It is almost like there is no new Bitcoin convert who does not express an interest in joining Bitcoin mining. It is understandable why. The lure of getting a reward that is convertible to thousands of US dollars for just leaving a machine run nonstop is too strong to resist.

That Bitcoin mining is a lucrative venture is true. There is no other reason why investors are putting millions of dollars into extensive Bitcoin mining farms. Having said that, it is important for anyone contemplating mining to know that this is a resource intensive game of chance.

You are not just competing with other miners to solve a mathematical problem, but you also have to be in the leading pack when it comes to acquiring the next hardware in the market with more computational power. As a matter of fact, miners with hardware that has better hashing rate are able to lock out those with inferior hardware from the rewards.

Bitcoin mining is like Gold mining

Perhaps to understand how Bitcoin mining difficulty has grown over time, you have to compare it to Gold mining in the real world. The first prospectors to reach a new gold deposit site are likely to pick it off the ground with their bare hands.

Those who will come after them might need to use picks, shovels and pans to get to the gold hidden just below the ground. With time and progress, only mining companies with enough capital as well as heavy and special equipment will be able to do the mining at the site. At this latest stage, small prospectors will be locked out by the sheer logistics required.

According to Joseph Bonneau a cryptographic expert and one of the instructors in the Bitcoin and Cryptocurrency Technologies course offered by Princeton University, Bitcoin mining has gone through these same stages.

In one of the lectures, in the Princeton Bitcoin course, Joseph Bonneau says, “Similarities to gold mining; While ‘mining’ may seem to be just a cute name, if we zoom out a little bit and think about the evolution of mining, we can see really interesting parallels between Bitcoin mining and gold mining.”

From CPU to ASICs

Bonneau enumerates that the first generation of mining was done with a general purpose Central Processing Unit (CPU). In other words, your regular desktop would mine you some coins. However, going by today’s Bitcoin mining difficult, it will take you over 140,000 years to get a valid block and thus earn some coins.

It follows then that CPU mining is out of the question even though miners in the early days made a lot of money of it.

Around the year 2010 there was a new kid on the block. Graphics Processor Unit (GPU) offered a higher performance through parallel and multiple computations thus mining shifted to it. One CPU could now drive more hash computation. The graphics did not last for long though. With today’s difficulty 100 GPUs rig will take about 173 years to solve a mining mathematical problem and get you a reward.

Around 2011 GPU were replaced with Field Programmable Gate Area (FPGA), which have higher performance than GPUs and could cool better than the GPUs. At the current difficulty, a mining rig of 100 FPGA boards will take about 25 years to solve a mining mathematical problem and afford you a reward.

The odds are against a small miner

Mining today is done using special purpose Bitcoin Application Specific Integrated Circuit (ASIC) chips, which are extremely fast in hash computation. Companies have sprung up to manufacture and ship mining hardware that uses this technology.

However, even with the ASIC-based miners, the computational power is changing fast and at an incredible cost. How fast the latest version is delivered to you determines how much profit you are going to make out of it. Otherwise, your new acquisition could be bogged down by even better hardware joining the Bitcoin network before you recoup your expenditure.

Bottom line, the dynamics are very unfavorable to a small scale Bitcoin miner. As a result, and as the years go by, the difficult grows the Bitcoin mining space is getting less crowded. This could be a threat to the dream of decentralization envisioned by Satoshi Nakamoto. Nonetheless, the reality is that Bitcoin mining is longer for all and sundry.