The next decade of sustainable crypto innovation begins today

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Since the creation of the first cryptocurrency over a decade ago, many have often been skeptical of its legitimacy, some even dismissing it as a fraud. But in 2020 that paradigm seemed to have changed. What has emerged is the shared realization that Bitcoin (BTC) and other digital assets will stay here and play a key role in the future of global finance.

This is not a far-fetched vision reserved for crypto anarchists – financial actors who have traditionally been suspicious of cryptocurrencies are now expressing their confidence in their disruptive potential. JPMorgan and Goldman Sachs, for example, recently rolled back their initial opposition to cryptocurrencies and are among the latest to bring new banking services and offerings to the digital asset market.

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As optimism and appreciation for the long-term potential of cryptocurrencies continue to grow, the opportunities for revenue growth among actors within the ecosystem will also increase. For example, the top numbers of Bitcoin miners in November rose nearly 50% from the previous month, as Bitcoin prices rose more than 60% to over $ 18,000 over the same period. However, in a highly competitive environment, success was largely limited to a few industry leaders while remaining elusive for many.

For miners, access to state-of-the-art mining machines, which are characterized by the highest energy and cost efficiency and the fastest processing speeds, remains the most important factor in securing a competitive advantage.

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The evolution

The crypto mining industry has gone through a number of significant changes in order to achieve today’s technological level. In the beginning, mining was done with simple computers without complex or powerful equipment. General central processing units or CPUs were all that was required to make Bitcoin. This led to the rapid expansion of the Bitcoin network as the appeal of easy money led to an influx of new entrants in the market – so much so that these first generation miners were unable to keep up with the demand for what they were into made obsolete for a year.

Next, graphics processors were introduced, which made mining bitcoin more efficient and profitable. Combining multiple GPUs became a common sight as miners wanted to further increase their mining performance and skills while maximizing profits. Despite these advances, second generation miners have failed the test of time due to their high energy consumption and lack of long-term effectiveness.

In 2011, field programmed gate arrays (FPGAs) were introduced as the next logical step in progress. They were fast, very energy efficient, had better performance and easier cooling than their predecessors. Still, FPGA miners were short-lived and were eventually replaced by ASICs, which to this day remain the dominant technology for the Bitcoin mining industry. ASICs were developed, built and optimized exclusively for dismantling. They are known for their superior harmonization of power consumption, performance and costs – around a million times more energy efficient and 50 million times faster in mining Bitcoin than the CPUs used in 2009.

Along the road

Indeed, crypto mining has come a long way. In addition to performance-related developments, the environmental aspects of the technology have also been significantly improved, e.g. B. higher energy efficiency and faster hash rates. With a growing focus on sustainability, this trend is likely to continue as chip design vendors seek innovative solutions to meet this evolving demand.

Two main areas of development come to mind. First, reengineering the current mining hardware to use radically less energy; and second, reprogramming the current mining chips to allow the use of hybrid energy for optimal cost performance.

Reengineering of the current mining hardware. There are already several concepts out there that are being researched and rigorously tested – one of which is the use of photonic chips to carry out computers. In theory, the technology appears promising, since two to three orders of magnitude are more energy efficient than current electronic processors. In reality, however, it remains unclear whether the energy savings are feasible, especially as Bitcoin scales. Until then, ASICs and their ongoing improvements will continue to dominate the crypto mining space and take responsibility for energy efficiency in crypto mining.

Reprogramming the current mining chips. Contrary to popular belief, the crypto mining industry is relatively environmentally friendly. In December 2019, Bitcoin was running on over 70% of renewable electricity. While the benefits of using renewable energy are undisputed, the truth is that renewable energy is an intermittent source of energy and is not always reliable for bitcoin miners who have constant energy demands. In contrast, fossil fuel-based energy generally serves as a more stable source of energy. In order to strike a balance between the sustainability of the industry and sustainability in the broader sense, a hybrid model can be applied in which renewable energies are primarily used as an energy source, with electricity from fossil fuels being used in the event of production bottlenecks. This includes redesigning and reprogramming current mining chips to simplify switching between the two variants of energy sources without disrupting the mining processes.

As cryptocurrencies are becoming more and more important, competition from new providers who want a piece of the pie is also increasing. Healthy competition can be positive in that it can lead to more innovation that brings the industry more efficiency and maturity. In order to fully exploit the growth of the emerging cryptocurrency market, however, established chip designers must continue to invest in research and development, especially in the areas of energy optimization and energy efficiency.

The views, thoughts, and opinions expressed here are the sole rights of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Nangeng Zhang, also known as NG, is the founder, chairman and CEO of Canaan Inc., a leading provider of supercomputing solutions. NG specialized in supercomputing and explored the potential of application-specific integrated circuit design. He brought the world’s first digital cryptocurrency miner based on ASIC chips onto the market and catalyzed the era of ASIC mining.