What is Bitcoin mining? Bitcoin mining is how Bitcoin transactions are validated and confirmed by the Bitcoin network. Bitcoin miners create a new block by solving a proof of work problem that is chained through cryptographic proof to the previous block.

Each block builds upon the previous one creating a blockchain. Every transaction in the blockchain can be proven. In this way, the Bitcoin network can come to distributed consensus as to how many Bitcoins (100,000,000 satoshis) are allocated to each public key address.

What is a Bitcoin miner? A Bitcoin miner is a computer specifically designed to solve problems according to the proof of work algorithm. Currently, highly specialized chips called ASICs, Application Specific Integrated Circuits, are used as Bitcoin miners. There are many places where you can buy a Bitcoin miner.

What is Bitcoin? Bitcoin is an internet protocol that enables the transfer of value over a communications channel like the Internet or radio.

One of its first applications is as a decentralized digital currency. Think of it like being able to send a gold coin as easy as you send an email.

But there will be a lot more applications of this blockchain technology. It will enable all types of amazing things like self-driving cars that are able to pick up passengers and pay for their own maintenance. Or a refrigerator that is able to pay for groceries to restock itself.

Bitcoin is changing the world of finance the same way that the Internet changed publishing. When everyone has access to this type of powerful financial technology then the whole world benefits as trade becomes cheaper, faster, simpler and more efficient.

Digital rendering of the still-on-the-drawing-board CoinTerra AIRE Miner.

Bitcoin-mining hardware maker CoinTerra announced today that it was accepting pre-orders for their newest creation, the 16nm AIRE Miner. On paper, it looks like a promising entry in the mining wars: 4.5 TH/s at 1350 watts at the wall, or around 0.28 watts per gigahash. If true, that level of efficiency doesn’t sound like bad deal for a pre-order price of $2,500.

Shortly after the announcement, however, skeptics began pointing out some troubling elements of the CoinTerra’s announcement. The most striking concern is that CoinTerra told CoinDesk that their new SHIVA ASIC “delivers a five-fold increase in performance-per-watt,” something that sounds like a true breakthrough. Unfortunately, it also sounds a little too good to be true.

In fact, the SHIVA ASICs that CoinTerra claims will power this device have yet to actually be produced. CoinDesk’s coverage noted that chips haven’t even been taped out, making it unclear exactly how far along in the process the ASICs actually are. Even CoinTerra’s own product listing for the pre-order notes that the TH/s rating is based purely “on simulations.”

Ask anyone burned by last year’s ASIC delays, and they’ll tell you this has the makings of a very big problem.

Even a minor loss in efficiency could put the AIRE into “ho-hum” mining rig territory, particularly when the AIRE is planned for a Q1 2015 release. This puts CoinTerra in a race against 14nm Intel chips slated for release later this year, and a Samsung/GlobalFoundries 14nm chip to be released at the start of 2015. Neither of those chips are claiming a five-fold increase in hashing power per watt, so either CoinTerra is onto something incredible, or something is wrong with their simulations.

Equally troubling, however, are CoinTerra’s Terms and Conditions for the sale, which ominously states:

ALL PURCHASES ARE FINAL, NON-CANCELABLE AND NON-REFUNDABLE. NO CANCELLATION OR RESCHEDULING OF ORDERS BY YOU WILL BE ACCEPTED.

While almost certainly not legally binding or enforceable, the tone of the T&C is decidedly hostile, going so far as to demand buyers to surrender their right to sue the company should the deal go belly-up. For a product that doesn’t exist, with no clear shipping date and a $2,500 price tag, that’s a bitter pill to swallow when the alternative is to buy bitcoin.

Antminer S4 promotional image.

Mining hardware maker Bitmain released a teaser image today (and very little else) for their upcoming Antminer S4 unit. According to Bitmain’s website, the unit will run at 2 TH/s and the first batch ship at the end of September. Beyond that, everything else about the unit is a mystery, including the price.

Given Bitmain’s somewhat embarrassing last-minute revisions to the S3’s hashing power estimates it’s not entirely surprising that they’ve decided to keep the details of the S4 under wraps until the launch. The S3 is a 441 GH/s device retailing at 0.64 BTC, meaning the price would need to be no more than 2 or 3 BTC per unit to be competitive with their own products or to just buy bitcoin.

The unit appears to use the same housing and form factor as the controversial S2, and a stark departure from the double-vented shoebox design of the S3. As such, it’s possible that the S4 is simply a revision of the S2’s build with an improved version of the S3’s ASIC blades. In that case, the S4 might be more accurately called the “S3.5.”

