September 24, 2020

The interesting Bitcoin mining history

The interesting Bitcoin mining history

The interesting Bitcoin mining history

In the beginning, Bitcoin was a single cryptocurrency that was interesting only for groups of enthusiasts. Now, this digital asset is more than an interesting project. A lot of people made mining and cryptocurrency trading a full profession.

The interesting Bitcoin mining history

In the beginning

The first miner was Satoshi Nakamoto, who is the creator of Bitcoin. There is a very popular opinion that Satoshi mined by himself for a lot of time, and now he is an owner of millions of BTC. However, we don’t really know the truth. There is no proof of this idea. There is only one reason why we can believe this: a lot of digital money hasn’t been traded yet.

To analyze the real numbers, there are 750 BTC which can be mined autonomously by Satoshi. Then, other miners could compete with Satoshi. A lot of early adopters are unknown. The first transaction in the BTC blockchain was carried out on January 12, 2009 between Satoshi and his friend. The size of the operation was 10 BTC. Today, from this address (we know who the owner is) 32 BTC were paid.

Generally, there were these periods of mining:

Probably, sometime later, a post-mining period will begin.

CPU-mining

Previously, mining required one CPU. Now, this power isn’t sufficient. The process isn’t interesting at all. This is a usual operation of hash calculations using the SHA256 algorithm, which is executed in many other situations that aren’t associated with cryptocurrencies.

The first change of Bitcoin mining difficulty was on December 30, 2009. At that time, about 100 users mined Bitcoin using the CPU. The biggest change of Bitcoin difficulty during that period was in 2010, after posting a publication about Bitcoin on the Slashdot website. The total number of users increased many times.

Maybe, Satoshi couldn’t predict how fast the mining industry will grow.

You need to join the special pool to get a small part of cryptocurrency. Also, the technologies of mining were changed. Now, cryptocurrency isn’t only a payment method or digital currency. This is a fully functional infrastructure with special apps with the highest level of security.

At the start of the cryptocurrency industry, the hash rate was about 50 hashes per block. If you were a nerd at that time, you were able to earn about 5 dollars per day. Now, with a similar level of engagement, you can earn up to 400 thousand dollars. However, now mining is significantly harder. Due to this, you need to have a real passion for this activity to become rich. In other situations, you would definitely give up after the first obstacle on your way.

Generally, mining is like a casino. There is a big probability to generate an orphan block and not get any money. This risk grows regularly.

Yet, success stories inspire a lot of miners and traders around the world. The stories about lost opportunities also affect people. One of these stories is the situation that occurred with one person. He decided to spend all Bitcoins on pizza when this cryptocurrency cost too little. In the long-term perspective, though, he really paid 8,6 million dollars for one pizza.

Mining with graphic cards

The year of 2010 was a time when users managed to earn money with Bitcoin. Naturally, the income was quite small, one block cost 5 dollars. It was good enough, especially for poor countries where an average salary was about 300 dollars. An additional 150 dollars a month was not so bad, especially if the person actually didn’t need to do anything.

Sometime later, you had to buy at least one graphic card because the difficulty of mining had increased. Next, you needed to buy two, three and more graphic cards. You didn’t need to have special skills, and this advantage had been a feature of cryptocurrencies for a long time. If you had 500 dollars, you were able to cover all your spendings.

Graphic cards had a lot of advantages such as:

  1. Productivity
  2. Price
  3. Energy consumption.

It was a time when you could stop working and drink expensive cocktails on the beach. However, this period wasn’t so long because the growing demand stimulated miners to buy more and more expensive and powerful hardware.

The technologies were also developing. The FPGAs that were invented sometime later could increase energy effectiveness 3 times. Later, they were very needed because the cost of electricity was becoming higher and higher to be able to earn any money.

The first mining farm was created on July 18, 2010. This moment started the period of industrial mining. Also, this method was far cheaper because you could install up to 4 graphic cards on your motherboard. Next, motherboards started supporting up to 8 graphic cards. The computer with minimal configurations cost similarly to the farm consisting of several top graphic cards. Thus, they became very popular instruments very fast.

