Bitcoin mining to make a comeback in households — Interview with Canaan

Bitcoin (BTC) mining went through a dramatic transformation over the years thanks to the skyrocketing popularity of cryptocurrencies. Despite the scaling up, ASIC devices — short for application-specific integrated circuits — are still the name of the game when it comes to efficiency, speed and energy in BTC mining.

Designed solely for Bitcoin’s SHA-256 hashing algorithm, ASIC miners can perform hash calculations at a much higher efficiency than general-purpose processors, contributing to mining success. The commercial availability of ASIC devices dates back to 2013, and the Chinese Bitcoin pioneer, Nangeng ‘NG’ Zhang, is often credited with releasing the first functioning Bitcoin ASIC miner that reached the public.

NG Zhang and his company, Canaan Inc., have established a strong presence in the Bitcoin mining ecosystem, including a listing on the Nasdaq Global Market. In this interview, NG Zhang shares key insights on the dynamics of the Bitcoin mining industry and introduces Canaan’s upcoming home-friendly miners.

Cointelegraph: It’s been a decade since you designed the first blockchain mining-specific hardware known as ASICs. How do you see the evolution of the digital asset mining space over the past 10 years?

Nangeng Zhang: Over the past decade, the digital asset mining space has evolved across multiple dimensions.

First, hardware performance has seen significant improvements. The first-generation Avalon miner had a hashrate of 66 Ghs with a power consumption of 700W. The 15th-generation A1566 now exceeds 200,000 Ghs with a power consumption of about 3600W. Performance has improved by approximately 3,000 times, and energy efficiency has improved by nearly 600 times.

Second, the ecosystem has developed dramatically, from nothing to something significant. In 2013, we were merely a community of thousands of enthusiasts; by 2015, it had gradually become an industry. Today it has grown into a force that cannot be ignored in the global monetary system.

Our customer base has also expanded from a handful of tech enthusiasts to individual investors, institutional investors and now to Wall Street and publicly listed companies. Looking back on the changes over the past ten years always fills me with excitement. Moreover, all of this was accomplished without a centralized leader — the real credit belongs to everyone.

CT: How did you come up with the idea of dedicated Bitcoin mining hardware? What inspired you to create the original Avalon series?

NGZ: Bitcoin’s algorithm is very suitable for hardware implementation, and I believe the move toward ASICs was one of Satoshi Nakamoto’s original intentions. The practice of ASIC-based Bitcoin mining has proven to bring great security to the ecosystem, allowing it to run stably for over ten years.

Looking back to late 2012, I analyzed the situation at that time: If Bitcoin mining could not quickly transition to being dominated by ASICs, then organizations with the majority of general-purpose computing power might attack the Bitcoin blockchain, leading to the failure of this social experiment. Fortunately, I successfully completed this transition in four and a half months.

CT: What are the most striking differences between 2013 and 2024 regarding the mining industry and the crypto space overall?

NGZ: The most significant change is the increase in scale. Today, the mining industry requires large-scale investments, with ongoing growth in facility size, company structure and investment levels.

I have a neutral view of this change — while the scale has grown, decentralization in the form of many centers is still a type of decentralization, and there has been no serious monopolization. At the same time, we are working to promote the development of the mining industry through approaches that align with business logic and environmental, social and governance (ESG) standards, such as our home heater product line and energy-friendly software and system designs.

CT: Can you discuss the shifting dynamics between institutional mining and home mining and what factors are driving these changes?

NGZ: The barriers to entry in mining are continuously rising, and if the only goal is profitability, home mining finds it challenging to compete with institutional mining. Therefore, our promotion of home mining is not about simply redesigning machines meant for institutional use but rather designing entirely new products to meet home needs.

Ease of use, fun and practicality are key. From USB hand warmer miners with 140W power (which can be placed in front of the keyboard to warm your hands), to 800W space heaters and water heaters that can heat villas and provide hot water. Previously, these devices only converted electricity into heat, but now they can also contribute to the security of the blockchain by outputting hashrate.

CT: What strategies has Canaan implemented to maintain its edge in ASIC high-performance computing and Bitcoin mining technology?

NGZ: Staying ahead in ASIC high-performance computing and Bitcoin mining technology requires substantial research and development investment while also meeting customer needs. We have consistently used the most advanced process technology to design our chips. In terms of full machines, although we are now on our 15th generation of products, innovation and improvements are happening every day.

More importantly, we also focus on business model innovation. For example, some customers need hashrate but lack experience in building and operating facilities. Therefore, we have expanded from offering mining machines to providing system solutions and even building and operating facilities on behalf of customers, directly selling hashrate to them. These business model innovations are crucial for maintaining our competitive edge.

CT: You have recently launched a new miner, Avalon Bitcoin Miner A1566. What are the key features of this product?

NGZ: The Avalon Bitcoin Miner A1566 is our latest generation product. Although it has been on the market for some time, its performance continues to improve. Initially, it had a hashrate of 185 THs, but now the delivered models have increased to around 210 THs, and the energy efficiency has improved from 18 J/TH, with some high-end models achieving below 17 J/TH.

The A15 series also has excellent heat resistance and is very durable. We have delivered several batches, and the feedback from our customers has been very positive. Additionally, given the diverse market demand, we have launched both water-cooled and oil-cooled versions.

CT: Could you introduce us to Canaan’s upcoming home miner and heater? What inspired this product, and how do you envision it impacting the home mining market?

NGZ: Our Avalon Nano3 series has been highly successful, with over 10,000 units shipped last quarter. By the end of this year, we will be launching the Mini series, which can provide room heating with a maximum power of about 800W and is built using our latest chips, with a maximum hashrate of 40T.

It's official, we've shipped 10,000 units of the Avalon Nano 3! Thank you for all the support! pic.twitter.com/Z3eiPTi5e3

— Canaan Inc. (@canaanio) August 14, 2024

This is not only environmentally friendly but also meaningful — rather than merely converting electricity into heat, the device also incorporates mining functionality, contributing to the decentralized ecosystem while providing returns. In fact, we had similar products a few years ago, and they received good feedback, but due to limited resources and an immature market at the time, we couldn’t continue their development.

Now, with current technology and design levels, we are reintroducing this series, and it’s incomparable to what it was before. I hope that, in the future, home mining products can account for 20% of the overall mining market, which will greatly enhance the security of the Bitcoin network.

CT: Looking ahead, how does Canaan plan to adapt to future industry trends, and what role do you see the company playing in shaping the future of Bitcoin mining?

NGZ: In the future, the mining industry will continue to evolve. As artificial intelligence develops into AGI (artificial general intelligence) and ASI (artificial super intelligence), for a future Earth that has evolved into a carbon-silicon hybrid civilization, blockchain-based digital currencies are likely to become the universal currency and settlement system for the planet and even the solar system.

By that time, the computational demands of artificial intelligence and the mining requirements of the blockchain will merge to create a more complete ecosystem. I believe that our efforts today will serve as a ladder toward the advancement of civilization.