It is possible that Bitmain has an ace up their sleeve with the S4, however. ASIC improvements have been huge in the last year, and the near-stealth launch could prove to be a canny marketing strategy. Then again, releasing a new line so soon after the lackluster launch of the S3 could indicate nothing more than Bitmain having a lot of S3 ASIC blades and S2 form factors to clear out of their warehouse. Only time will tell.

SP20-Jackson promo image.

“As I’m sure you know, a lot of people have declared home mining to be a thing of the past,” Spondoolies-Tech VP of Marketing Gadi Glikberg recently told CryptoCoinsNews. “That however is only true if home miners do not have access to the most efficient ASIC in the market.”

Glikberg’s pointed comment comes as the Israeli company prepares to launch its latest consumer-level miner, the SP20-Jackson. Though not exactly on the bleeding edge of mining hardware specs, the 1.7 TH/s, 8-chip ASIC machine pulls a reasonable 1100 watts at the wall, and is overclockable to 1.8 TH/s.

With a $1,190 price tag, it’s not the best deal on the market, but it is priced within the range of a hobbyist. According to Glikberg, that’s the point. He told CCN that the SP20-Jackson was intended to “spread the hash rate” and put “power back in the hands of home miners.”

The hardware itself seems to still be in development, however. The company is currently taking pre-orders, with an expected ship date sometime in October.

Even if the Spondoolies-Tech hardware isn’t exceptional, there’s something to be said for a mining hardware maker giving priority to the home-mining market. With bitcoin mining becoming an increasingly industrial-scale, venture-capital driven business, many small miners are likely to be squeezed out or have to rely on bitcoin cloud mining. With centralization an increasingly worrying problem, the existence of a robust home-mining community is more important than ever.

KnCMiner’s “Arctic Cloud” facility in Sweden.

According to the Wall Street Journal, KnCMiner is out of the home cryptocurrency mining market. The mining hardware maker behind the Saturn, Jupiter and Titan lines told the news outlet that even with $70 million in first-year sales, direct sales to customers was rapidly becoming a losing game. The company plans to reposition itself as a cloud-based mining operation and chip designer, relying heavily on the $14 million cash injection it received from Creandum to launch a new dedicated hashing center.

That new facility, Clear Sky Farm, is located in northern Sweden, a region with plenty of cheap electricity and even more cheap cooling. KnCMiner currently controls about 7 PH/s, largely built from unsold Neptune units. With even the best of the KnCMiner line now looking like an increasingly bad investment from an ROI perspective, and with a particularly painful series of delays making even pre-ordered equipment a loss of customers, the company has decided to close the door or direct-to-customer sales.

“We don’t like people sitting in these queues for five months. It’s terrible. We generate a lot of stress for people,” KnCMiner CEO Sam Cole told the WSJ. Cole also noted that hundreds of customers had opted to simply have their money refunded rather than take possession of the mining equipment. That unclaimed mining hardware may already be in use at Clear Sky Farm.

Cole also declined to say if cloud-based mining contracts were actually profitable for customers.“We don’t give indications of returns,“ Cole told the WSJ. "That would be bad for business. We are not a financial adviser. We cannot guarantee the performance they will get. The customer will have to do this.”

The HRP hashing center, ready to host miners.

If all goes according to plan, a giant warehouse in Michigan may soon become one of the largest bitcoin hashing centers in the U.S. Mining startup Hash Rack Power (HRP) announced yesterday that it will be converting the 60,000 sq ft space (location undisclosed, but likely in the outskirts of Detroit) to a “co-op style hosting center” for bitcoin miners. The location is already equipped to handle 2.7 megawatts of power, and the group claims that this could easily be increased to 8.7 MW should the need arise.

For those willing to take the plunge, the space does seemingly offer some interesting amenities:

Service elements will be in place, such as high security, monitoring, carrier grande Internet, climate control, live remote hands by experienced IT personnel 7/24 service and the whole 60,000 of space covered with high powered industrial air conditioning and air balancing equipment power that will be ducted to the mining equipment.

Those services are nice, but the project will live or die by the price of electricity. Michigan has a huge power infrastructure from the state’s days as an industrial center, and at the moment power is relatively inexpensive there. HRP is currently pricing power for co-op members at $60 for 500kW per month, but said in the press release that lower rates could be negotiated if participation was high enough.