At that time, applications for professional mining with GPU weren’t available for the general population. Only in September of 2010, a CUDA-based miner for the nVidia cards was published and the next month the OpenCL-based cards for ATI Radeon were sold. In the fall of 2010, the first pool was created. It has been working since then without breaks. In 2011, the power of this pool was 10 giga hashes per second. Now, this number is like a joke. However, at that time Bitcoin’s difficulty was 5 million times lower than now. That year, Bitcoin cost about 1 dollar and the price was growing until it reached the $20 level. So, an easy way to get a great passive income was a reason why so many miners decided to do it. That’s why the total number of competitors was growing. This luck couldn’t last long. Sometime later, MtGox had been hacked and the price of Bitcoin fell, so some users stopped their activities in this direction.

In 2011, the first decentralized pool was created, but the effectiveness wasn’t so good. This pool could mine only one block a day. This is a bad result for so much effort. That’s why miners don’t like decentralized pools even now.

Mining in decentralized pools is not convenient and easy to set up. Also, there were a lot of unexpected issues associated with mining in the decentralized pools.

That year, a new digital coin was created. Its name is Litecoin. It was developed to save a possibility to mine cryptocurrency with CPU. There is one interesting fact. Two years later, this cryptocurrency became a refuge for those traders who wanted to mine with the graphic cards when ASIC increased in popularity.

Graphic cards had been popular for 3 years. The first decrease in the reward for one block occurred in 2012. The period of FPGA started at that time. They were less effective in comparison to the CPU, but as we said earlier, they were more effective regarding energy consumption. They were more expensive than classic graphic cards but more stable. Also, spendings were covered very fast.

Graphic cards were the most popular mining method. The cost of FPGA was too high for an average person. They were a base for ASIC mining because the development of these devices was almost similar.

The ASIC mining period

ASIC miners aren’t universal. They are developed only for one task, and they are able to complete only one task. However, the quality is much greater. The difference in computing power is up to 10 times bigger. Yet, production is very long and expensive. Creating a prototype costs several million dollars, and nobody can guarantee positive results.

First, ASIC was developed when the first FPGA was produced for mass consumption. The development of ASIC miners was realized with the money of future customers. This type of cryptocurrency equipment became popular in August of 2013.

Let’s describe some developers.

ASICminer

This company was established in 2013 by a group of three Chinese citizens. The creators of this great device collected money for the realization of this idea via special forums. However, they didn’t take money from every person. This company had a business model where investors got their money and financial assets. The representatives of this company answered all questions customers ask. We don’t know for sure the owner of this company. We know only the nickname, which is “Fried cat”. Maybe, he is another nationality, but the people who work with him don’t reveal any information about him.

At the beginning of 2013, the miner was created based on the process technology 130 nm. It cost a little. A totally new ASIC was developed for 150 thousand dollars. Yes, this is a very low price.

The interesting Bitcoin mining history

The first miners created by ASICminer had quite good technical characteristics at that time. Hashrate was 10 Hh/s and energy consumption was about 100 watt. An older technical process could save a lot of money without any negative effect.

Avalon Project

This company was created in September of 2012. As with the previous company, the head of this company was a man from China. Though, the name was adapted for the European and American people. Now, this company is only one of the many other manufactures because it was transferred to the Canaan Creative. The devices created by this corporation were stable, but there was one disadvantage of these miners. The TP-Link controller was not so good. There were a lot of bugs.

The interesting Bitcoin mining history

BFL

This company is an example of dishonest manufactures. It was a master of pre-orders. Orders for 250 thousand USD were made on the first day. However, the real development was much harder than promising. The real device was bigger in comparison to the pre-design and terms were violated many times.

The interesting Bitcoin mining history

Now, big pools have become popular where you don’t need to pay for a very expensive device. You can buy sufficiently powerful devices. However, most modern cryptocurrencies aren’t mined, but this is a completely different story.