It's no secret that the Bitcoin mining industry is being battle-tested in the wake of the fourth halving. The hash price (revenue per terrahash) has reached historic lows as Bitcoin block support has been cut. Meanwhile, the post-halving frenzy has diminished, adding fuel to the fire for already stressed mining operators.
Nanjing Zhang, founder and CEO of Singapore-based Canaan Inc, and creator of the first Bitcoin mining applications-specific integrated circuit (ASIC), sat down with Bitcoin Magazine For the company's first ever interview with a North American media commenting on the state of the industry. Zhang commented on the origins of Bitcoin mining and offered his perspective on the overall chip design landscape as well as trends in environmental sustainability.
Zhang also identified the booming opportunities for Bitcoin in the Middle East, as well as the convergence of the Bitcoin and artificial intelligence industries.
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The open source core of Bitcoin mining
Canaan, founded in 2013, revolutionized mining by launching the first AvalonMiner ASIC hardware – marking a turning point in computational efficiency for those securing the Bitcoin network. As the industry moves away from GPU and GPU-based hashing, the embrace and commoditization of specialized ASIC hardware has seen commercial-scale mining operations begin to take shape.
This gradual change by Kanan did not happen in a vacuum, but led to ASIC-based hashing becoming more ubiquitous after the company open sourced both Avalon hardware and management software. Chang noted that embracing the open source movement in Bitcoin's early days was not a “decision” but rather a “requirement for anyone who wants to participate in the blockchain community” and a way to “decentralize computing power around the world.” world.”
“The best way to defend against (51% of attacks) was to rapidly distribute ASIC-based computing to users around the world.” In Zhang's estimation, the 51% risk of an attack has been greatly reduced by democratization and the widespread deployment of ASIC devices. Since then, the open source nature of Canaan's chip design has prompted major companies, including China-based Bitmain and computing powerhouse Intel, to create their own ASIC devices.
Running Bitcoin Against Moore's Law: Trends in Chip Efficiency
As an ASIC chip designer, Kanaan has been a beneficiary of the boom in semiconductor manufacturing over the past decade. At the heart of this progress lies Moore's Law—the observation that computational efficiency roughly doubles every two years. Today, companies including Taiwan Semiconductor Corporation (TSMC), Samsung (SSLF), and Semiconductor Manufacturing International Corporation (SMIC) are ramping up efforts toward 3nm chips in their pursuit of improvement.
However, the move toward smaller and more compact semiconductor designs is not without challenges. Increasing transistor density on smaller and smaller chips, i.e. on scales below 2 nanometers, invokes quantum, not classical, effects. This regime shift results in transistor malfunction and potential disagreement with Moore's Law.
The question now becomes: Will Moore's Law hold up, or has the classical computational boom turned into a quantum bust?
Faced with the issue of these fundamental limitations on ASIC calculations, Zhang admitted, “In the past, when we boosted performance, the cost per terahash decreased. Today, this curve has flattened. This indicates that technological progress is entering a new phase.”
“We are already seeing a slowdown in the progress of process nodes, which encourages us to adopt new transistor technologies such as GA (gate array) or nanosheet technologies along with back-end power delivery. This not only makes the surface smaller, it changes the circuit architecture (itself “)
“Bitcoin computing is based on pure digital logic, but today we are getting closer to designing mixed signals for analog applications.” This increase in complexity, according to Zhang, indicates a need for “design technology co-optimization (DTCC)” between designers like Kanan and the foundries that produce the chips themselves.
Despite these challenges, Zhang believes AISC efficiency “is still on the rise over the next three to five years” and the company plans to release at least one new product per year with “more than 20% efficiency gains” per generation.
This efficiency gain was demonstrated at the Bitcoin Asia conference in Hong Kong on May 9, where Canaan launched his work Next generation A15 AvalonMinerfeatures an efficiency of 18.5J/T compared to ~20J/T provided by the previous model Model A14. Zhang noted that the A15 is specifically optimized for changing environmental conditions.
In particular, Canaan opened up the A15's overclocking capabilities, and Zhang poked fun at the catchphrase buyers often say: ''Oh, can you get extra performance for free?!'' Unfortunately, that's not the case, according to Zhang, but The added capabilities promise to create additional operational flexibility for A15 customers.
