Now that the price roller coaster has ended, and it has been strongly confirmed that Bitcoin is a commodity worth investing in, the race to see who can mine the remaining Bitcoins fastest is on. In a big, big way.

Over the past year, a handful of companies and individuals have been racing to build a new generation of computers which are specifically designed to mine and mint Bitcoins. And of course, serious Bitcoin investors have been clammering to get their hands on the hardware. Because Bitcoin is not a centralised currency, transfer and creation of Bitcoin logged by a peer-to-peer network of computers. These computers keep track of the exchange of Bitcoins, and every ten minutes they enter a crytographer’s lottery, where the winner gets paid 25 Bitcoins for their work. This is how Bitcoin miners earn their money and also how Bitcoins are fed into the network.

The lottery ticket is a hash, this is a number that represents a large amount of data that is created by cryptographic algorithms. If a Bitcoin miner takes a transaction on the network and converts it into more cryptographic hashes faster than someone else, their chances of winning the 25 Bitcoin payout are higher.

At the start of the Bitcoin revolution, the hashing lottery could be won with a personal computer, but now that is impossible. Today it takes 9 million times the processing power typically available in a PC to produce a Bitcoin. And if Bitcoin miners want to win the lottery, their processing power needs to be up to scratch.

This is when Butterfly Labs, Avalon Asics and Asicminer came to the party, and the race began to produce a new generation of computers built with custom designed chips, whose only job is to create tickets to the Bitcoin lottery. All it takes is to plug one of these machines into your computer, run special mining software, and sit back and wait for the Bitcoins. But these powerful machines are making things harder for other Bitcoin miners according to Gavin Andresen, chief scientist with the Bitcoin foundation.

Fellow Bitcoin miner, Scott Novich found out about Butterfly Labs and their new machine last year. Novich decided on Butterfly Labs as the company had already shipped mining rigs that when used in conjunction with other miners made an average of four to six Bitcoins monthly for Novich. Butterfly seemed like a safe bet, they had a good reputation with their mining rigs inthe past. But, $1,200 (R11,000) later, Novich is still waiting for his Butterfly machine which is said to be able to perform more than 60 billion hashes per second.

Butterfly got in over their heads. Designing a brand new chip manufacturing process proved to be too much. The chip design had to be redone, Josh Zerlan Chief Operations Officer of Butterfly said:

The plastic packaging on the top of the chip just couldn’t exhaust the heat fast enough, so it basically melted the package.

Due to these set backs,Butterfly lost the front postition. Avalon Asics managed to ship out its 67 Gigahash unit in Febraury of this year. According to Avalon Asics CEO, Yifu Guo it was all because they relied on their network of friends, college buddies and acquaintances in China. He says this helped them build their first 300 units in four months. Guo said:

Nothing happens in Asia if you don’t know somebody. It doesn’t matter how much money you have. That’s really what it came down to.

Jeff Garzik was one of the lucky few to get his hands on one the first Avalon machines. He forked out $1,300 (R12,000) last year for the unit.

At the time, it was a very risky bet. None of the ASIC vendors were shipping, and all were funding their efforts through a pre-order model, akin to Kickstarter. This meant any buyer was paying months in advance for hardware that did not exist, and not even a guarantee of a refund upon failure.

Within 20 hours of having his Bitcoin rig set up, Garzik had earned 15 Bitcoins, and now he gets just under four Bitcoins daily. The value of one Bitcoin currently stands at around $150.

[Source: Wired]