Early members of the co-op will receive shares in the company, allowing the organization to eventually transition to a for-profit model once the infrastructure is in place. Should the location prove profitable, HRP noted that the property has significant acreage for future growth, and that similar warehouse spaces are readily available in the area.

Mining hardware makers KnCMiner and Bitmain formally announced plans this week to launch new cloud-based Bitcoin mining services. Both announcements were widely anticipated, with both manufacturers lagging a few months behind their competition in offering the contract-based service. Neither service is yet live, with only pre-order subscriptions currently available.

The KnCMiner facility, dubbed Clear Sky Farm, is billed as a 7 PH/s hashing center in northern Sweden. The system is built from “excess” Neptune “Hash While You Wait” units that had been previously put to use to offset customer losses due to shipping delays of their 20nm line.

In an interview about the launch with CoinDesk, KnCMiner’s marketing director Nanok Bie said:

“We’re launching cloud services because of shifts in the market and demand from would-be customers. Home mining is becoming more and more difficult because of energy costs etc. Having your mining in the cloud has obvious advantages  – we can source green electricity cheaper for instance, and have other bulk advantages.”

Instead of building up a new hashing center, Bitmain simply decided to buy an existing one. The “Antminer” maker purchased Hashnest.com, and will be independently developing a new cloud-mining platform. Of particular interest is Bitmain’s annoucement that the new ANTPOOL platform will be fully integrated with 51% attack resistant pool system P2Pool.

We are investing significant resources into the development of p2pool mining protocol. … The development of contributed into p2pool is almost completed, and in the final testing and deploying. … We have a focused team who are developing the p2pool mining protocol, and the goal is to have 80% of the total network hash rate join p2pool within next 12 months. At that time, the whole Bitcoin community will never be anxious about the potential risks of the decentralization risk associated with the pool mining model now.

Bitmain noted that the first contributor to the ANTPOOL system will be adding around 4 PH/s to the P2Pool network.

One of many revealing images from the Coinsman’s blog post. Source: http://www.thecoinsman.com/2014/08/bitcoin/inside-one-worlds-largest-bitcoin-mines/

Earlier this month, bitcoin blog The Coinsman reported on the internal workings of a massive hashing center in Northeastern China, revealing key details on the operations of the mining operation. This week, the Coinsman visited another Chinese hashing center, this one being a “larger, even more secretive operation” than the last.

Bitcoin mining is clearly a booming enterprise across the globe, but this massive, four-building facility is something new. As the Coinsman noted: “This wasn’t a repurposed factory like the previous mine I visited… this was an entire facility being constructed just for bitcoin mining!”

According to the report, each warehouse-like space has around 3,000 square meters of floor space (9842.52 square feet). All told, the site will eventually have eight such buildings, all dedicated to creating a true behemoth of industrial bitcoin mining power.

How soon with it be complete? The answer is staggering, both from a logistical and safety perspecitve:

The mine operators told me that each warehouse took fifteen days to construct, and an additional ten days to fill up with hardware and get it all hashing away. The concrete was still drying on some of the buildings.

The buildings are clearly designed for bitcoin mining and little else, with a wall of industrial fans on one side and the opposite wall covered in what appears to be a cardboard-based evaporative cooling system. Not only is the system inexpensive, it’s also seemingly effective, keeping the internal temperatures of the hashing centers at 77 °F.

And inside? Racks and shelves filled with brand-new mining hardware. It seems that the center is equipped for both bitcoin and alt-coin mining, and has new equipment from a variety of ASIC vendors arriving constantly. The Coinsman estimates that the center may already have several petahashes of mining power under its command, and may already account for as much as 5% of the entire bitcoin network.

If you’ve been wondering why the bitcoin difficulty rate has been spiking of recent, look no further than China’s digital gold rush.

Iceland’s Jökulsárlón, a glacial lake. Image source: https://www.flickr.com/photos/krmuir/142110701/

Bitcoin industry blog CoinDesk published a profile of Australian bitcoin-mining company DigitalBTC this week, revealing the company’s fiendishly cost-effective vision for the future of industrial-scale hashing centers. At the core of their plan: Low-cost renewable power, and a naturally cold climate.

The company is building its new hashing center at the Verne Global data center in Iceland. Powered entirely by geothermal and hydroelectric sources, the data center can take advantage of Iceland’s famously inexpensive electricity costs (roughly $0.10 per kWh). Given that Australian electricity can be hugely expensive (around $0.31 kW/h in 2012), those savings alone could be enough to justify relocating a mining operation.

