ASIC chip creator: The next wave of Bitcoin mining opportunities is coming

Original title: 《CREATOR OF THE BITCOIN ASIC SAYS NEXT WAVE OF MINING EFFICIENCY IS COMING》

Original author: Bitcoin Magazine

Original translation: 0xFacai

It is well known that the Bitcoin mining industry is undergoing a test after the fourth halving. As Bitcoin's block subsidy has been slashed, the hash price (revenue per terahash) has reached an all-time low. At the same time, the post-halving mempool frenzy has subsided, which has added fuel to the fire for already nervous mining operators.

Canaan Creative, founder and CEO of Singapore, creator of the first Bitcoin mining application-specific integrated circuit (ASIC), spoke to Bitcoin Magazine in an interview, the company's first interview with a North American media outlet, to express his views on the state of the industry. Zhang commented on the origins of Bitcoin mining and offered his views on the future of chip design as well as trends in environmental sustainability. He also pointed to emerging opportunities for Bitcoin in the Middle East, and the convergence between the Bitcoin and AI industries.

The Open Source Core of Bitcoin Mining

Founded in 2013, Canaan Creative revolutionized the mining industry with the launch of the first Avalon ASIC machine, marking a turning point in the efficiency of computing that secures the Bitcoin network. As the industry gradually moved away from traditional GPU- and CPU-based hashing algorithms, the adoption and commoditization of specialized ASIC hardware allowed commercial-scale mining operations to begin to take shape.
This shift at Canaan did not happen in a vacuum, but rather led to the general proliferation of ASIC-based hashing technology after the company open-sourced its Avalon hardware and management software. Zhang noted that Bitcoin’s early embrace of the open source movement “was not a decision” but rather “a requirement for anyone who wanted to participate in the blockchain community” and a means to “distribute computing power across the blockchain community.”

“The best way to defend against 51% attacks is to quickly distribute ASIC-based computing to users around the world.” Zhang Nangeng estimates that the risk of a 51% attack has been greatly reduced due to the democratization and large-scale deployment of ASICs. Since then, the open source nature of Canaan's chip design has prompted major companies including China's Bitmain and computing giant Intel to create their own ASIC machines.

Is mining efficiency about to violate Moore's Law?

As a designer of ASIC chips, Canaan has been a beneficiary of the semiconductor manufacturing boom of the past decade or so. At the heart of this progress lies Moore's Law - computing efficiency doubles approximately every two years. Today, companies such as TSMC, Samsung (SSLF) and Semiconductor Manufacturing International Corporation (SMIC) are accelerating 3-nanometer chip production and seeking optimization.

However, the trend toward smaller and smaller semiconductor architectures is not without challenges. Increasing transistor density on smaller and smaller chips (i.e., sub-2 nanometer scale) triggers quantum effects rather than classical effects. This state transition leads to transistor failures and potential deviations from Moore's Law.

The question now is: does Moore's Law hold, or will the boom in classical computing turn into a quantum bust?

Faced with these fundamental limitations of ASIC computing, Zhang Nangeng admitted that "in the past, when we increased performance, the cost per terrahash would go down. Today, this curve has flattened. This shows that technological progress is entering a new phase."

"We do see a slowdown in process node progress, prompting us to adopt new transistor technologies such as GA (gate array) or nanosheet technology and back-side power transmission. This is not just about making the surface smaller, but also changing the structure of the circuit itself."

"Bitcoin computing resorts to pure digital logic, but today, we are moving closer to mixed-signal designs implemented in analog." Zhang Nangeng said that the increase in complexity shows the need for "design technology co-optimization" (DTCC) between designers such as Canaan Creative and the foundries that produce their own chips. Despite these challenges, Zhang believes that AISC's efficiency "will continue to rise in the next 3-5 years" and that the company plans to release at least 1 new product per year, with each generation of products "improving efficiency by more than 20%."

This efficiency improvement was demonstrated at the Bitcoin Asia conference in Hong Kong on May 9, where Canaan launched its new generation A15 Avalon miner, which has an efficiency of 18.5J/T, while the previous A14 model had an efficiency of about 20J/T. Zhang pointed out that the A15 is specially optimized for variable environmental conditions.

In particular, Canaan enabled overclocking capabilities in the A15, poking fun at a common question often asked by buyers, who often say: "Oh, you can get extra performance for free?!" Unfortunately, according to Zhang, this is not the case, but the added functionality is expected to bring additional operational flexibility to customers of the A15.

