Bitcoin Mining – Race For Large Scale - Essay Example

Bitcoin mining, the activity that brings bitcoins into existence and keeps the digital currency’s all-important blockchain ledger intact, has come a long way from the basement hobby it was for early enthusiasts.

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As bitcoin’s price has risen, an arms race has produced an exponential increase in computing power across the network, all for the sole purpose of winning the rights to bitcoins.

Increasingly, the only way to guarantee decent profit margins on this capital-intensive business is to go large scale.

An installation by mining rig manufacturer CoinTerra at a datacenter in Utah brings it home. Behold the industrialized future of bitcoin mining.

High-powered fans needed to cool the 500 CoinTerra TerraMiner ASIC rigs. Each rig in this particular arrangement is capable of computing 1.6 terahashes per second.

In other words, every second they calculate 1.6 trillion of the special numbers that are computed and discarded in a race to find the one that will seal off the latest 10-minute block of confirmed transactions.

Like every other mining rig around the world, they are racing to be the first to find that number, for which they are rewarded with a new batch of 25 bitcoins, their compensation for acting as bitcoin’s ledger keepers.

All of that hashing activity demands an enormous amount of electricity — at around 20 kilowatts for a stack of ten rigs, each column in this installation consumes almost 10 times as much power as a rack of regular computer servers of the same size.

In this case, the facility uses the ambient, dry cool air of the Utah desert to cool down the rigs. The rigs’ fans suck the air in from outside through a filter and then push it through to a sealed area at the back. From there, the hot air is released via an exhaust to the outside. Air conditioning is rarely needed, ensuring a big cost saving.

According to CoinTerra CEO Ravi Iyengar, who gave us a tour of the facility and showed us another 1,500 boxes of rigs to be installed there soon, this particular datacenter will by the end of June have a total hashing power of 4 petahashes per second.

That’s a total of 4,000 trillion hashes per second. The company’s near-term goal is to have 10 petahashes installed across all of its datacenter locations in North America.

CoinTerra will use some of that capacity to mine on its own behalf; some of it will be leased out to individuals and businesses on 12-month contracts. The company even has demand from one customer seeking to rent an entire petahash per second.

To put all this in perspective, the bitcoin network’s is currently 79 petahashes per second, according to Blockchain.info, down from a recent peak just below 100 but 564 times higher than the 140 terahashes it handled just a year ago.

The computing power needed to achieve this is now 6,000 times more powerful than the top 500 supercomputers of the world combined, according to Bitcoin Magazine.

Three reasons why is this manic increase is happening:

-Even if bitcoin’s price is well down from its $1,165 December peak, coins are considered valuable and scarce, given that only a finite number will ever be released.

-Bitcoin’s guiding algorithm, which enlists miners to confirm transactions and authenticate and maintain the payment system’s blockchain transaction ledger, deliberately makes it increasingly difficult for one of them to find the winning hash. That’s so that the current 25-bitcoin payout to winner of this lottery-based compensation system continues at steady 10-minute intervals.

-The technology behind the ASIC (application specific integrated circuit) chips used to perform the bitcoin hashing task is improving exponentially .

This noisy, power-hungry, expensive business is no longer something to do in your basement.