Decentralized Computing: A View of the Middle East
Now, more than ever, miners are looking for efficiency gains to… *drum roll*… reduce their costs and increase revenues. This is of course normal, but miners are turning to new technologies and geographies in their quest for cheap energy.
Zhang pointed to the strategic shift by Canaan to face this change in the market, stressing the company's recent move to enter into partnerships with mining companies in the Middle East. “(The Middle East) is keen to invest in high-tech industries. These countries are particularly welcoming of Bitcoin and cryptocurrencies. The Middle East holds great promise to become a very important digital hub.
Regarding the issue of regulation in the Middle East, Zhang noted that the region “has progressed rapidly in establishing free regulatory frameworks for mining.” It follows that companies like Zero Two – backed by Abu Dhabi’s sovereign wealth fund – have made great strides to combine Bitcoin mining and waste heat for the purpose of desalinating salt water.
Heat screening: trends in mining sustainability
Since Canaan's IPO on the Nasdaq in 2019, the Bitcoin market has been on fire, and with it, Bitcoin mining companies. Major publicly traded mining companies like Marathon Digital Holdings Inc (NASDAQ: MARA) and Riot Platforms (NASDAQ: RIOT) became household names during the 2020-2022 bull market when Bitcoin hit the mainstream.
But with increased visibility has also come increased scrutiny from environmental organizations, particularly a poorly designed Ripple-funded law change campaign led by Greenpeace USA.
When asked about environmental criticisms of mining, Zhang seemed nonchalant, welcoming discussion of sustainability in the mining sector. “Perceptions of Bitcoin mining as environmentally unfriendly are changing…Bitcoin mining can help develop renewable energy industries.”
In particular, Canaan's CEO praised heat recovery as perhaps the biggest trend yet to be implemented in both residential and commercial applications. “Heat recovery products have taken off in mining this year. Within a few years, I think people will see many very cool products that use heat generated by mining. Today, we can generate near-boiling water from mining operations. He believes this The trend underlies the sustainable features of mining and the general trend towards heat liquefaction in mining as a whole.
Zhang also highlighted the hydropower industry, whose energy often suffers from a mismatch between supply and demand, as a key area where mining can boost renewable energy deployment.
Instead of battery storage, Zhang hypothesized that “[Bitcoin mining]could allow these facilities to operate at full capacity most of the time.” This can reduce the payback period to about 5 to 10 years – meaning the same amount of capital can be developed Double that number Hydropower plants in the same time frame… The same principle applies to other renewable energy resources such as solar and wind energy driven by purely economic factors.
He believes that mining will continue its trend towards low-carbon energy resources, and expressed optimism that the market dynamics driving the pursuit of low-cost energy show that “mining can automatically balance environmental protection, economic efficiency and development.”
Convergence of AI and Bitcoin: Developing and Scaling Energy Assets
Typically, Bitcoin miners have been leaders in energy markets, flocking to where energy is available and demand is low. The symbiotic relationship between underdeveloped energy resources, and the inherently flexible and mobile network of Bitcoin miners, has driven ASIC-based computations to develop resources at the edge of the network. But, according to Zhang, this is not the end of the story.
He sees a new relationship forming between AI data centers and Bitcoin miners looking for less expensive energy inputs. Zhang pointed to “key players” and “early movers” that are beginning to recognize the potential complementarity between Bitcoin mining and AI calculations.
“In this context, Bitcoin mining can serve as an initial occupant of this (stranded) energy, and (generate) economic benefits before AI computing power becomes fully available online. This is what we have seen over the past six months.”
Zhang also expects the co-location of high-performance AI data centers and Bitcoin mining even after the AI facilities are operational: “Given the redundancy requirements of large-scale AI computing centers (25-30%) of power redundancy… Bitcoin mining can use excess power and shut it down when (it comes) Artificial intelligence connected).”
Conclusion
The zero-sum mining industry remains, as always, its own worst enemy. Combined with the fourth halving, declining margins, and the next wave of ASIC efficiency, it would be fair to say that making a profit from mining could be as easy as squeezing blood from a (digital) rock.
But on the margins, there are positive trends happening in the industry – and Canaan's CEO sees opportunities abound for enterprising mining companies and ASIC companies wanting to blaze a trail on the frontiers of energy and AI.