ASIC (Application Specific Integrated Circuits)

Mining Software Explained

CoinBundle Team
Sep 12, 2018 · 5 min read

You already know what mining is — or maybe you don’t, which is fine. Just check out our article now to catch up! But have you ever wondered how some of the best miners use software to efficiently and profitably mine? Well, that’s exactly where ASICs come into play, allowing crypto-miners to have the best chance of solving a block and receiving the coveted block reward. Without getting too technical, let’s look at what makes ASICs so good and popular when it comes to mining for crypto.

This is not financial investment advice.
This article will touch upon key aspects regarding how ASICs work and why they’re so important.

In this article

  1. Terminology Explained
  2. What Is An ASIC?
  3. How Do ASICs Work
  4. Conclusion

Terminology Explained

As always, you have to know what we’re talking about to understand what we’re saying. Take some time to check out these important words to better understand how ASICS work.

Application-Specific Integrated Circuit (ASIC): An application-specific integrated circuit (ASIC) is a piece of computer hardware that is designed for one particular use, such as running the hash algorithms used in bitcoin or litecoin mining.

Hash Algorithms: Hash Algorithms (functions) a mathematical process that takes input data of any size, performs an operation on it, and returns output data of a fixed size.

Mining: Mining is the process by which transactions are verified and added to the public ledger, known as the blockchain, and also the means through which new bitcoin are released. Anyone with access to the internet and suitable hardware can participate in mining.

Central Processing Unit (CPU): The central processing unit (CPU) is the unit which performs most of the processing inside a computer. To control instructions and data flow to and from other parts of the computer, the CPU relies heavily on a chipset, which is a group of microchips located on the motherboard.

Familiarize yourself with the aforementioned terms in order to gain a better understanding of how ASIC’s work and function.

What Is An ASIC?

ASICs have actually been around for quite some time now, and you can probably find them in some of the technology you already own such as your cell phone. The integration of ASICs in cryptocurrency is relatively new, since the field of cryptocurrency and mining also emerged not too long ago. The first Bitcoin ASICs were sold in 2013, and since then ASIC miners have been developed for a number of other coins, such as Litecoin and Dash. Think of it this way: if cryptocurrency is disrupting the finance industry, the ASICs are disrupting the cryptocurrency industry.

ASICs have turned securing the blockchain network into an entire industry all on its own, using up insane amounts of electricity and energy to do so. Building an ASIC miner is possible, but you need to not only deal with programming software (or cobbling together preprogrammed software) but putting together the hardware as well. Specific mining rigs will be customized for certain coins. So basically, any mining rig that is built to mine Bitcoin can mine anything that uses the encryption the Bitcoin uses. In other words, any SHA256-based miner like Antminer can mine SHA-based currencies such as Litecoin and Bitcoin.

A straight comparison between CPUs, GPUs,and ASICs is difficult since CPUs and GPUs can technically be considered a type of ASIC. The main difference between mining ASICs versus CPUs and GPUs, is that the mining ASICs don’t have all the extra “capabilities” that make CPUs and GPUs so versatile. You can’t run an operating system or play a video game on a Bitcoin ASIC because the chip is meant to do only one thing: mine Bitcoin. Thus, a mining ASIC’s efficiency is gained because all of its computing resources can be optimized for a single well-defined task. Overall, an ASIC uses all of its capabilities to mine and does not leave any other computing power at rest.

Mining is the colloquial term for a resource-intensive computing process that basically involves guessing a number that results in a desired solution when plugged into a hash algorithm. This value “solves” a block of Bitcoin transaction data, and the block is added to the blockchain. A miner receives a reward in cryptocurrency for this work, and these hash-based algorithms are called proof-of-work (PoW) algorithms.

An ASIC is a piece of computer hardware that is designed for one particular use, such as running the hash algorithms used in bitcoin or litecoin mining. ASICs have turned securing the blockchain network into an entire industry all on its own, using up insane amounts of electricity and energy to do so.

How Do ASICs Work

So now that you know what an ASIC actually is, let’s go over how they function and operate. Don’t worry, we won’t be getting too technical here, so keep reading and following along!

In a nutshell, mining is the process of running complicated calculations in the search for a specific number. Mining hardware, whether it’s an ASIC miner or a GPU mining rig, runs through many calculations before finding that number that will effectively “solve” the hash function. In proof of work (Pow) systems like Bitcoin, the first one to find that number receives the block reward and notifies the rest of the network to stop working on that hash and to move to the next one. Today, there are many people and powerful computing systems trying to mine Bitcoin. To get an edge, people have begun mining in groups called mining pools, that almost everyone bands together with a group of miners to try and find that number.

That said, miners tend to earn more if they have faster hardware. That’s why people who can afford it choose ASIC miners because it gives them the greatest chance of earning cryptocurrency in exchange for their investment. Each cryptocurrency has its own cryptographic hash algorithm and ASIC miners are designed to mine using that specific algorithm. Bitcoin ASIC miners are actually designed to calculate the SHA-256 hash algorithm. That means technically they could mine any other coin that’s based on the same algorithm, though typically people who buy ASIC hardware designed with one particular coin in mind, mine that coin.

An ASIC’s mining efficiency is increased due to all of its computing resources being optimized for a single well-defined task. Overall, an ASIC uses all of its capabilities to mine and does not leave any other computing power at rest.

Conclusion

Hopefully, you’re still with us and that wasn’t too technical. We understand that this may seem like a relatively complicated topic that isn’t necessary for solely crypto enthusiasts, but the more that you understand about the smaller processes which make up the big picture, the better you will be able to perform when making investment decisions. A better understanding of technical intricacies also gives you a much deeper appreciation for the system as a whole, s always, happy investing!


Do you or someone you know use ASICs to mine?
Let us know in the comments!

CoinBundle

We're not another typical boring crypto project. Follow us to get the best crypto-articles and of course big announcements about CoinBundle.

CoinBundle Team

Written by

CoinBundle is the easiest way for people to invest in cryptocurrencies. Backed by top Silicon Valley VCs and Y-Combinator. Learn more: coinbundle.com

CoinBundle

We're not another typical boring crypto project. Follow us to get the best crypto-articles and of course big announcements about CoinBundle.

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