Bitcoin ASIC Creator Says Next Wave of Mining Efficiency Is Coming

It is no secret that the Bitcoin mining industry is undergoing a fierce test following the fourth halving. With Bitcoin’s block subsidy cut, hash prices (revenue per terahash) have reached historic lows. Meanwhile, the post-halving mempool frenzy has abated, further fueling already nervous mining operators.

Nangeng Zhang, founder and CEO of Singapore-based Canaan Inc, which developed the first Bitcoin mining application-specific integrated circuit (ASIC), said: Bitcoin Magazine The company conducted its first interview with a North American media outlet to understand the state of the industry. Zhang commented on the origins of Bitcoin mining and offered his perspective on the chip design landscape and environmental sustainability trends.

Zhang also identified the burgeoning opportunity for Bitcoin in the Middle East and the convergence between Bitcoin and the artificial intelligence (AI) industry.

Listen to the full audio interview with Canaan CEO Nangeng Zhang on the Bitcoin Magazine podcast. Click here to watch.

The open source core of Bitcoin mining

Founded in 2013, Canaan revolutionized mining with the release of the first AvalonMiner ASIC machine, marking a turning point in computing efficiency for securing the Bitcoin network. As the industry moves away from traditional GPU and CPU-based hashing and embraces and commoditizes specialized ASIC hardware, commercial-scale mining operations are starting to take shape.

This step change at Canaan did not occur in a vacuum; it was after the company open sourced both its Avalon hardware and management software that ASIC-based hashing proliferated everywhere. Zhang pointed out that embracing the open source movement in Bitcoin’s early days was “not a decision” but “a requirement for everyone who wants to participate in the blockchain community” and “a means to decentralize computing power globally.” world.”

“The best way to defend against a 51% attack was to quickly deploy ASIC-based computing to users around the world.” According to Zhang’s assessment, the democratization and widespread deployment of ASICs has significantly reduced the risk of 51% attacks. The open-source nature of Canaan’s chip design has led major companies, including China-based Bitmain and computing stalwart Intel, to create their own ASIC systems.

Bitcoin Defies Moore’s Law: Trends in Chip Efficiency

Canaan, an ASIC chip designer, has been a beneficiary of the semiconductor manufacturing boom for more than a decade. At the heart of these developments is Moore’s Law. In other words, the observation is that computational efficiency approximately doubles every two years. Today, companies including Taiwan Semiconductor (TSMC), Samsung (SSLF), and Semiconductor Manufacturing International Corporation (SMIC) are ramping up production of 3-nanometer chips for optimization.

However, the move toward increasingly smaller-scale semiconductor architectures is not without challenges. Increasing transistor density on increasingly smaller chips, i.e. on the scale of less than 2 nanometers, leads to quantum rather than classical effects. These regime changes lead to transistor malfunctions and potential deviations from Moore’s Law.

The question now is whether Moore’s Law will hold, or whether the classical computing boom will turn into a quantum collapse.

Faced with questions about these fundamental constraints on ASIC computations, Zhang said, “In the past, increasing performance lowered the cost per terahash. Today this curve has flattened. This means that technological development is entering a new phase.”

“We are actually seeing a slowdown in the advancement of process nodes, encouraging the adoption of new transistor technologies such as GA (gate array) or nanosheet technology with backside power delivery. “This is not simply about making the surface smaller, but about changing the structure of the circuit (itself).”

“Bitcoin computing appeals to purely digital logic, but today we are moving closer to mixed-signal designs for analog implementations.” According to Zhang, this increase in complexity suggests a need for “design technology co-optimization” (DTCC) between designers like Canaan and the foundries that produce the chips themselves.

Despite these challenges, Zhang believes AISC efficiency “will continue to increase over the next three to five years,” and the company plans to launch at least one new product per year that will deliver “more than 20 percent efficiency gains” per generation.

These efficiency gains were demonstrated at the Bitcoin Asia conference held in Hong Kong on May 9th. There, Canaan launched the next-generation A15 AvalonMiner, boasting an efficiency of 18.5 J/T compared to the ~20 J/T provided by the previous A14 model. Zhang noted that the A15 is particularly optimized for a variety of environmental conditions.

