The fourth half-halving has put the Bitcoin mining industry to the test. As bitcoin block subsidy is slashed, the hash rate (revenues per terrahash), has hit historic lows. The post-halving frenzy of mempools has also waned. This is adding more fuel to an already stressed mining industry.
Nangeng Zhang sat with the Founder and CEO, Singapore-based Canaan Inc., who created the world’s first Bitcoin mining ASIC. Bitcoin Magazine The firm was granted its first ever interview by a North American publication to discuss the current status of the industry. Zhang spoke about the beginnings of Bitcoin mining as well his thoughts on trends and developments in chip design.
Zhang identified the burgeoning opportunity for Bitcoin to be used in the Middle East as well as convergence of the artificial intelligence and bitcoin industries.
Watch the entire audio interview of Canaan Inc.’s CEO Nangeng Zhang. Bitcoin Magazine Podcast.
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Open Source Core of Bitcoin Mining
Canaan, founded in 2013, revolutionized mining with the launch of its first AvalonMiner ASIC machine – marking a turning point in computational efficiency for those securing the Bitcoin network. Commercial-scale mining began as the industry moved from GPU and CPU hashing to specialized ASIC equipment.
Canaan’s Avalon software and hardware were open-sourced by the company, which led to the widespread use of ASIC hashing. Zhang said that the embrace of open-source movement during the early days bitcoin was a good thing. “not a decision” Instead, “a requirement for anyone who wants to get involved in the blockchain community” It is a way “to decentralize computing power all over the world.”
“The best way to defend against [51% attacks], was to rapidly distribute ASIC-based computing to users worldwide”. Zhang estimates that ASICs have made it easier to democratize and deploy them at a large scale, reducing the likelihood of an attack. Canaan’s open-source chip design led to major companies such as Bitmain in China and Intel, a computing giant.
Moore’s Law and the Future of Bitcoin
Canaan has benefited from the explosion in the semiconductor industry over the last decade. At the heart of this progress lies Moore’s Law – an observation that computational efficiency has approximately doubled every 2 years. In this pursuit of optimization, companies such as Taiwan Semiconductor Corporation (TSMC), Samsung Semiconductor Limited (SSLF) and Semiconductor Manufacturer International Corporation (SMIC), are working towards the production of 3 nanometer chips.
But the shift to ever smaller semiconductor architectures has its own challenges. Invoking quantum rather than classic effects, increasing the transistor density of smaller and small chips (sub-2 nanometers) is a way to increase transistor density. This shift in regime can lead to malfunctioning transistors and divergence from Moore’s Law.
It is now a question of whether Moore’s Law will hold up, or if the classic computational boom has become a bust.
Zhang acknowledged that these constraints are fundamental to ASIC computing. “in the past, when we boosted performance, the cost per terrahash went down. Today, this curve has flattened. This indicates that technological advancements are entering a new phase.”
“We are indeed seeing a slowdown in the advancement of process nodes, promoting us to adopt new transistor technologies like GA (gate array) or nanosheet technologies along with backside power delivery. This is not just making the surface smaller, but changing the structure of the circuit [itself].”
“Bitcoin computing appeals to a purely digital logic, but today, we are moving closer to a mixed signal design for analog implementations.” Zhang suggests this complexity increase is a sign of the increasing need for “design technology co-optimization (DTCC)” Canaan is a chip designer.
Zhang is confident that AISC will be able to meet its goals despite these obstacles. “still on the rise for the next 3-5 years” The company intends to launch at least one new product each year. “over 20% efficiency gains” per generation.
Canaan showcased its efficiency at the Bitcoin Asia conference held in Hong Kong May 9, where it launched their next-generation A15 AvalonMinerThe new’s efficiency is 18.5J/T, compared to the old’s 20J/T. A14 model. Zhang noted that the A15 is particularly optimised for changing environmental conditions.
Zhang made light of buyers’ comments about the A15. “‘oh you can get extra performance for free?!'” Zhang says that this is not true, but added capabilities will provide customers with more operational flexibility.
