ASIC, GPU & CPU Mining (Mining difficulty In a Nutshell)

When Cryptocurrencies first appeared with the advent of Bitcoin in 2009, any modern computer could mine these currencies with relative ease.

These days, however, if you were to tell a group of Crypto enthusiasts that you mine Bitcoin using a CPU, then you'd likely be laughed out of the room.

In this article, we're going to dive into the question of "what really is mining difficulty", in a nutshell.

The mining difficulty is determined by several factors. First of all, there is a global block difficulty, which forces valid blocks to have a hash below this target. Second, there is the factor of how many people are actively mining on the network alongside oneself. Last but not least, it is possible the mining pool itself uses a “share difficulty” setting for mining a particular cryptocurrency.

In the world of bitcoin, the mining difficulty automatically adjusts every 2,016 blocks on the network. Depending on how many people were mining – and their combined hash power – and the time it took to find those 2,016 blocks. The difficulty will go up or down. As the difficulty increases, miners need more powerful hardware to accommodate for this change.

CPU Mining -
It is because of difficulty that today, CPU and GPU mining is now largely phased out of Bitcoin mining, but other currencies such as Monero (XMR) still have a difficulty low enough to allow for profitable CPU mining.

When Bitcoin was newly released, you could mine 100 coins a day using just your CPU, unfortunately, today it is impossible to mine a single Bitcoin with your CPU. This being because the difficulty increases every two weeks, so you'd never actually manage to mine enough Bitcoin to receive a payout, nevermind a full coin.

On the technical side, CPU's are slow at mining because confirming blockchain transactions on the Bitcoin blockchain is highly arithmetically intense. Compared to GPU's, and now ASIC's; CPU's have fewer arithmetic logic units than the other listed devices. Thus making them a lot slow at solving arithmetic issues.

GPU Mining -
Although not as powerful as ASIC mining devices, GPU mining is very flexible, and also very efficient relative to the processing power of a CPU in regards to arithmetic algorithms.

GPU's were mainly designed for texture mapping, and are hugely popular thanks to the graphics demand of modern video games. But thanks to the way they process data, they are markedly brilliant at executing hashing algorithms, and as such a huge spike has occurred in the demand for mid to high-range Graphics cards.

As there are no ASICs available for Ethereum mining, for now, GPU's have become very, very popular with Ethereum mining set-ups. While one of the largest Bitcoin ASIC hardware manufacturers is planning to create an Ethereum ASIC, the Ethereum community are in favor of switching from proof of work, to proof of stake. The main advantage for miners being that people do not wish to invest millions into a mining setup that will become worthless overnight.

ASIC Mining -
ASIC is short for "Application Specific Integrated Circuit". As the name would suggest, it is a hardware device that is specifically designed to mine cryptocurrency.

As the difficulty has increased, the need for specifically designed mining hardware has arisen, but the usage of these ASIC devices has increased the need for more hashing power further.

ASICs are unlike GPUs, in that they cannot simply mine any coin, but they are designed for a specific algorithm. This is how they are able to have such a high hash rate comparable to other hardware solutions on the market.

Given the serious hashing power of ASICs, one might ask; why doesn't everyone serious about mining cryptocurrency use them?

Well, to put it simply, ASICs are borderline industrial equipment. They produce masses of heat and a lot of sound, and need dedicated cooling units and industrial class environments to be able to run a farm. This isn't the kind of device you can keep under your stairs.

On top of that, they can become worthless overnight.

Thanks to difficulty, if ASICs are released and allowed to mine a specific coin, then thanks to the example of Bitcoin, many people with threaten to "Fork" the currency to make it ASIC resistant. This is because if there is a serious exponential growth in the hashing power on the network, this means that the difficulty increases, wiping out mining profits for those using GPUs.

So generally speaking, if a network decides to fork to become ASIC resistant, then good look re-selling those now worthless, single-algorithm machines on the market.

An example of the Bitcoin mining difficulty over time.