Understanding ASIC Miners

In mining cryptocurrency, miners need to use computers in order to get the solutions to very complex puzzle. The first individual that solves the puzzle gets rewarded with cryptocurrency. The computer with most power has the greatest chance of solving the puzzle and thus ASIC mining was invented to maximize the chances of mining.

As time went by, this became the industry doctrine, especially for Bitcoin, considered the gold standard for cryptocurrency. Here’s how it works.

What is ASIC mining?

ASIC (which is an acronym for Application-specific integrated circuit) miners are computers whose main purpose of creation was mining cryptocurrencies like bitcoin that are generated through proof of work. Under this system, whenever a new block of information needs to be verified and added to a cryptocurrency’s blockchain, it’s encoded with a complicated puzzle that a computer needs to solve. Whoever solves the problem first gets to update the blockchain with the new information and is awarded a certain amount of cryptocurrency.

Ideally, any computer can be used to solve these puzzles. However, because proof-of-work mining is essentially a race, the people with a greater hash rate — a measure of the calculations that can be made per second — are more likely to solve the puzzle first. So ASIC miners were created to increase cryptocurrency miners’ hash rates.

Rob Chang, the founder and chief executive officer of Gryphon Digital Mining, says that ASIC miners can be used to mine all cryptocurrencies that are generated through proof of work, though general computers would suffice. However, they’re practically mandatory for Bitcoin mining because of how competitive it is. “The alternative, the more generalist machines, are no longer competitive relative to the ASICS, and so it’s just not economic for someone to [use them],” Chang says.

How do ASIC miners work?

ASIC miners are designed for one hashing algorithm, which affects which cryptocurrencies you can mine. For example, Bitcoin is mined through the SHA-256 algorithm and Ethereum is mined through ETHASH. So you’d need an ASIC miner for SHA-256 and a separate rig to mine ETHASH if you wanted to mine both.

The cost of ASIC miners rise and fall with the fluctuations in cryptocurrency prices. “That’s kind of a unique aspect that I haven’t really observed in any other industry, but because [ASIC manufacturers are] a small group with a lot of power, the manufacturers have the ability to do so at least for the time being,” he says. Chang also says they’re usually priced so that it will take you a year to break even with the money you earn from your miner.

The amount of money you make can be substantially affected by how much your power costs, given the amount of energy an ASIC miner consumes per hour. Yet, there are websites that can calculate your average profit when taking electricity costs into account. When buying an ASIC mining rig, you should also be thinking about the terahash per dollar, not the overall cost of the machine. According to Chang, ASIC miners can range from $100-$120 per terahash.

NoteThe high cost of these ASIC miners are by design. The cost in money and time are intentionally high to weed out potentially bad actors to ensure that the integrity of the blockchain stays secure.

 

Note: The high cost of these ASIC miners are by design. The cost in money and time are intentionally high to weed out potentially bad actors to ensure that the integrity of the blockchain stays secure.

 

The odds of single-handedly solving a proof-of-work puzzle is incredibly small, even if you had several ASIC miners operating. The Bitcoin network has a hash rate of 190 exahash (one million terahash). So if you had an ASIC miner with an 18 terahash per second capability, you’d still only have a one in 10.56 million chance of being the first to solve the puzzle.

To increase the odds, most cryptocurrency miners join a mining pool, a group of miners who combine hash rates so they have a greater chance of solving the puzzle first. They split whatever they earn based on what they contribute to the pool based on what they contributed to the group.

Is it worth getting an ASIC miner?

The question of whether ASIC mining is worth it or not will change depending on who you ask. As discussed earlier, cryptocurrency mining takes up an inordinate amount of energy. A 2021 report showed that annually, Bitcoin consumes 91 terawatts of power, which eclipses the power usage of the entirety of Finland at 86.1 terawatts. The power that Bitcoin alone uses — 0.5% of the world’s energy consumption — puts a heavy burden on the environment.

ASIC miners get more energy efficient in taking the same amount of energy and turning it into a greater hash rate. This theoretically lowers the amount of overall power it takes to create one Bitcoin. However, approximately every four years, the amount of Bitcoin that’s awarded for updating the blockchain is halved. It currently sits at 6.25 coins, but is expected to be reduced sometime in 2024. Though the price might restabilize to account for the production decrease,  the amount of energy it will take to create one coin will double overnight.

Putting aside the serious effects that ASIC mining has on the environment, there’s an additional risk that ASIC mining will become obsolete in the future. For one, nearly 90% of all the 21 million Bitcoin that will ever exist has already been mined. Unless the cap for Bitcoin changes, all Bitcoin will be mined in the year 2140.

That isn’t necessarily to say that ASIC mining will become completely obsolete. It’s tough to speculate about the future of cryptocurrency. Even if Bitcoin mining ceases, mining operations may have shifted their focus to another coin by the time the year 2140 rolls around.

Proof of work itself may also become obsolete, which would make ASIC mining obsolete by proxy. There are new methods of generating cryptocurrency that don’t require ASIC mining, such as proof of stake. Through this method, validators need to put up coins they already hold in order to validate new blocks of information. This is the method through which Etherium 2.0 — the new version of Etherium that moves away from mining and proof of work — and Web3 will operate on.