DigitalBTC told CoinDesk that it expects to see an energy savings of around 40% following the center’s launch, with additional savings coming from cooling. Although relatively mild by comparison to deceptively named neighboring island Greenland, Iceland’s temperature is still exceptionally cool, ranging from an average of 55 °F in the summer to a bone-chilling 14 °F  in winter. For an industry that is increasingly reliant on effective cooling technology to keep warehouses of ASIC hardware operating efficiently, Iceland seems like a veritable mining Shangri-La.

Ironically, due to the country’s capital control laws and the policies of the Icelandic Central Bank, bitcoin and other cryptocurrencies are unambiguously illegal for transactions within Iceland. Iceland’s government, the Althing, has been harshly opposed to cryptocurrency adoption, most notably during the failed launch of the Auroracoin alt-coin earlier this year. With an increasing number of industrial-scale mining operations looking for low-cost options, and Iceland increasingly looking for outside investments, that attitude may be about to thaw.

CoinBau promotional image from: https://bitcointalk.org/index.php?topic=719143.0

Last week, the Wall Street Journal published a profile of Dresden-based mining hardware startup CoinBau AG and their plan to bring German engineering to the ASIC market. The company claims to have created a custom 28nm chip design that can achieve 0.19 joules per gigahash, an unheard of efficiency in an already cutting-edge industry. By comparison, today’s best-performing real-world ASICs operate at around 0.35 joules/GH.

The company is attempting to raise between $10 and $15 million to mass-produce the new chip, dubbed Wolfblood Extreme Efficiency, although it has admitted that testing of the design has been limited to simulations.

The ever-skeptical mining community has been questioning CoinBau’s claims since the company announced plans to fund chip development by selling shares of an eventual mining operation once the ASICs went into production. With no publicly testable version of their first-generation chip, and no plans to release the second-generation chip into the wild until funding is complete and their hashing center operational, CoinBau is asking investors to take quite a leap of faith.

Should CoinBau’s chips prove up to the task and find funding, the company estimates packing around 4.8 TH/s into a 19” case, and with a targeted energy consumption of 0.27 W/GH/s per case. While impressive in theory, this performance isn’t terribly far removed from several products already announced for Q4 of 2014, meaning that it might be standard performance by the time CoinBau could reasonably expect to test and release a product in mid-2015.

Over the weekend, GAW Miners launched their cloud-based mining platform Hashlet. The system, which allows users to buy, rather than lease, hashing power in a cloud-based mining operation, was expected to have a significant demand as it went live. What wasn’t expected was that demand would be so high for the service that it would temporarily crash GAW Miners’ payment service, Shopify.

Reports on a variety of bitcoin-focused news sites claim that the traffic was high enough to effectively create a “natural DDoS” attack on Shopify’s servers, causing the payment gateway to return errors on over 100,000 online stores. The problem was quickly resolved by Shopify’s tech staff.

Speaking to Cryptocoins News about the event, GAW Miners CEO Josh Garza said: “We use Shopify, the largest e-commerce system in the world.
And we literally just brought it to its knees! … We knew the response was going to be big, but we didn’t know just how big it’d get.”

Garza added: “We’ve been politely asked to give advance warning next time.”

While the demand for a new product like Hashlet is understandable, from a mining perspective it’s not entirely clear if the pay-per-GH/s model GAW Miners has created is any more profitable than traditional mining systems, or offers significant advantages over lease-based mining.

Image source: https://bitcoinwisdom.com/bitcoin/difficulty

After three consecutive single-digit difficulty increases, bitcoin miners are bracing for a return to steep growth in the hashrate and steadily diminishing returns for old hardware. If the current hashrate increase holds, the next difficulty increase will happen around August 19, and will increase roughly 20 percent. 

While not exactly welcome, this is a moderate increase by bitcoin standards. Considering that the network has gained nearly 30 Petahash of power since the last increase on August 8, and currently tops out at around 177.5 PH/s, the situation could certainly be worse. That said, with nearly a week until the next increase, those estimates could change quickly.

What’s to blame for the increase? A better question might be “Why has the difficulty been so low for the last six weeks?” Did we see the results of the bitcoin mining community holding its collective breath until the delivery of new ASICs? Or is the situation more complex and nuanced than that?

Clearly the changes have something to do with the delivery and activation of new mining hardware, and perhaps a boost in new investment in industrial-scale hashing centers. It’s also possible that a reshuffling of mining pools in the wake of the GHash.io 51% incident may have played a role.