In particular, Canaan enabled overclocking capabilities on the A15, and Zhang ridiculed a common reluctance from buyers who often say, “‘Oh, can I get that extra performance for free?'” Unfortunately, that is not the case. According to Zhang, however, the added functionality promises to provide A15 customers with additional operational flexibility.

Distributed Computing: A Look at the Middle East

Now more than ever, miners… *drumroll*… are looking to improve efficiency to reduce costs and increase profits. Of course, this is not surprising, but miners are turning to new technologies and geographies in their search for cheap power.

Zhang cited strategic changes on Canaan’s part to meet these market changes, highlighting the company’s recent moves to partner with mining companies in the Middle East. “(The Middle East) is eager to invest in high-tech industries. These countries especially welcome Bitcoin and cryptocurrencies. “The Middle East has great potential to become an important digital hub.”

On the topic of regulation in the Middle East, Zhang noted that the region has “made rapid progress in establishing a free regulatory framework for mining.” Companies such as Zero Two, backed by Abu Dhabi’s sovereign wealth fund, have made significant progress in integrating waste heat with Bitcoin mining for the purpose of seawater desalination.

Heat Check: Trends in Mining Sustainability

The Bitcoin market has been on fire since Canaan’s Nasdaq IPO in 2019, and Bitcoin mining companies are also boiling over accordingly. Large publicly traded miners such as Marathon Digital Holdings Inc (NASDAQ: MARA) and Riot Platforms (NASDAQ: RIOT) rose to prominence during the 2020-2022 bull market as Bitcoin entered the mainstream.

However, increased visibility has also led to increased scrutiny of the Ripple-funded and misguided code change campaign led by environmental groups, particularly Greenpeace USA.

When asked about environmental criticism of mining, Zhang seemed unphased and welcomed discussion about the sustainability of the mining sector. “The perception that Bitcoin mining is not environmentally friendly is changing. Bitcoin mining can help advance the renewable energy industry.”

In particular, CEO Canaan praised heat recovery as the biggest trend yet to emerge for both residential and commercial applications. “Our mine heat recovery products started rolling out this year. I think that in a few years, people will see a lot of very impressive products that utilize the heat generated by mining. “Today we can produce close to boiling water in our mining operations.” He believes that these trends underlie the sustainable nature of mining and the general trend towards heat monetization across the mining industry.

Zhang also highlighted the hydropower industry, whose power often suffers from supply-demand mismatches, as a key area where mining can supercharge renewable deployments.

Instead of battery storage, Zhang said, “(Bitcoin mining) allows these facilities to operate at full capacity most of the time. This can shorten the payback period to approximately 5 to 10 years. This means that the same amount of capital can be developed. twice as much Building a hydroelectric power plant in the same period… The same principle applies to other renewable energy sources, such as solar and wind energy, which are driven purely by economic factors.”

He believes the mining industry will continue the trend toward low-carbon energy resources, expressing optimism that market dynamics driving the pursuit of low-cost energy “show that the mining industry can automatically strike a balance between environmentalism, economic efficiency and development.” .

AI and Bitcoin Convergence: Developing and Scaling Energy Assets

Typically, Bitcoin miners are pioneers in the power market, flocking to places where power is abundant and demand is low. The symbiotic relationship between untapped energy resources and the inherently flexible and mobile network of Bitcoin miners has enabled ASIC-based computation to exploit resources at the edge of the grid. But according to Zhang, this is not the end of the story.

He sees new relationships forming between AI data centers and Bitcoin miners, each seeking the lowest cost energy input. Zhang spoke of “key players” and “early movers” who are starting to realize the potential integration between Bitcoin mining and AI computation.

“In this context, Bitcoin mining can generate economic benefits by acting as an early occupant of this (locked-up) energy before AI computing power comes fully online. “This is what we have seen over the last six months.”

Zhang also expects AI high-performance data centers and Bitcoin mining to be co-located even after AI facilities are operational. Use backup power and turn off (when AI comes online).”

conclusion

The zero-sum mining industry continues to be its own worst enemy, as it always has been. Combined with the fourth halving, declining margins, and the next wave of ASIC efficiency, it would be fair to say that profiting from mining could be as easy as squeezing blood from a (digital) rock.

However, positive trends are emerging in the industry, and CEO Canaan sees plenty of opportunity for enterprising mining and ASIC companies willing to blaze new trails in the energy and artificial intelligence sectors.