Opportunities hidden in the Middle East

Now more than ever, miners are seeking efficiency gains to reduce costs and increase revenue. This is normal, of course, but miners are turning to new technologies and new geographies to seek cheap electricity.

Zhang Nangeng noted that Canaan has made a strategic shift in response to this change in the market, and highlighted the company's recent move to work with mining companies in the Middle East. "The Middle East is eager to invest in high-tech industries, and these countries are particularly welcoming of Bitcoin and cryptocurrencies. The Middle East is expected to become an important digital hub."

Speaking about regulatory issues in the Middle East, Zhang pointed out that the region has "made rapid progress in establishing a complementary regulatory framework for the mining industry." As a result, companies like Zero Two, which is backed by the Abu Dhabi sovereign wealth fund, have made significant progress in integrating Bitcoin mining and its waste heat for desalination.

Heat recovery? A new trend in sustainable development in the mining industry

Since Canaan's IPO on Nasdaq in 2019, the Bitcoin market has been hot, and Bitcoin mining companies have been hot with it. As Bitcoin went mainstream, large, publicly traded miners such as Marathon Digital Holdings Inc (NASDAQ: MARA) and Riot Platforms (NASDAQ: RIOT) became household names during the 2020-2022 bull run.

However, with increased visibility came increased scrutiny from environmental groups, notably the Ripple-funded and ill-conceived "Change the Code" campaign led by Greenpeace USA. When asked about environmental criticism of the mining industry, Zhang seemed unphased, welcoming discussions on the sustainability of the mining industry. "People's perception that Bitcoin mining is not environmentally friendly is changing... Bitcoin mining helps develop the renewable energy industry."

In particular, the Canaan CEO praised heat recovery as perhaps the biggest trend yet to emerge in residential and commercial applications. "Mining heat recovery products have been launched this year. I think in a few years, I believe people will see many impressive products that utilize mining heat. Today, we can generate water close to boiling point through mining operations." He believes this trend is fundamental to the sustainable attributes of mining and the overall trend of heat monetization in the mining industry as a whole.

Zhang Nangeng also stressed that electricity from the hydropower sector often faces a mismatch between supply and demand, and that the hydropower sector is a key area where the mining industry can strengthen the deployment of renewable energy. Zhang believes that instead of battery storage, "Bitcoin mining can allow these facilities to operate at full capacity most of the time. This can shorten the payback period to about 5 to 10 years - meaning that the same amount of capital can develop twice the number of hydropower stations in the same time... The same principle applies to other renewable energy resources such as solar and wind power that are purely driven by economic factors."

He believes that mining will continue to move toward low-carbon energy, and is optimistic that market dynamics drive the pursuit of low-cost energy, indicating that "mining can automatically balance between environmental protection, economic benefits and development."

AI+Bitcoin, Developing and Expanding Energy Assets

Typically, Bitcoin miners have been pioneers in the electricity market, flocking to places where electricity is abundant and demand is low. The symbiotic relationship between underdeveloped energy resources and the inherently flexible and mobile networks of Bitcoin miners has driven ASIC-based computing to develop resources at the edge of the grid. However, according to Zhang Nangeng, this is not the end of the story.

He sees a new relationship forming between AI data centers and Bitcoin miners, with each miner looking for the lowest-cost energy input. Zhang Nangeng noted that "major players" and "pioneers" have begun to realize the potential integration between Bitcoin mining and AI computing.

“In this context, Bitcoin mining can serve as the initial occupant of this “stranded energy”, generating economic benefits before AI computing power is fully online. This is what we have seen over the past 6 months.”

Zhang also foresees AI high-performance data centers and Bitcoin mining being co-located even after AI facilities are up and running: “Given the redundancy requirements (25-30%) of power redundancy for large-scale AI computing centers… Bitcoin mining can use redundant power and shut down when AI comes online.”

The End

The zero-sum mining industry remains, as always, its own worst enemy. Add in the fourth halving, falling profit margins, and the next wave of ASIC efficiency improvements, and it’s fair to say that extracting profits from mining will be as difficult as squeezing blood from a digital rock.

But on the other hand, there are positive trends emerging in the industry - Canaan Creative’s CEO believes that opportunities are everywhere for enterprising mining and ASIC companies willing to blaze trails in the energy and artificial intelligence fields.

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