Bitcoin frenzy : 19th century Gold Rush lessons for crypto-mining

Olivier Huez
C4 Ventures
Published in
4 min readDec 30, 2017


A new Gold Rush
Between 1848 and 1855, California was swept by the frenzy of the Gold Rush: the news of gold brought more than 300,000 people from all over the world to a state which had little more than 157,000 inhabitants, most of whom were Native Americans. It was the biggest migration in US history.

People hurried in to get rich, and while it is true that those who got there first easily found a few gold nuggets, studies show that those who arrived at a later stage found little and even ended up losing money. At the same time, Levi Strauss, a German tailor who arrived in 1850, built the foundations of a manufacturing empire by selling resistant work pants to miners. Wells Fargo, a premier US banking institution, was also born on the back of the gold frenzy. It soon appeared that selling picks and shovels was a safer way to make money, like Samuel Brannan, who became quickly the wealthiest person in California!

Today, we are witnessing a new and somewhat different Gold Rush: the cryptocurrency frenzy. People are now in a race to get the biggest share of the new digital currencies, the most famous of which are probably Bitcoin and Ethereum. Bitcoin’s value has climbed from less than $1000 a year ago to more than $15,000, reaching a peak of $19,000 over the past year, so much so that even tabloids like The Sun or The Daily Mail started writing about bitcoin price.

Like the gold nuggets of the 19th century, there are specific tools required to operate these crypto currencies.

Mining in the 21st century
Almost all crypto currencies rely on “miners”: in what is called crypto-mining, the miners group several transactions, among other things, to form a block. To confirm the block, they need to find a “hash” of this block which is under a certain difficulty level, itself defined by the total processing power of the network. This process is a bit like solving a very complex maths puzzle.

Therefore, serious miners are constantly looking for the fastest and cheapest way to “brute force” the solution to mine a block. In terms of infrastructure, this is no longer done with a traditional desktop computer but usually with dedicated computing units which can be based on CPUs (Central Processing Units, usually produced by Intel), GPUs (Graphical Processing Units, typically produced by Nvidia) or ASICs — Application Specific Integrated Circuit, which are chipset customised for a particular use.

Today ASICs are seen as the best solution for Bitcoin mining. However, having a fast processing power is not always enough: you also need high memory and bandwidth, which you don’t have on ASICs. That is why some crypto-currencies are still mined with GPUs that have more bandwidth but are less powerful than ASICs.

Ethereum relies on an algorithm, which is memory-bound and ASICs-resistant, meaning that the algorithm spends more time requesting data than actually processing it. Without going into too much detail, to mine Ether, miners need to access a large data set (DAG — Directed Acyclic Graph) that the Ethereum algorithm will hash until coming up with a solution that is under the difficulty level.
Since fetching the DAG pages from the memory is much slower than the actual computation (mixing), there is almost no performance improvement from speeding up the mixing computation. This is a good example of the memory wall issue: data just can’t be backhauled to the CPU fast enough.

Crypto-picks and shovels
Today’s miners need specific tools that will give them an edge against other miners and this is where companies like UPMEM fit in: UPMEM’s Processor in Memory technology solves the memory wall and the huge energy cost and slow data movement between the processor and the main memory in application servers by accelerating data-intensive applications twenty times faster with close to zero additional energy needs.

UPMEM will certainly provide the best picks and shovels for this 21st century Gold Rush and we’re proud at C4 Ventures to have led their Series A a few months ago.

As in 1848, this new ecosystem allows the emergence of many more tools and service providers: Coinbase is probably the world’s best known exchange platform for cryptocurrencies, while Trezor and Ledger provide secure hardware and offline wallets to store them. Circle is betting on mobile crypto payments with its platform and Axoni provides financial institutions with distributed ledger infrastructure and technology.
And to close the loop, Wells Fargo, which was born from California’s Gold frenzy, now invests heavily in this new Gold Rush, knowing what it means to bet on picks and shovels.

Bitcoin, Ethereum and other crypto-currencies’ exchange rates will rise and fall. As in the 1850s, the first early investors in these currencies already earned a lot of money and it is very likely that most people who invest today won’t make much. Profits will flow to companies providing the miners with the tools for their digging and at the gold may actually be in the shares of the companies producing the computer processors and chips used to create the digital currencies.

Big thanks to Nathan Clarke for his help in writing this up!