ASIC Chip Pioneer: The Next Wave of Bitcoin Mining Opportunities is Coming Soon

Original Title: 《CREATOR OF THE BITCOIN ASIC SAYS NEXT WAVE OF MINING EFFICIENCY IS COMING》

Author: Spencer Nichols, Bitcoin Magazine

Translation: 0xFacai

As is well known, the Bitcoin mining industry is undergoing a test after the fourth halving. With the Bitcoin block subsidy significantly reduced, the hash price (revenue per terahash) has reached a historical low. Meanwhile, the frenzy in the mempool after the halving has weakened, adding fuel to the already strained mining operators.

Zhang Nangeng, founder and CEO of Canaan Creative in Singapore, is the creator of the first Bitcoin mining-specific integrated circuit (ASIC). He accepted an interview with Bitcoin Magazine, marking the company's first interview with North American media to share insights on the industry situation. Zhang commented on the origins of Bitcoin mining and offered his views on the prospects of chip design and trends in environmental sustainability. He also pointed out emerging opportunities for Bitcoin in the Middle East, as well as the integration between the Bitcoin and AI industries.

The Open Source Core of Bitcoin Mining

Canaan Creative was founded in 2013 and launched the first Avalon ASIC machine, which revolutionized the mining industry and marked a turning point in the computational efficiency that secures the Bitcoin network. As the industry gradually moved away from traditional GPU and CPU-based hashing algorithms, the adoption and commercialization of specialized ASIC hardware began to form commercial-scale mining operations.

This transformation at Canaan did not happen in a vacuum; it was the result of the company's open-sourcing of Avalon hardware and management software, leading to the widespread diffusion of ASIC-based hashing technology. Zhang pointed out that Bitcoin's early embrace of the open-source movement was "not a decision," but rather "a requirement for anyone wanting to participate in the blockchain community," and a means to "distribute computational power across the entire blockchain community."

"The best way to defend against a 51% attack is to quickly distribute ASIC-based computation to users worldwide." Zhang estimates that the risk of a 51% attack has been significantly reduced due to the democratization and large-scale deployment of ASICs. Subsequently, the open-source nature of Canaan's chip design has prompted major companies, including China's Bitmain and computing giant Intel, to create their own ASIC machines.

Is Mining Efficiency About to Defy Moore's Law?

As a designer of ASIC chips, Canaan has been a beneficiary of the semiconductor manufacturing boom over the past decade. The core of this advancement lies in Moore's Law—computational efficiency roughly doubling every two years. Today, companies like TSMC, Samsung, and SMIC are accelerating the production of 3-nanometer chips, seeking optimization.

However, the trend of semiconductor architecture moving towards smaller sizes is not without challenges. Increasing transistor density on increasingly smaller chips (i.e., sub-2-nanometer scale) can trigger quantum effects rather than classical effects. This state change can lead to transistor failures and potential deviations from Moore's Law.

The question now is: Does Moore's Law still hold, or will the boom in classical computing turn into a quantum slump?

In the face of these fundamental limitations of ASIC computation, Zhang acknowledged, "In the past, when we improved performance, the cost per terahash would decrease. Now, that curve has flattened. This indicates that technological advancement is entering a new phase."

"We are indeed seeing a slowdown in the progress of process nodes, prompting us to adopt new transistor technologies, such as GA (Gate Array) or nanosheet technology, as well as backside power delivery. This is not just about making the surface smaller, but changing the structure of the circuits themselves."

"Bitcoin computation appeals to pure digital logic, but today, we are moving towards mixed-signal designs that incorporate analog implementations." Zhang stated that the increase in complexity indicates a need for "design technology collaborative optimization" (DTCC) between designers like Canaan and the foundries that produce chips. Despite these challenges, Zhang believes that ASIC efficiency "will continue to rise over the next 3-5 years," and the company plans to release at least one new product each year, with each generation "improving efficiency by over 20%."

This efficiency improvement was showcased at the Bitcoin Asia conference held in Hong Kong on May 9, where Canaan launched the new generation A15 Avalon miner, achieving an efficiency of 18.5J/T, compared to the previous A14 model's efficiency of about 20J/T. Zhang noted that the A15 was specially optimized for variable environmental conditions.

