite difficult to generate blocks by the miners. The concept of mining pools was introduced way too back in 2010 and it seems that it is the only thing which is still in operation even after such a long time.

Mining Farms, on the other hand, is a location in which different computers are under operation to mine cryptocurrencies. These mining farms are developed in a very large space because, during the mining process, computers tend to consume a lot of energy due to which there is a high need of air conditioning otherwise it will simply end up being overheated. Along with this, the computers also need to be replaced quickly and this will become highly expensive for an individual or a small group of miners hence mining farms becomes the ultimate solution.

As the crypto market is growing rapidly, it has been seen that the business of mining pools and farms is also flourishing to a very great extent. People invest their share in these mining pools and farms in order to stay away from the high cost of mining and hence it has become quite a big business for the ones who develop such pools or farms.

Different countries have seen subsequent increases in Bitcoin mining but one of the most notable ones is China. Even though the Chinese government has imposed a ban on Bitcoin and believes that it is a fraud, it has been noticed that China has become the global epicentre of Bitcoin mining. However, there are several news reports which suggest that the government of China might impose a ban on Bitcoin mining as well but till now they are functioning successfully.

Conclusion

Ever since the Bitcoin came into existence, it has gone through some huge evolution and so does its mining. The people of crypto industry are always looking forward to some new ways but over time it has been seen that mining has now become quite affordable as compared to earlier times due to the different measures that keep coming up every now and then.

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Vandana Malik
Vandana Malik

Vandana has received Master of Arts degree in English from GEU Dehradun. She is currently working as a content writer with Agio Support Solutions and earlier worked as a sub-news editor at Business News and Information Services Private Limited. She is an enthusiastic content writer and aims to bring a compelling yet informative content to the audience. Meanwhile, enhancing her own knowledge in the cryptocurrency and blockchain industry.