Advantages and Disadvantages of ASIC Miners

Advantages of ASIC miners

  • ASIC mining is the only way
  • They’re more energy efficient than GPU/CPU miners — greater hash rate for electricity used.
  • ASIC miners are more competitive than GPU or CPU mining.

Disadvantages of ASIC miners

  • ASIC mining gets more competitive as more people start their own mining operation, so your hash rate continues to decline.
  • They still consume a lot of energy anyways.
  • Bitcoin halving every four years cuts the amount of Bitcoin awarded for solving the puzzle in half.
  • New developments in blockchain verification may make ASIC mining obsolete in the distant future.

How to Use ASIC Miners to mine Cryptocurrencies

Although ASICs have plug-and-mine capabilities, they’re actually a bit more complicated than buying hardware and pressing “start”.

Let’s say you’re interested in mining Bitcoin with an ASIC Miner as an example. Below is how to mine Bitcoin using ASIC miner:

1. Picking a Rig for Your Asic Miner

To choose the best ASIC miner rig, it’s suggested to select the one with your desired budget and computational power.

When purchasing a new ASIC miner, the most current model is the ideal option. However, there are also secondhand models that can be acquired on Amazon and eBay, as well as other local and foreign markets.

You’d also need to consider how much physical space you’re willing to allocate to your rig. The free space in the garage may be ideal for some miners, while a mini ASIC mining farm may be more appealing to others.

Asic Miner Rig setup

Whatever the choice, there are a number of aspects of ASIC miners’ to consider before buying, such as:

  • Hardware: Your mining rig is made up of multiple ASIC devices – the “hardware” that are all networked together. In hardware, speed, efficiency, and electrical optimization must be taken into account
  • Motherboards: The motherboard is the most important component since it connects all of the other pieces of hardware. The motherboard you choose depends on the gear you want to use.
  • Power Supply: Power is required to run the ASIC miner. The size of the power supply you’d need is determined by the number of devices you’re looking to supply power to.
  • Central Processing Unit (CPU): The CPU is in charge of coordinating the ASIC and other components of the rig as a whole. As a result, a sound processor is critical to ensure the system’s proper operation.
  • Frames: When building a compact system, the frame serves as the linchpin. More durable frames often need fewer repairs. The size, on the other hand, also depends on how many miners you want to install.

2. Picking a Software for Mining

Mining software refers to a computer program specifically designed to link mining hardware to the blockchain as well as mining pools.

If you choose the wrong BTC mining software, you will not be able to connect to the pool or even the Bitcoin network itself.

Asic Miner software for mining

The finest software is defined by the target operating system and the level of mining expertise you have. MultiMiner(for beginners) CGMiner (for experienced users) and BitMiner (for quick setup) are the most popular Bitcoin mining software.

Some mining software can be used for free, but most of them require payments. Some of these premium versions are subscription-based, while others charge depending on the hash power of the rig you are using.

3. Be Part of a trusted mining pool

Even if being a solo ASIC miner sounds like an exciting idea, you may have to break the bank in order to acquire enough mining equipment and successfully add new blocks to the blockchain for reward.

Joining a mining pool is another option. ASIC mining rigs allow miners to harness the combined computing power of several machines, direct it to the Bitcoin network, and share the rewards for each block that is successfully mined.

Asic Miner Mining Pool

Though the benefits are noteworthy, it’s also important to be safe when mining cryptocurrencies, especially collaboratively.

To avoid being a victim of fraud, here are some things you need to pay attention to when joining a mining pool:

Reputation

Unfortunately, there are mining pools that do not compensate their members, while also charging expensive fees in the crypto mining industry.

To decrease the likelihood of joining one, do your research. Perusing other miners’ views on social media, such as Reddit and Twitter, is a good way to evaluate the trust level of each crypto mining pool.

However, be aware of praises that seem too good to be true. Several crypto-industry actors have been caught using fictitious internet personas to post inauthentic customer reviews.

Size

Another way to tell whether a mining pool is trustworthy and reputable is by looking at the size of the pool.

Mining pool size for Asic Miners

If you’re looking for a greater hash rate, a bigger pool may be the best option. As a result, big pool members have greater hash rates, which can be translated to a greater chance to win rewards on a regular basis.

Payment rules

How often does the pool release the rewards to miners? Is there a minimum payment?

When looking for an ASIC mining pool, it’s critical to consider these aspects. Like the minimum payment, for example, small miners may have to wait longer to get their rewards if the pool has a large minimum payment.

Indeed, the cost pool and payment options you have are defined by the payment rules.

DGM (Double Geometric Method), ESMPPS (Equalized Shared Maximum Pay Per Share), and CPPSRB are some of the payment options available (Capped Pay Per Share including Recent Backpay).

Other factors: Latency, customer service, and efficiency are also key factors when looking into joining a Bitcoin mining pool.

4. Calculate mining profitability

ASIC mining is a lot like doing business, in which profit planning should be taken into account.

Prior to buying your ASIC mining rig, you may want to use the mining profitability calculator to assess your return on investment (ROI).

Key parameters like the hash rate of mining rigs, current BTC prices, rig power consumption, and energy costs will all be factored in by the calculator. These parameters will then be used to calculate the profitability per day, month, and year.

CryptoCompare is one of the mining profitability calculators available. It offers a robust mining profitability calculator, including powerful features to help your profit planning.