In particular, Canaan enabled overclocking features in the A15, poking fun at a common question from buyers who often say, "Oh, can you get extra performance for free?!" Unfortunately, according to Zhang, that is not the case, but the added functionality is expected to provide A15 customers with additional operational flexibility.

Opportunities Hidden in the Middle East

Now, miners are seeking efficiency improvements more than ever to reduce costs and increase revenue. Of course, this is normal, but miners are turning to new technologies and new geographical locations to seek cheap electricity.

Zhang pointed out that Canaan has made a strategic shift to respond to this market change and emphasized the company's recent initiatives to collaborate with mining companies in the Middle East. "The Middle East is eager to invest in high-tech industries, and these countries are particularly welcoming to Bitcoin and cryptocurrencies. The Middle East is expected to become an important digital hub."

When discussing regulatory issues in the Middle East, Zhang noted that the region has "made rapid progress in establishing a complementary regulatory framework for mining." As a result, companies like Zero Two, supported by the Abu Dhabi sovereign wealth fund, have made significant strides in integrating Bitcoin mining and its waste heat for seawater desalination.

Heat Recovery? A New Trend in the Sustainability of the Mining Industry

Since Canaan went public on NASDAQ in 2019, the Bitcoin market has been booming, and Bitcoin mining companies have followed suit. As Bitcoin has become mainstream, publicly traded large miners like Marathon Digital Holdings Inc (NASDAQ: MARA) and Riot Platforms (NASDAQ: RIOT) have become household names during the bull market of 2020-2022.

However, with increased visibility, environmental organizations have also intensified scrutiny, particularly with the "Change the Code" campaign led by Greenpeace USA, which is funded by Ripple and poorly considered. When asked about the environmental criticisms of the mining industry, Zhang seemed unfazed and welcomed discussions on the sustainability of mining. "People's perceptions of Bitcoin mining being environmentally unfriendly are changing… Bitcoin mining helps develop the renewable energy industry."

In particular, Canaan's CEO praised heat recovery as potentially the biggest trend not yet seen in residential and commercial applications. "Mining heat recovery products have launched this year. I believe that in a few years, people will see many impressive products utilizing mining heat. Today, we can produce water close to boiling point through mining operations." He believes this trend is foundational to the sustainable attributes of the mining industry and the overall trend of monetizing mining heat.

Zhang also emphasized that the hydropower industry often faces supply-demand mismatches, and the hydropower sector is a key area where mining can strengthen renewable energy deployment. Zhang believes that instead of battery storage, "Bitcoin mining can allow these facilities to operate at full capacity most of the time. This can shorten the payback period to about 5 to 10 years—this means the same amount of capital can develop twice the number of hydropower stations in the same time… The same principle applies to other renewable energy resources like purely driven solar and wind energy, which are affected by economic factors."

He believes that mining will continue to move towards low-carbon energy and optimistically states that the market dynamics driving the pursuit of low-cost energy indicate that "mining can automatically balance environmental protection, economic benefits, and development."

AI + Bitcoin, Developing and Expanding Energy Assets

Typically, Bitcoin miners have been pioneers in the electricity market, flocking to places with abundant power and low demand. The symbiotic relationship between underdeveloped energy resources and the inherent flexibility and mobility of Bitcoin miners drives ASIC-based computation to develop resources at the grid edge. However, according to Zhang, this is not the end of the story.

He sees a new relationship forming between AI data centers and Bitcoin miners, with each miner seeking the lowest-cost energy input. Zhang pointed out that "major players" and "pioneers" have begun to realize the potential integration between Bitcoin mining and AI computation.

"In this context, Bitcoin mining can serve as the initial occupant of this 'stranded energy,' generating economic benefits before AI computing is fully online. This is what we have seen over the past six months."

Zhang also envisions that even after AI facilities are launched and operational, AI high-performance data centers and Bitcoin mining will coexist at the same location: "Considering the power redundancy requirements (25-30%) of large-scale AI computing centers… Bitcoin mining can utilize the redundant power and shut down when AI goes online."

Conclusion

The zero-sum mining industry remains, as always, its own biggest enemy. Coupled with the fourth halving, declining profit margins, and the next wave of ASIC efficiency improvements, it is fair to say that profiting from mining is as difficult as squeezing blood from a digital stone.

But on the other hand, positive trends are emerging in the industry—Canaan's CEO believes that opportunities abound for enterprising mining and ASIC companies willing to pave the way in the energy and AI sectors.