What are Application-Specific Integrated Circuits? (ASICs)

The term “integrated circuit” means that all the different circuits required to run the entire system are on the same chip. This arrangement enables it to be customized to run a set of functions to complete the specific task or application for which the system is built. As such, ASICs can complete the task faster than general-purpose systems, which must allow for a greater range of functions and combinations on the same chip or distribute tasks across several chips.

ASICs have a wide array of applications in different industries, including telecommunications, automotive, and consumer electronics. However, in the blockchain sector, ASICs are customized to generate hashes to mine Bitcoin and other Proof of Work (PoW) cryptocurrencies.

A brief history of ASICs in crypto mining

In the early days of Bitcoin, when the network was small, it was possible to mine BTC using general-purpose hardware such as a GPU. However, as interest in Bitcoin grew, more people joined the network, increasing the overall network hash power. To prevent a scenario where someone with a large amount of hash power can simply mine all available BTC, the Bitcoin program operates a difficulty algorithm that increases the amount of hash power needed to mine a block, thus maintaining a consistent block time.

Over time, as the network hash power increases, more hash power is needed to participate in mining.

Since around 2014, it’s only been possible to mine BTC using ASICs since only dedicated hardware can produce a high enough hash rate to be competitive.

Bitmain is the largest manufacturer of ASIC mining equipment, dominating as much as 80 percent of the market.

How ASIC mining works

An ASIC miner is configured for the sole task of computing a mining algorithm. In the case of Bitcoin, which uses the SHA-256 algorithm, the ASIC miner will output many hashes per second, a capability known as hash power. Each hash is an attempted solution to the PoW puzzle.

Thanks to advancements in areas such as chip and cooling technologies, the performance of ASIC miners is improving over time. Today’s ASICs can output at a rate of over 470 terahashes per second.

ASICs use large amounts of electricity to run the hashing program. Furthermore, they also generate substantial heat, which can slow down operations. As a result, cooling is also required to ensure ongoing optimal operations, consuming more energy.

ASIC miner considerations

There are several variables to consider when choosing an ASIC miner.

Hashpower

Since the likelihood of mining a block increases with the number of hashes generated, miners running state-of-the-art equipment with the highest hash rating stand the best chance of mining the next block.

For this reason, many miners join mining pools, where their hardware is pooled together with others, further maximizing the chance of mining a block and earning a share of the block reward and transaction fees.

Supported coins

ASICs are generally configured to support a particular mining algorithm, so an SHA-256 miner can only mine Bitcoin, Bitcoin Cash, and other SHA-256 coins, while a Scrypt miner supports mining of Litecoin, Dogecoin, and other Scrypt coins.

Power consumption

The hashpower and the cooling technology will affect the amount of power the ASIC miner consumes. ASICs use vast amounts of electricity, so the power grid to which they are connected will need to be able to support consumption.

Developments in ASIC mining

ASIC miners benefit from advancements in semiconductor technology, resulting in more efficient chips that can process at higher speeds using less energy.

Advancements in cooling technologies that enable more rapid dissipation of the heat generated by ASIC miners also contribute to efficiency. In September 2024, Bitmain announced it is collaborating on the launch of a next-generation ASIC miner featuring a liquid-to-chip cooling mechanism that will enable the device to consume less energy per terahash.

Criticisms of ASIC mining

ASIC mining is often criticized for introducing centralization risks, increasing the chances of a 51% attack.

First, as mining has become more competitive, it’s become more difficult for smaller miners to compete, so the only way to participate is to join a mining pool. BTC mining is dominated by the largest mining pools, such as Antpool and ViaBTC, which account for the majority of hashpower.

Furthermore, Bitmain dominates the market for ASIC mining equipment and also operates one of the biggest mining pools.

Beyond centralization risks, ASIC mining has been heavily criticized for its environmental impact. The energy-intensive nature of PoW mining, particularly with ASICs, consumes vast amounts of electricity, raising concerns about the sustainability of cryptocurrencies reliant on PoW systems. However, you can read about efforts to reduce the environmental impact of mining in our “Bitcoin and Energy” article.

The idea of ASIC-resistant cryptocurrencies emerged as a backlash to the centralization of cryptocurrency mining. ASIC-resistance aims to ensure that using ASICs conveys no substantial advantage over miners using general-purpose hardware such as GPUs or CPUs. Cryptocurrencies using the Proof of Stake (PoS) consensus or one of its many variations are inherently ASIC-resistant. Privacy coin Monero is an example of a cryptocurrency that can be mined and is designed to be ASIC-resistant.

ASICs essentials

Application-specific integrated circuits (ASICs) are chips holding all circuits necessary to perform a specific application, enabling rapid processing.

ASIC miners are used to mine proof-of-work cryptocurrencies such as Bitcoin and Litecoin.

Operating ASIC hardware is now the only way to participate in Bitcoin mining, resulting in concerns about centralization.