Case Study: History of Crypto Mining

Cryptocurrency mining has been a lucrative thing since the first Bitcoin was minted. It could even replace one’s regular job. We offer you to dive into the history of crypto mining and find out if this business is still profitable.

Definition of Mining

Mining is the process of creating new Bitcoins (Ethers, or other cryptocurrencies) by solving complicated math problems that verify transactions and create new blocks. Miners receive a predetermined amount of cryptocurrency for doing it.

CPU mining

A type of mining that uses central processing unit cores (a computer, a mining rig, etc.). The first BTC was mined on a CPU.

GPU mining

A type of mining that utilizes the power of graphics cards. GPU devices are optimized to perform a narrow range of computational tasks. 

Mining History: Timeline

First BTC Block: 2009

Back in January of 2009, mythical Satoshi Nakamoto mined the first bitcoin block using a personal computer. Being the only miner of the whole Bitcoin network at the time, he didn’t need specialized equipment to launch the blockchain. Satoshi could create more bitcoin blocks with only CPU power.

GPU Era: 2010

Not long after, in July 2010, the first GPU miner was developed. It allowed users to achieve higher speeds through video cards and create large mining farms. Soon, GPU miners took over CPU mining, which was not profitable anymore.

ASIC Miners Era: 2012

In 2012, the first ASIC projects started to emerge. ASIC miners are represented as computer devices with the sole purpose of mining a specific cryptocurrency — BTC, ETH or other coin (but only of one type). As ASIC miners were becoming more widespread, GPU mining eventually became less effective and was forced out.

Nowadays: Hardware vs Software

Today, crypto miners are free to choose the most suitable way for creating new Bitcoins. It all depends on how much they can invest in mining, and how much profit they want to receive in future.

One can set up a large mining farm (or a mining pool) that will use the power of 1000 computers, GPUs or even gaming consoles, or just use their personal devices at home. While some prefer not to invest in hardware, and turn to software solutions and various platforms for cloud mining.

Controversies in Crypto Mining

1) Graphics card prices. The boom of GPU mining provoked rising costs of video cards, and turned into the crisis of circuits (started in 2020). While the GPU shortage appears to be coming to its end, as prices have reduced as much as 50% this year, profitable mining requires at least several graphic cards. This can’t be cheap.

2) Electricity. Crypto mining is very energy-consuming, not only because you need to power your mining rig (or the whole farm), but also to cool it down. This results in scary bills for electricity.

3) Another issue is the legality: though crypto mining is legal in most jurisdictions, it’s prohibited in such a large region as China.

4) Bitcoin limitations. Probably, the most important issue about mining is the intrinsic limitations of the network itself. Each 4 years, the Bitcoin network comes through halving, which means miners are paid less. Initially, the reward was 50 BTC, which dropped to 25 BTC, then 12.5 BTC, and as of last year, 6.25 BTC.

However, this only applies to Bitcoin mining.

Future of Mining

During the past several years, the competition in crypto mining has become crazy. With mining companies setting up large firms across the world, it’s almost impossible to mine digital currencies at home anymore. Crypto mining of today is a race of arms.

At the same time, BTC mining is becoming less profitable due to a row of controversies, so many miners are pulling out. But as history shows, each evolution step of the mining rigs, each increase of power and efficiency, was celebrated by another mining boom. 

Competition for mining rewards will continue — at least to the moment when 21M Bitcoins will be mined, and it will hopefully foster new solutions for profitable mining in the following years.