The bitcoin mining industry is going through tough times after the 4th halving. The reduction in block subsidies has led to all time low hash price (revenue per terrahash) and post halving mempool activity is further straining mining operations.

Nangeng Zhang, Founder and CEO of Canaan Inc., a pioneer in bitcoin mining ASICs, shared his insights with Bitcoin Magazine in an exclusive interview. Zhang talked about the origin of bitcoin mining, trends in chip design and the push towards environmental sustainability. He also mentioned the emerging opportunities in the Middle East and the intersection of bitcoin and AI.

The Open Source Revolution in Bitcoin Mining

Canaan was founded in 2013 and revolutionized the mining industry with the AvalonMiner ASIC machine, which increased the computational efficiency for Bitcoin network security. The transition from traditional GPU and CPU based hashing to specialized ASIC hardware enabled commercial scale mining.

Canaan’s open source approach to its Avalon hardware and management software played a crucial role in decentralizing the computing power globally. Zhang said this was essential to democratize ASIC based computing and reduce the risk of 51% attacks by distributing these machines widely.

Moore’s Law and ASIC Chip Efficiency

Canaan has benefited from the advancements in semiconductor manufacturing driven by Moore’s Law, which states that computational efficiency doubles every two years. Companies like TSMC, Samsung and SMIC are now working towards 3 nanometer chip production.

However, scaling down to sub-2 nanometer architecture introduces quantum effects which leads to transistor malfunctions and potentially deviate from Moore’s Law. Zhang mentioned this challenge and said the cost per terrahash no longer decreases as it used to, we need new technologies like gate array or nanosheet technologies and backside power delivery.

Chart of Moore's Law: Transistor Count Over Time

1971: Intel 4004 - 2,300 transistors

1974: Intel 8080 - 6,000 transistors

1978: Intel 8086 - 29,000 transistors

1982: Intel 80286 - 134,000 transistors

1985: Intel 80386 - 275,000 transistors

1989: Intel 80486 - 1.2 million transistors

1993: Intel Pentium - 3.1 million transistors

1997: Intel Pentium II - 7.5 million transistors

1999: Intel Pentium III - 9.5 million transistors

2000: Intel Pentium 4 - 42 million transistors

2006: Intel Core 2 Duo - 291 million transistors

2008: Intel Core i7 - 731 million transistors

2012: Intel Ivy Bridge - 1.4 billion transistors

2015: Intel Skylake - 1.75 billion transistors

2020: AMD Ryzen 3 (Zen 2) - 3.9 billion transistors

2022: Apple M1 - 16 billion transistors

Despite the obstacles, Zhang is optimistic about the future of ASIC efficiency, he predicted more than 20% gain per generation for the next 3-5 years. Canaan’s latest product, the A15 AvalonMiner, shows this progress with 18.5J/T efficiency, improved from the previous A14 model’s ~20J/T and has overclocking capability for more operational flexibility.

Exploring New Horizons: Bitcoin Mining in the Middle East

In the pursuit of cheaper power and higher efficiency, miners are exploring new technologies and geographies. Canaan is partnering with companies in the Middle East, where there’s a strong interest in high tech industries and supportive regulatory framework for mining. Companies like Zero Two in Abu Dhabi are integrating bitcoin mining with innovative applications like saltwater desalination using waste heat.

Sustainability Trends in Bitcoin Mining

Since Canaan’s IPO on NASDAQ in 2019, the visibility of bitcoin mining has increased and environmental organizations are paying attention. But Zhang is confident about mining’s potential to drive renewable energy adoption. He mentioned heat recapture from mining as a new trend, which can generate near-boiling water for residential and commercial use.

Zhang also pointed out the synergy between bitcoin mining and hydropower, which can address the supply-demand mismatch in renewable energy production. This can significantly boost the deployment of renewable energy sources.