Middle East Decentralization of Computation
Now, more than ever, miners are on the lookout for efficiency gains to… *drumroll*… reduce their costs and increase revenue. It is not news that the mining industry has been looking for ways to reduce costs and increase revenue.
Zhang mentioned that Canaan has made a recent strategic move in order to respond to this shift in the market. She highlighted Canaan’s decision to work with mining companies in the Middle East. “[The Middle East] is eager to invest in high-tech industries. These countries are particularly welcoming to Bitcoin and cryptocurrency. The Middle East holds great promise to become a crucial digital hub.”
Zhang noted the Middle East has a diverse regulatory system. “quickly advanced in establishing complimentary regulatory frameworks for mining”. It follows that firms like Zero Two – backed by Abu Dhabi’s sovereign wealth fund – have made significant strides Integrate bitcoin mining with its waste heat to desalinate saltwater.
Heat Check: Trends In Mining Sustainability
Canaan’s NASDAQ IPO in 2019 has ignited the Bitcoin market, along with bitcoin mining firms. After bitcoin became mainstream, publically traded mining companies like Marathon Digital Holdings Inc. and Riot Platforms Inc. were household names.
The increased visibility also brought increased scrutiny, particularly from the Ripple-funded, poorly-conceived Change the Code initiative led by Greenpeace USA.
Zhang was unfazed when asked to comment on environmental concerns about mining. He welcomed the discussion regarding sustainability within the mining industry. “Perceptions of bitcoin mining as environmentally unfriendly are changing… bitcoin mining can help to develop renewable energy industries.”
Canaan’s CEO, in particular, hailed heat capture as the most important trend to emerge for both commercial and residential applications. “Mining heat recovery products have started this year. I think in a few years, I believe people will see many very impressive products that utilize heat from mining. Today, we can generate near-boiling water from mining operations.” The trend, according to him, is what underpins mining’s environmental attributes, and the general trend of heat monetization.
Zhang said that mining can also be used to boost the deployment of renewable energy in hydropower, an industry whose supply is not always in line with demand.
Zhang proposed that instead of batteries, he could use a battery-free storage system. “[bitcoin mining] can allow these facilities to operate at full capacity most of the time. This can reduce the payback period to about 5 to 10 years – that means the same amount of capital can develop twice as many hydro-stations in the same time frame… the same principle applies to other renewable energy resources like solar and wind energy driven purely by economic factors.”
He expressed confidence that market forces will drive the quest for lower-cost energy. “mining can automatically balance between environmentalism, economic efficiency and development.”
AI and Bitcoin convergence: developing and scaling energy assets
Bitcoin miners are usually pioneers on the energy markets. They flock to places where there is abundant power and low demand. ASIC computation has been used to create resources at the edge of grids because of the symbiotic relationships between the underdeveloped energy sources and bitcoin miners’ mobile and flexible network. Zhang says that this isn’t the end of it.
He believes that a relationship is forming between AI-based data centers and Bitcoin miners, each of whom are searching for low-cost inputs. Zhang made note of “major players” The following are some examples of how to get started: “early movers” The potential for integration of bitcoin mining with AI computation has been realized.
“In this context, bitcoin mining can serve as an initial occupant of this [stranded] energy, [generating] economic benefits before AI computing power fully comes online. This is what we have seen in the past 6 months.”
Zhang predicts that AI data centers will co-locate with bitcoin mining, even when AI is fully operational. “Given the redundancy requirements for large-scale AI computing centers (25-30%) of power redundancy… bitcoin mining can use the redundant power and shut off when [AI comes online].”
The conclusion of the article is:
As always, the zero-sum industry continues to be their own worst enemy. It is fair to say, with the Fourth Halfing, Margin Reduction, and Next Wave of ASIC Efficiency, that making a profit in mining may be as simple as sucking blood out of a rock.
But, on the margin, positive trends are taking place in the industry – and the Canaan CEO sees opportunities abound for enterprising mining and ASIC firms willing to blaze a trail on the energy and artificial intelligence frontiers.
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Source: bitcoinmagazine.com
