I don’t typically write about mining on the Bitcoin network, but the next 6–12 months are going to be far too interesting to refrain from doing so.
As I’ve written before, Bitmain is currently the premier company providing Bitcoin mining hardware and organizing Bitcoin mining pools. Unfortunately, they came under quite a bit of scrutiny in the lead-up to a Bitcoin hard fork last August and have been under the microscope by the Bitcoin community ever since. As cheerleaders of the forked coin (Bitcoin Cash), Bitmain has certainly made a loud statement within the cryptocurrency community and is looking like they may be set up to eat crow. In dedicating their resources to the promotion of Bitcoin Cash in lieu of Bitcoin, the coffers aren’t looking quite like they did. Additionally, due to the activation of SegWit through a soft fork in the Bitcoin protocol, their new proprietary technology (ASICBoost) that was developed to give a 20%-30% edge in the mining market is no longer viable. Additional market players have entered the field and without diving too deep into the technicals of the ‘next-gen’ chips, it appears that Bitmain may have been caught with their pants down. Throwing good money after bad in a series of blunders between the Bitcoin Cash hard fork and present-day, they appear to be chasing a grand slam instead of moving their runners and now we’re in the 9th inning.
As previously mentioned, there are a number of new players entering the mining hardware space and they’re raising a few eyebrows. Beyond initial price, mining rigs are dependent on two things: hashing power and efficiency. Prospective miners will want to buy rigs with the most hashing power per unit and the greatest efficiency available in order to avoid blowing margins on the cost of electricity. The latest mining unit produced and sold by Bitmain is the Antminer S9, released in May of 2016, which can achieve a hashing power of approximately 14 TH/second. This is incredibly powerful when compared to the mining technology of several years ago. As a reference point, one Antminer S9 produces the same hashing power as the entire Bitcoin network as late as August of 2012.
New market entrants are focusing on using smaller, more efficient chips in order to increase the number of chips per unit and therefore increase the hashing power of each unit. This, in combination with other hardware tweaks, is being incorporated into a “next generation” of mining equipment that is set to more-than-double the hashing power of each unit as well as decrease electricity costs (on a unit basis). Notably, Japanese company GMO is releasing the new B2 model in October and the B3 model in November (slight differences in casing, but no differences in the underlying tech) and these are already on pre-sale. Estimates are putting the hashing power of these units in the low 30’s with an uptick in electrical efficiency to boot. Meanwhile, Bitmain has been swinging for the fences and doesn’t appear to have a competitor on deck warming up.
In the last two days, the hashing power of the Bitcoin network has increased around 37% to a new high of almost 62 million TH/second, a jaw-dropping surge in the security of the network. Fairly large deviations, both up and down, occur normally in the total hashing power but this seems a bit larger than normal oscillation around a mean. I suspect that GMO or another competitor could be bringing their miners on-line for testing purposes. And if this is the case, Bitmain is likely watching the hashing chart and sweating bullets. 37% surge in two days? Whew lad. If that’s what this is, the S9’s will be retired to Bitcoin museums as fast as the next-generation can be produced. And with partnerships being created with legacy (read: deep-pocketed) sluggers like Samsung, you can expect that next-gen miner production will meet demand quicker than the last round. The 2019 mining field manual may look quite a bit different than this year’s.
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