Bitcoin miners build their own chips

The virtual currency Bitcoin has lost traction recently but now those who are mining the coins have turned to custom built chips to do it.

Bitcoin mostly appeared last year and promised the world that cash could change hands unfettered by any government controls.

Then there were a few digital heists and Bitcoin was forgotten.

However, it has been estimated that there are $130 million worth of bitcoins are still out there which are supported by a community dedicated to them.

More coins are still being “mined” in a process that rewards digital gold-diggers when their software solves mathematical puzzles.

Accrding to MIT Technology Review,  some in that community are taking the expensive step of creating custom chips dedicated to running the software that carries out that process.

Josh Zerlan, COO of Butterfly Labs, in the US, sees building the custom chips as a business opportunity.

It is having the chips built in Asia and will resell them to Bitcoin enthusiasts in a line of products that plug into a computer via USB and supercharge its efforts to mine the currency.

The chips cost from $149 to $29,899, and in early 2013 the chips will ship to more than a thousand customers who placed advance orders.

The stiffest competition seems likely to come from another New York–based BTCFPGA, and two based in China, Avalon and ASICMiner.

But getting an ASIC fabricated is a highly technical and expensive proposition.

Butterfly Labs says it has paid for chips with features as small as 65 nanometers while BTCFPGA and some others say they have opted for a cheaper 90 nanometer production process.

It is the third go at making money from Bitcoin. When it first started, some spent thousands on heavily customised “mining rigs” capable of performing mining calculations faster than ordinary PCs.

Small businesses popped up to sell mining rigs and the latest GPUs to other miners. The later technology involved FPGAs or chips with a reconfigurable design. The programming FPGAs could perform mining calculations resulted in significant speed increases. But ASICs promise to be at least 100 times faster than FPGAs, and thousands of times faster than GPU-based mining rigs.

However when the ASICs arrive, many Bitcoin miners could give up.

Many small-time miners will find that their outmoded equipment will no longer be able to pay for the electricity bills.

What is more strange is that the Bitcoin economy is still not based on actual business transactions. WordPress is one of the few major brands that accepts Bitcoins. It is possible to buy stuff but only through the Bitcoin community.