It is no secret that the bitcoin mining industry is being battle-tested in the wake of the fourth halving. Hash price (revenue per terrahash) has reached historic lows as bitcoin’s block subsidy has been slashed. Meanwhile, the post-halving mempool frenzy has waned, adding fuel to the fire on already strained mining operators.

Nangeng Zhang, Founder and CEO of Singapore-based Canaan Inc, the creator of the first bitcoin mining application-specific integrated circuit (ASIC), sat down with Bitcoin Magazine for the firm’s first-ever interview with a North American media outlet to weigh in on the state of the industry. Zhang commented on the origins of bitcoin mining and offered his perspective on the landscape for chip design as well as trends in environmental sustainability.

Zhang also identified burgeoning opportunities for Bitcoin in the Middle East, as well as the convergence between the bitcoin and artificial intelligence (AI) industries.

Check out the full audio interview featuring Canaan Inc. CEO Nangeng Zhang on the Bitcoin Magazine Podcast.

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The Open Source Core of Bitcoin Mining

Canaan, founded in 2013, revolutionized mining with the launch of its first AvalonMiner ASIC machine – marking a turning point in computational efficiency for those securing the Bitcoin network. As the industry moved away from traditional GPU and CPU-based hashing, the embracing and commodification of specialized ASIC hardware saw commercial-scale mining operations begin to take shape.

This step-change by Canaan did not occur in a vacuum, but led to the ubiquitous proliferation of ASIC-based hashing after the firm open sourced both its Avalon hardware and management software. Zhang noted that this embrace of the open source movement in the early days of bitcoin was “not a decision” but rather “a requirement for anyone who wants to get involved in the blockchain community” and a means “to decentralize computing power all over the world.”

“The best way to defend against [51% attacks], was to rapidly distribute ASIC-based computing to users worldwide”. In Zhang’s estimation, the risk of a 51% attack has greatly diminished due to the democratization and wide-scale deployment of ASICs. The open source nature of Canaan’s chip design has since led major firms including China-based Bitmain and computing stalwart Intel to create their own ASIC machines.

Running (Bitcoin) Up Against Moore’s Law: Trends In Chip Efficiency

Canaan, as a designer of ASIC chips, has been a beneficiary of the boom in semiconductor manufacturing over the past decade-plus. At the heart of this progress lies Moore’s Law – an observation that computational efficiency has approximately doubled every 2 years. Today, firms including Taiwan Semiconductor (TSMC), Samsung (SSLF), and Semiconductor Manufacturing International Corporation (SMIC) are ramping up towards 3 nanometer chip production in this quest for optimization.

However, the move toward smaller and smaller scale architectures for semiconductors is not without challenges. Increasing transistor density on smaller and smaller chips, namely, sub-2 nanometer scales, invokes quantum, rather than classical, effects. This regime shift leads to transistor malfunction and a potential divergence with Moore’s Law.

The question has now become: will Moore’s Law hold, or is the classical computational boom becoming a quantum bust?

Zhang, faced with the question of these fundamental constraints on ASIC computation, acknowledged “in the past, when we boosted performance, the cost per terrahash went down. Today, this curve has flattened. This indicates that technological advancements are entering a new phase.”

“We are indeed seeing a slowdown in the advancement of process nodes, promoting us to adopt new transistor technologies like GA (gate array) or nanosheet technologies along with backside power delivery. This is not just making the surface smaller, but changing the structure of the circuit [itself].”

“Bitcoin computing appeals to a purely digital logic, but today, we are moving closer to a mixed signal design for analog implementations.” This increase in complexity, according to Zhang, suggests the need for “design technology co-optimization (DTCC)” between designers such as Canaan and the foundries that produce the chips themselves.

Despite these challenges, Zhang believes that AISC efficiency is “still on the rise for the next 3-5 years” and the company plans to release at least 1 new product per year with “over 20% efficiency gains” per generation.

This efficiency gain was on display at the Bitcoin Asia conference in Hong Kong on May 9th, where Canaan launched its next-generation A15 AvalonMiner, boasting an 18.5J/T efficiency in comparison to the ~20J/T afforded by the previous A14 model. Zhang noted the A15 as being particularly optimized for variable environmental conditions.

In particular, Canaan has enabled overclocking capabilities in the A15, and Zhang poked fun at the common refrain from buyers who often remark: “‘oh you can get extra performance for free?!’” Sadly that’s not the case, according to Zhang, but the added capabilities promise to create additional operational flexibility for customers of the A15.

