Tackling the Maturity of The Bitcoin Mining Industry with Marko Tarman from NiceHash

Fifteen years have passed since the launch of Bitcoin, offering a true alternative to how we use and view money. The core innovation that made Bitcoin the first real cryptocurrency was the idea of its consensus mechanism, which allowed for ordering transactions in a verifiable way backed by Proof of Work (PoW).

The first few years of Bitcoin saw people just devote their home computers to securing this network, and very little activity otherwise.

Today, the landscape of cryptocurrencies has changed significantly, making it easier and more common for users to engage with digital currencies.

Users do not need to set up mines with their computers, and Proof of Work itself has steadily decreased in market share as alternatives came about — most importantly, Proof of Stake (PoS) became the dominant mechanism after Ethereum switched to it in 2022.

Nonetheless, miners remain a crucial part of the crypto community. While the process of mining itself has changed, becoming more centralized and being managed by large computer centers, companies such as NiceHash continue to serve small and big miners across the world, adapting their model from the previous GPU-first miners to primarily leveraging ASICs.

Marko Tarman, a veteran of professional mining since the early days, is today Lead Mining Manager at NiceHash, and he agreed to discuss with us about how and why the process of mining has changed and how it can fit the current and future DeFi and crypto landscape.

Hello Marko. You’ve been around for a while, and mining is definitely one of the aspects of crypto that changed the strongest since its initial ‘glory days.’ At first, anyone with a computer could mine, while today the process requires much more specialization and larger industrial bases. Do you miss the old days?

MT: In a way, yes, I miss the old days. However, we often look at the past through rose-colored glasses, seeing it as nicer than it was. There was a lot of learning and mistakes back then. The amount of effort a miner had to put in to set up even a small farm was immense. There were no guides or established practices to follow. The bitcointalk.org forum was where people shared their ideas, which was both intriguing and satisfying as it involved learning and solving new challenges.

Today, it's all about the price of electricity and the efficiency of miners. The industry has grown significantly in the last two years. There are now playbooks on how to build mining sites and companies specializing in different parts of the process, which signifies an evolving and maturing industry.

Do you think ASIC technology has “peaked” as we get closer to the end of Moore’s law? Would you see the mining market changing in response?

MT: No, I think ASIC manufacturers will continue to evolve their machines. Even if chip performance can't be doubled, ASIC manufacturers will find ways to enhance machines with higher hashrates or improved power consumption. They can increase cooling capabilities, allowing for higher chip density on the boards. We're already seeing hydro models and various immersion tanks at conferences. Two-phase immersion tanks, which are far more efficient than single-phase immersion, are also being developed, boosting the performance of existing ASIC machines.

These innovations will ensure the Bitcoin network hashrate continues to rise.

Politically, we’re living through a more intense period of scrutiny and regulation. Do you think these will involve mining as well? Do you think geopolitics may affect the industry in the future?

MT: Yes, definitely. We are already seeing governments supporting Bitcoin mining. In the US, particularly, there are many groups spreading awareness about Bitcoin mining and its importance.

Governments might provide significant financial endorsements to gain voting and controlling power over Bitcoin by controlling a larger portion of the network hashrate.

Besides environmental concerns, one of the criticisms against Proof of Work is how centralized it is, as miners are painted now as huge companies controlling the entire industry. How would you respond to such criticism?

MT: I would partly agree with that. Pools represent centralized entities and they are the ones interacting with the blockchain. Fortunately, miners can easily switch pools if they disagree with the pool's actions.

However, most miners are primarily concerned with profits, and they might overlook instances where a pool censors certain transactions in exchange for higher payouts.

Until upgrades are made to address potential centralization risks or a better method for validating transactions is discovered, Proof of Work remains the best-known method for transaction validation. To be clear, Proof of Stake is not a viable solution.

There are very few major Proof of Work coins left today — Bitcoin, Litecoin, Bitcoin Cash and Ethereum Classic come to mind. Especially for ETC, why do you think no community banded around it as the “PoW alternative” to ETH?

MT: I think it's because most people were using ETH, making it challenging to transfer all the tokens to another chain. Additionally, people do not realize the risks of PoS until it will be too late.

Is NiceHash focused on any particular innovations or updates to improve its mining product suite?

MT: Yes, we are always eager to innovate. Currently, we are developing Docker Miner for HPC data centers, which will enable the monetization of idle compute resources. Additionally, we are working on ASIC Manager, a software solution that monitors local data from ASICs and reports it to a centralized dashboard.

Moreover, we have several other projects in the pipeline that will be announced soon, promising significant advancements for the mining industry.

How do you view the new activity in Bitcoin involving Ordinals, L2s and more?

MT: From my perspective, Bitcoin is primarily a monetary system and should not carry additional data on its blockchain; other chains can serve that purpose. I appreciate the Lightning Network and believe it represents the future of instant payments.

While it may not remain exactly as it is now, all technologies evolve and improve over time, and Bitcoin is no exception. Innovation is essential for its growth. There must be continuous efforts to enhance it, and only the truly remarkable advancements will endure.