Cryptocurrency(often abbreviated as “crypto”), once an experimental venture in the digital domain, has now become a sweeping global financial revolution.
Over a decade of development has not only led to the term ‘Cryptocurrency’ being officially included in the Webster’s Dictionary, but it has also made Bitcoin, as the first successful crypto project, a household name. Around Bitcoin, a mature and comprehensive industrial ecosystem chain has formed, stretching from upstream to downstream.
Bitcoin mining, a cornerstone of this ecosystem, has evolved from its initial unregulated expansion to a sector marked by professionalism and specialization. Entities such as mining rig manufacturers, software service providers, mining farms, and mining pools, along with the miners themselves, are instrumental in propelling the industry forward. The ecological framework of Bitcoin mining is now more defined and mature than ever.
According to the compilation by ViaBTC (a globally renowned mining pool service provider), participants in the Bitcoin mining industry ecosystem can be broadly divided into the following 7 key segments:
- ASIC Manufacturers
- GPU Manufacturers
- Firmware Providers
- Hosting Providers
- ASIC Brokers
- Public Miners
- Mining Pool
In this article, we will delve into the backgrounds of these 7 key segments, analyze their flagship projects, and discuss how they are guiding market trends, fostering technological advancements, and playing a pivotal role in shaping the future of the mining industry.
01 ASIC Manufacturers
Background Introduction:
An ASIC (Application Specific Integrated Circuit) is a specialized integrated circuit crafted for executing particular tasks, with its use in crypto mining being primarily for running mining algorithms.
The advent of ASIC mining rigs represents a pivotal shift in Bitcoin mining technology. Initially, Bitcoin mining depended largely on CPUs and GPUs. However, with the escalating mining difficulty, the demand for more efficient mining solutions grew, paving the way for the innovation of ASIC mining rigs.
However, the research and development of ASIC mining rigs involve substantial financial investment and human resource support, requiring the backing team to have strong capital strength and a deep talent pool. Therefore, although ASIC manufacturers initially experienced rapid growth, only a few have survived the fierce market competition as the industry evolves.
Representative Projects:
BITMAIN, Microbt, Canaan, etc.
Interpretation:
The current mining rig market competition has transformed into a contest of comprehensive strength, encompassing factors such as technology, capital, and supply chain management, thereby establishing a very high barrier to entry in the industry. Therefore, the likelihood of new entrants into the mining rig market is not great.
While manufacturers are expanding their ASIC mining rigs for various crypto, the Bitcoin market, boasting a daily production value of nearly forty million dollars, continues to be their primary focus. As Bitcoin approaches its fourth halving, the market is anticipated to undergo a significant refresh of mining rigs, where only the most competitive models will withstand the intense competition.
02 GPU Manufacturers
Background Introduction:
In addition to ASIC mining rigs, GPUs remain crucial in crypto mining, particularly for new PoW projects or those employing ASIC-resistant algorithms. Prior to Ethereum’s transition to PoS, GPUs experienced a surge in demand, leading to supply shortages and significant price increases driven by the escalating mining machines. GPU manufacturers such as NVIDIA and AMD reaped considerable profits from the mining frenzy in recent years.
According to data provided by the research firm Wedbush Securities, in the six quarters prior to October 2022, NVIDIA’s average quarterly revenue from the crypto-related sector was about 800 million dollars. However, with the completion of Ethereum’s The Merge upgrade and the exit of Ethereum miners, the golden era of GPU mining has also come to an end.
Representative Projects:
NVIDIA, AMD, etc.
Interpretation:
Unable to compete with more efficient ASIC mining rigs and unable to continue mining on Ethereum as it shifts to the PoS mechanism, GPUs are returning to their original domain, mainly serving gaming enthusiasts. Despite this, in the mining industry, GPUs are still suitable for some emerging PoW projects. Additionally, expanding their application to provide high-performance computing and rendering services for fields like artificial intelligence and Web3 is also an important use of GPUs.
03 Firmware Providers
Background Introduction:
Similar to the firmware we may install to expand the functionality of our home routers, ASIC firmware is the software embedded in ASIC mining rigs.
By installing the proper firmware，miners can control the operation and functional programs of various components in ASIC mining rigs chips, such as managing input/output interfaces, controlling clocks and timers, handling interruption, etc. These optimization efforts help to increase the hashrate and reduce power consumption of mining machines.
Representative Projects:
Braiins, Hiveon, etc.
Interpretation:
Today’s market offers a variety of ASIC firmware options, broadly categorized into official and third-party firmware. BITMAIN’s firmware for the ANTMINER series, for instance, is an example of official firmware, renowned for its stability and reliability but somewhat restricted in expandability. Consequently, third-party firmware, with its broader features catering to diverse mining machines, continues to hold a distinct competitive edge in the market.