Decentralizing Computation: A Look To The Middle East

Now, more than ever, miners are on the lookout for efficiency gains to… *drumroll*… reduce their costs and increase revenue. This is, of course, par for the course, but miners are turning to new technologies and geographies in their quest for cheap power.

Zhang noted a strategic shift on the part of Canaan to meet this change in the market, emphasizing the firm’s recent move to partner with mining firms in the Middle East region. “[The Middle East] is eager to invest in high-tech industries. These countries are particularly welcoming to Bitcoin and cryptocurrency. The Middle East holds great promise to become a crucial digital hub.”

On the topic of regulation in the Middle East region, Zhang noted that the region has “quickly advanced in establishing complimentary regulatory frameworks for mining”. It follows that firms like Zero Two – backed by Abu Dhabi’s sovereign wealth fund – have made significant strides to integrate bitcoin mining and its waste heat for the purpose of saltwater desalination.

Heat Check: Trends In Mining Sustainability

Since Canaan’s IPO on the NASDAQ in 2019, the bitcoin market has been on fire, and along with it, bitcoin mining companies. Publicly traded megaminers like Marathon Digital Holdings Inc (NASDAQ: MARA) and Riot Platforms (NASDAQ: RIOT) became household names during the 2020-2022 bull market upon bitcoin’s arrival to the mainstream.

But, with the increased visibility, also came increased scrutiny from environmental organizations, notably the Ripple-funded and ill-conceived Change the Code campaign led by Greenpeace USA.

When asked about environmental criticisms of mining, Zhang appeared unphased, welcoming discussion of sustainability in the mining sector. “Perceptions of bitcoin mining as environmentally unfriendly are changing… bitcoin mining can help to develop renewable energy industries.”

In particular, the Canaan CEO praised heat recapture as perhaps the biggest trend yet to play out in both residential and commercial applications. “Mining heat recovery products have started this year. I think in a few years, I believe people will see many very impressive products that utilize heat from mining. Today, we can generate near-boiling water from mining operations.” This trend, he believes, underlies mining’s sustainable attributes and a general trend towards heat monetization in mining as a whole.

Zhang also emphasized the hydropower industry, whose power often suffers from a supply-demand mismatch, as a key area where mining could supercharge renewable deployment.

In lieu of battery storage, Zhang posited that “[bitcoin mining] can allow these facilities to operate at full capacity most of the time. This can reduce the payback period to about 5 to 10 years – that means the same amount of capital can develop twice as many hydro-stations in the same time frame… the same principle applies to other renewable energy resources like solar and wind energy driven purely by economic factors.”

He believes that mining will continue its trend toward low-carbon energy resources and expressed optimism that the market dynamic driving the pursuit of low-cost energy shows that “mining can automatically balance between environmentalism, economic efficiency and development.”

AI and Bitcoin Convergence: Developing and Scaling Energy Assets

Typically, Bitcoin miners have been pioneers in the power markets, flocking to where power is abundant, and demand is low. The symbiotic relationship between underdeveloped energy resources, and the inherently flexible and mobile network of bitcoin miners, has driven ASIC-based computation to develop resources on the edge of the grid. But, according to Zhang, this is not the end of the story.

He sees a new relationship forming between AI data centers and bitcoin miners each searching for the lowest-cost energy inputs. Zhang made note of “major players” and “early movers” that have begun to realize the potential integration between bitcoin mining and AI computation.

“In this context, bitcoin mining can serve as an initial occupant of this [stranded] energy, [generating] economic benefits before AI computing power fully comes online. This is what we have seen in the past 6 months.”

Zhang also foresees co-location of AI high-performance data centers and bitcoin mining even after AI facilities are up and running: “Given the redundancy requirements for large-scale AI computing centers (25-30%) of power redundancy… bitcoin mining can use the redundant power and shut off when [AI comes online].”


The zero-sum mining industry, as always, continues to be its own worst enemy. Coupled with the fourth halving, reduction in margins, and the next wave of ASIC efficiency, it would be fair to say that gleaning a profit from mining could be as easy as squeezing blood from a (digital) rock.

But, on the margin, positive trends are taking place in the industry – and the Canaan CEO sees opportunities abound for enterprising mining and ASIC firms willing to blaze a trail on the energy and artificial intelligence frontiers.


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