Five interesting facts about crypto mining

Tanzeel Akhtar , 21 May 2018 - Bitcoin MiningCryptocurrencyEnergy Consumption

As cryptocurrency mining grows, the methods and amount of energy it consumes is coming under scrutiny. Here we look at five interesting crypto mining facts and fictions.

 

China is the largest crypto miner

China is the world’s largest player when it comes to cryptocurrency mining which has been facing increased scrutiny from authorities that may eventually result in regulating the power used for mining.  China maintains about 60-75 percent of the bitcoin mining network and, according to Chinese media, 600 bitcoin miners have been seized in the northern municipality of Tianjin, on the grounds of “electricity theft.” 

One popular way to measure energy consumption is through the Digiconomist Bitcoin Energy Consumption Index. There is the Ethereum Energy Consumption Index, which offers an identical source for ether. Currently, there is no register where global crypto energy consumption is recorded.

Mining costs keep increasing

Many crypto enthusiasts will go as far as running mining operations from their bedrooms, though the cost for both equipment and energy usage has soared. In order to remain profitable, miners will move to locations where the cost of electricity is cheapest.

For example, cheap hydroelectric energy has recently made Sweden and Norway places of interest along with Iceland which has been the focus of crypto miners for some time. According to an EliteFixtures study South Korea is the most expensive country for mining a single Bitcoin, with costs coming in at $26,170 per coin; whereas Venezuela, where the cost per token is just $531, is the cheapest

As cryptocurrency mining evolves so will the use of energy.  The increase in cryptocurrency mining pools on a global scale is rapid. Alexander Blair, VP of Engineering at blockchain cybersecurity and smart contract auditing firm, Hosho, explains crypto mining pools have been a natural response to the issue that arises from solo mining - namely that there is massive financial risk in mining alone due to the fact that mining is essentially a game of chance.

Blair said: “Pooled mining solutions allow groups of people to band together to attempt to find a solution, each receiving a piece of the reward. Due to this, increased centralization is expected, however, the issue is not one that can be solved via a technical means, but instead, would need to be solved by a social contract, held by the developers, miners, and owners of pools.”

PoW v PoS - the reality of the consensus landscape 

In terms of consensus algorithms Brave New Coin's General Taxonomy for Cryptographic Assets shows 30% of cryptographic assets are using PoW, 18% PoS, 8% a PoW-PoS hybrid, and 4% were using novel mechanisms such as Burstcoin's ‘Proof of Capacity’ and NEM's ‘Proof of Importance.’ Around 40% are issued, either as interim tokens or Protocol Tokens. 

Canada's green mining revolution

Canadian firm Hydro Quebec hosts 30 large cryptocurrency miners on its network. The vice president of Montreal International, Stephane Paquet, recently called Quebec a place for “green bitcoin.” According to a recent Reuters report, Hydro Quebec offers some of the lowest electricity rates in North America, charging an industrial rate of $0.0248 per kilowatt hour (Kwh) (2.48 US cents) for data centers and $0.0394/kwh (3.94 US cents) for cryptocurrency customers.

The evolution of bitcoin mining chips

For those who want to know more about the mining process.  So far, there’s been four phases of Bitcoin mining:

CPUs 2009 - 2011: In the beginning, any laptop or PC could easily mine bitcoins. The CPU processor provided the computing power.

GPUs. 2011-2013: As bitcoin increased in value, the graphics cards contained within gaming PCs were used. These could solve SHA256 problems much more quickly than CPUs but were more expensive.

FPGAs 2011: The general rationale behind Field Programmable Gate Arrays is to try to get as close as possible to the performance of custom hardware while also allowing the owner of the card to customize it or reconfigure it "in the field". Whereas GPU mining dominated for about a year or so, the days of FPGA mining were far more limited — lasting only a few months before custom ASICs arrived.

ASICs. 2013 onwards: Finally, as bitcoin’s value soared to over $1000 USD in 2013, purpose built mining hardware was created to mine bitcoin. ASIC computers were much more powerful and efficient at mining than GPUs, and are now what keep the Bitcoin network running. They are, however, very expensive, and have been criticised because most people cannot afford them.