For many miners, however, the time for speculation about the past is over. Instead, it’s back to the grind of pool selection, hardware upgrades and ongoing cost/benefit analysis.

A Chinese hashing center. Image source: http://www.thecoinsman.com/2014/08/bitcoin/inside-chinese-bitcoin-mine/

Bitcoin-industry blogger Jason “The Coinsman” Smith recently posted a revealing look inside an industrial-scale bitcoin mining operation in northeastern China. Although understandably light on the specifics,  perhaps in part due to the Chinese government’s ongoing hostility to cryptocurrency in general, the photo essay shed some light on just how global the bitcoin community is. While hashing centers in the U.S. have gained considerable attention in the IT and bitcoin media, the barebones nature of the Chinese center is no less relevant to the growing digital currency infrastructure.

Smith wrote of the experience:

The first thing you notice as you approach the warehouse is the noise. It begins as soon as you step out of the car, at which point it sounds like massive swarm of angry bees droning away somewhere off in the distance. It becomes louder and louder the closer you get to the building, and as you step through the doors it becomes a deafening and steady roar; a combination of tens of thousands of tiny ASIC chips hashing away, and dozens of large industrial fans serving to cool down the “workers”.

According to Smith, even with all of those fans running the temperature was a constant 105° F, a situation even hobby miners can easily imagine. Littered with old, now-useless Avalon mining hardware, the former factory houses 2,500 machines, each “hashing away at 230 GH/s.” The power bill? Around $60,000 per month.

Smith calls the three operators of the hashing center the “heroes that keep our precious bitcoin network safe,” and clearly has a great deal of respect for the operation itself. The original post is well worth taking a look at, offering a glimpse into a side of bitcoin rarely considered, even by most miners.

Image source: Doge assets

The alt-coin mining world has been abuzz this week after the recent announcement by the Dogecoin development team that the Scrypt-based crypto would be introducing auxiliary proof of work (AuxPoW) in the next core update. While many of the discussions have been about the impact of a hard fork on a coin that is already experiencing a decline in network power, many have focused on the upshot: Merged mining with other Scrypt-based coins, such as Litecoin.

Although AuxPoW won’t directly connect LTC and DOGE, it does enable a single miner to hash away on a variety of Scrypt pools at the same time, significantly increasingly the odds of seeing some kind of reward. This is great for ailing blockchain networks like Dogecoin’s, providing incentive for Litecoin miners to contribute and pushing back the threat of a 51% attack.

This does, however, beg the question: If all of these AuxPoW-enabled coins are mining together, isn’t this a step towards alt-coin unification?

Are we seeing the first steps towards a new crypto paradigm aligning the major flavors of Scrypt coins into a new, more powerful network that is AuxPoW-Scrypt-coin in all but name? Could this de facto network actually make a viable mechanism for all those proposed, non-currency blockchain-using startups? Will this rising mega-alt-coin network compete with the bitcoin network, or complement it?

For established coins like LTC and DOGE, this may not be a bad thing. Although both have established niches (China and tipping, respectively), neither has gained ground against the juggernaut that is global bitcoin adoption. As Litecoin creator Charlie Lee told CoinDesk, the Dogecoin network’s adoption of AuxPow means that the community “can focus on what dogecoin does best (tipping, donations, wow) instead of worrying about defensive dogecoin mining and network security.”

It may seem strange, given its now-significant impact on the bitcoin mining community, but BitFury-backed mining pool GHash.io launched only a year ago. In that time, the pool has drawn both immense praise (for providing a stable payout system, top-notch merged mining and modern mining dashboard)  and severe criticism (for unapologetically seizing the majority of the bitcoin network, crashing the price and creating unambiguous proof that a 51% attack was possible). Love them or hate them, there’s no ignoring the force that GHash has become.

A new post on the official blog of GHash parent company CEX.io puts the pool’s impact on the bitcoin network into terms almost anyone can understand: Dollars and cents. Since its launch on August 3, 2013, GHash has created over 413,750 BTC, or just under $250 million.

By any measure, that’s a lot of bitcoin. For perspective, that’s 382,760,564,258,698,078,191,616 hashes, solving over 150,000 blocks and confirming over 6 million transactions. All that hashing has taken its share of electricity, consuming 159,519,788 kilowatt hours in the process. No matter how you look at it, GHash,io is a behemoth.

Who is doing all that mining? If you’re reading this post, it may well include you. The pool claims to have over 220,000 registered users.