Posted 25th January 2021

What is ASIC Mining and is it Worth Your Investment?

ASIC mining has remained the most efficient method of acquiring cryptocurrency for years. Is it worth investing in today?

Short for Application-Specific Integrated Circuit, an ASIC miner – unlike other mining setups that repurpose CPUs, graphics cards or even disk storage – has been manufactured for the sole purpose of mining cryptocurrency.

Offering the greatest leap in efficiency and simplicity since Canaan’s first ASIC miner in 2013, many manufacturers have entered into the technological race of producing the most efficient ASIC rigs. Now, those who are serious about crypto-mining enjoy a wealth of choices when selecting their ASIC miner.

The catch to ASIC units compared to their predecessors is that they can only mine a single crypto hash algorithm. This means that they will only be able to mine cryptocurrencies locked to that algorithm, which could be just one or several.

Initially seen as an investment only available for those with extensive funds, ASIC rigs have become affordable and viable for smaller investors.

With knowledge and interest in cryptocurrencies growing amongst even the tech-illiterate, more individuals are wondering whether ASIC mining is worth pursuing.

What companies are involved with ASIC mining?

ASIC rigs were first mass-produced in 2013, following the launch of Canaan’s Avalon V1. This ASIC bitcoin miner could acquire upwards of $200 a day in Bitcoin. Although today, the ASIC landscape is significantly different.

Despite the crypto market cap taking a plunge of 70% in 2022, the mining firm still expects annual profits to drop less than 15% this year. In fact, Canaan’s annual revenue last year was still significantly bigger than it was a few years prior, having surged nearly 90% to around $201 million in 2019.

However, it’s not just ASIC manufacturers which have turned into multi-billion dollar enterprises. Entire companies have been created to invest in ASIC mining farms and bring together thousands of rigs into a single location to mine cryptocurrencies 24/7 at a massive scale.

These include the likes of Riot Blockchain, Marathon Patent Group and HIVE Blockchain – all of which have enjoyed substantial growth in recent years, capitalising on the significant increase in Bitcoin and Ethereum value.

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What are the pros and cons of ASIC mining?

Now, from the above, you’d be forgiven for thinking ASIC mining was the only real consideration for any individual or group looking to start crypto-mining.

However, the drawbacks of ASIC can range from mild to rather significant depending on where your operation is based and how much you’re able to invest in terms of funds, space and time.

In very general terms, the more you can invest in an ASIC mining rig, the greater the profit you’ll be able to yield. While this has always been the case for crypto-mining, the principle has never been more true than now.

As mining grows more popular, the time taken to validate transactions on the blockchain is ever-increasing – this serves to tackle uncontrollable inflation within the currency. Unsurprisingly, the ASIC miners with the greatest hash power to validate these blockchain transitions are the most expensive.

A top of the market ASIC miner like Bitmain’s Antminer S19 PRO would set you back between $1,000 to $12,000, if not more. That is a tremendous investment for someone with no experience or background in mining to make. Plus, that doesn’t account for the sizable electricity costs required to keep it running.

Naturally, you don’t have to go for one of these premium models.

In fact, you don’t even have to buy new – especially with China’s ban on crypto-mining leading to swathes of units being auctioned off on second-hand markets on eBay and Amazon. These can be especially inviting if they’re sold alongside their required power supply, offering further savings.

This means there is an abundance of ASIC mining hardware to match any budget. For a relatively modest $400, you could pick up Antminer S9. With just enough profitability to keep you in the red, this would be a perfect starter miner for someone looking to become more familiar with mining without losing money on the rig.

However, such small profits can be quickly consumed by how much you have to pay for electricity. Even just a small increase in kilowatt per hour can turn a profitable rig into a lossmaker.

This naturally means those with access to a surplus of renewable energy have a distinct advantage. As an inexpensive alternative, it will substantially reduce – or completely eliminate – the sizable electrical bill that comes with mining. With the limits of improved hash rates already being seen, it’s predicted that the next race for mining cryptocurrency will be who can achieve the greatest energy efficiency.

For larger enterprises, establishing an ASIC farm in the desert driven by electricity from solar panels is a feasible proposition. For smaller startups and individuals, however, commercial access to that amount of renewable energy would be a more difficult acquisition.

There is also the previously mentioned limitation on the currency that can be mined from each rig. While the simplicity of ASIC mining is unparalleled – plug in, log in, connect your wallet and away you go – the volatility of your chosen currency could make your profitable rig into a financial burden overnight.

Currently, this is the case with Ethereum ASIC mining hardware. With the switch to Ethereum 2.0 and its ‘Proof of Stake’ concept, mining the currency will no longer be possible in a couple of years. This will lead many to reconsider investing in any costly Ethereum miners.

While it may seem that ASIC mining is better suited to larger enterprises, it does offer a few advantages to individuals looking to earn some passive income. Given their compact size, you could easily house several ASIC units in a modest apartment.

However, be warned. You will have to find an effective way to exhaust the heat, as even a single ASIC miner will begin to push the temperatures up in the room it’s working in.

The more we explore the ups and downs of ASIC mining, the more difficult it becomes to give a reliable answer on whether it’s the right mining solution for you. Another popular alternative on the mining market presents itself in the form of GPU mining. In this article, we’ll help you to understand how GPUs are used in mining rigs and how you can mine effectively with them.

However, with preparation and the right resources, ASIC mining still remains the most profitable form of crypto-mining.

This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.