04 Hosting Providers
Background Introduction:
Compared to purchasing and managing a large number of mining rigs, especially in areas with less than ideal mining conditions, choosing a hosting service is undoubtedly a more convenient solution for investors eager to enter the mining industry.
Hosting providers typically set up large-scale mining farms in regions with low-cost electricity resources and offer a range of services including machine hosting, maintenance management, cooling optimization, and security monitoring. They leverage the advantages of scale operations to provide customers with more cost-effective mining solutions. These services also enable customers to avoid personally managing the operation and maintenance of mining rigs, significantly lowering the barriers and operational complexity of mining.
Representative Projects:
Compass Mining, Bitkern, etc.
Interpretation:
The rise of mining rig hosting service providers not only offers more choices for individual miners but also drives the professionalization and scaling of the entire mining industry. These service providers, by centralizing management and optimizing resources, have enhanced the operational efficiency and sustainability of the whole sector.
05 ASIC Broker
Background Introduction:
ASIC mining rigs are favored for their high efficiency, but at the same time, the process of purchasing and selling these miners is often complex, requiring professional knowledge and access to first-hand market information. For those individuals or companies wishing to invest in crypto mining but lacking relevant market experience and resources, through ASIC Brokers, these investors can enter the mining market in a more competitive manner.
The primary responsibilities of an ASIC Broker include monitoring market dynamics, understanding the latest ASIC mining rigs information, evaluating miner performance and cost-effectiveness, and providing clients with purchasing and sales consulting services.
Representative Projects:
Blockware Solutions, ASIC Jungle, etc.
Interpretation:
The existence of ASIC Brokers greatly simplifies the process of buying and selling mining rigs, enabling non-professionals to participate in the mining market. Their services enhance market transparency and efficiency, allowing a broader group of people to conveniently engage in the mining industry.
06 Public Miners
Background Introduction:
The high profits from Bitcoin mining are attracting more and more people to this industry. To reduce production costs, some choose to rapidly expand their hashrate and increase mining capacity by forming companies and going public.
In fact, the rise of Bitcoin Public Miners is closely related to the development of Bitcoin itself. In the early days, Bitcoin mining could be done by individuals using CPUs or GPUs, but as the Bitcoin network’s difficulty increased, efficient mining required more professional hardware and large-scale hashrate. This led to the birth and development of Bitcoin Public Miners.
Representative Projects:
Marathon Digital, Hut 8, etc.
Interpretation:
According to data provided by The Block, Bitcoin Public Miners, including Marathon Digital, Hut 8, CleanSpark, and others, control about 20% of the total network hashrate. These companies have become crucial maintainers of the Bitcoin network and are indispensable key components of its entire ecosystem.
07 Mining Pool
Background Introduction:
The emergence of mining pools is primarily to address the issue where individual miners struggle to independently obtain block rewards as mining difficulty increasingly rises.
In the early days of Bitcoin, mining was primarily an activity of individual miners, who used the CPUs or GPUs of personal computers for mining. With the increasing difficulty of Bitcoin mining and the advent of ASIC mining rigs, individual miners found it increasingly difficult to independently earn mining rewards. Therefore, mining pools were created, aggregating the hashrate of multiple miners to increase the probability of solving complex algorithmic problems, thus enabling each participant to earn more stable returns.
Representative Projects:
AntPool, F2Pool, ViaBTC, etc.
Interpretation:
Mining pools can be considered an inevitable product of the development of the crypto mining industry and a sign of the industry’s growth and maturity. However, this industry has also sparked discussions about mining centralization, as efficient ASIC mining rigs are often concentrated in a few mining pools. Essentially, mining pools primarily act as technical service platforms, while the actual control of hashrate remains in the hands of the miners, who retain the freedom to join, leave, or switch pools.
Additionally, mining pools are fundamentally platforms operating with the goal of profit. Initiating a 51% attack would cripple the Bitcoin network and disastrously affect Bitcoin’s value. Hence, the likelihood of mining pools conducting such an attack is low, both in terms of motivation and feasibility.
Conclusion
A comprehensive look at the Bitcoin mining ecosystem highlights the many diverse players involved in propelling the industry forward. It is the continual technological evolution that drives these leading industry projects. Through innovation, market adaptability, and a commitment to sustainability, they are not only defining the current state of crypto mining but also sketching the blueprint for its future.
Leading industry projects, while focusing on profit generation, are equally committed to their environmental and social responsibilities. They contribute to sustainability by integrating energy-saving technologies, using waste heat recovery systems, and directing investments into carbon offsetting, thus lessening their environmental impact and advancing sustainable practices across the industry.
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