Bitcoin and Cryptocurrency Technologies

Figure 5.9: BitFury mining center, ​a professional mining center in the republic of Georgia.
When determining where to set up a mining center, the three biggest considerations are: climate,
cost of electricity, and network speed. In particular, you want a cold climate to keep cooling costs low.
Cooling is particularly challenging with Bitcoin mining, which is estimated to use an order of
magnitude more electricity per square foot than traditional data centers (and hence give off an order
of magnitude more heat). You obviously want cheap electricity. You also want a fast network
connection to be well connected to other nodes in the Bitcoin peer‐to‐peer network so that you can
hear about new blocks as quickly as possible after they’ve been announced. Georgia and Iceland have
reportedly been popular destinations for Bitcoin mining data centers.
Similarities to gold mining. ​While ‘mining’ may seem to be just a cute name, if we step back and think
about the evolution of mining, we can see interesting parallels between Bitcoin mining and gold
mining. For starters, both saw a similar gold rush mentality with many young, amateur individuals
eager to get into the business as soon as possible.
Whereas with Bitcoin mining we've seen a slow evolution from CPUs to GPUs to FPGAs, to now ASICs,
gold mining saw an evolution from individuals with gold pans to small groups of people with sluice
boxes, to placer mining — consisting of large mining groups blasting away hillsides with water — to
modern gold mining which often utilizes gigantic open pit mines to extract tons of raw material from
the earth (See Figure 5.10). Both with Bitcoin and with gold, the friendliness and accessibility to
individuals has gone down over time and large companies have eventually consolidated most of the
operations (and profits). Another pattern that has emerged in both places is that most of the profits
have been earned by those selling equipment, whether gold pans or mining ASICs, at the expense of
individuals hoping to strike it rich.
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