The cryptocurrency mining market is surprisingly small

Bitcoin (BTC) and Ethereum (ETH) are generated by a process called “mining”. Here we look at the size and scope of the overall cryptocurrency mining market.

It’s surprisingly small.

We recently surveyed the top 100 cryptocurrencies by market cap and only 28 are mineable. The market is also extremely concentrated; most of the mining is BTC and ETH. We also provide a bit of background on GPU vs. ASIC mining.

The big conclusion: As Ethereum moves to a Proof-of-Stake system, which may happen in 2018, those owning GPU mining capacity will be scrambling to find profitable opportunities.

ASIC vs. GPU mining

ASICs (Application Specific Integrated Circuits) are custom-designed microcircuits optimized to execute a limited instruction set very rapidly. Bitmain, a Beijing-based concern, is the dominant designer and manufacturer of ASIC-based mining systems. Where an ASIC is applicable, it is vastly cheaper and faster than competing solutions.

Some cryptocurrencies are “ASIC-resistant”, typically requiring much more memory. GPUs (Graphical Processing Units), a market dominated by Nvidia and AMD, offer the best architecture, whereas CPU (Central Processing Unit) mining is far slower, and because it uses more power per calculation, is less economic. Ethereum is the most popular ASIC-resistant currency.

Proof-of-Work vs. Proof-of-Stake: Why It Matters to Everyone Involved in Crypto Mining

Proof-of-Work (PoW) and Proof-of-Stake (PoS) are simply different ways to safely and securely confirm transactions and maintain the blockchain network.

Due to a number of concerns, including the vast amounts of electricity wasted in mining (see here), we believe momentum will grow in support of PoS, and it’s already on the Ethereum product roadmap. The Ethereum Caspar Testnet recently went live, and it will start a transition to PoS -although the Caspar release may not happen until 2019. We’ve heard industry participants refer to it as an Ethereum Ice Age. As our 6-card GPU Ethereum test rig puts out roughly 1500 watts in heat, we get the reference.