CoinDesk’s Daniel Cawrey recently visited and toured the facilities at Butterfly Labs,one of the most prominent and written about producers of bitcoin mining technology. In this second part of this series,he reports on the factors involved in the bitcoin mining arms race.

Now that Butterfly Labs is shipping ASIC bitcoin miners at a steady pace,their production plus that of Avalon and mining pools like ASICMiner are causing the mining difficulty to go up quite quickly. What this means is that it takes more computational power to complete proof of work algorithms. It means that a race is now on to offer the most processing power,but will also mean that other technical elements will come into play very soon.

I asked Butterfly Labs if the rise in mining difficulty is causing an increase in sales which might be leading to the price fluctuations. They didn’t seem overly concerned about any price volatility. It seemed to me that they have simply been too busy to contemplate if mining had anything to do with the price on any given day.“I don’t think that anyone knows. It’s so uncharted”,Dave McClain,who works on account management,told me during my recent visit to BFL.

Computational speed on the Bitcoin network. Source: bitcoin.sipa.be

The current generation of bitcoin miners

In the previous FPGA generation,processing was measured in hundreds of megahashes. The current generation of Bitcoin miners perform at a speed of gigahashes. The most powerful unit that Butterfly Labs offers is the 500 gigahash per second Mini Rig SC,currently priced at $22, 484. It comes with a Nexus 7 tablet that has a custom built BFL app for mining bitcoins,which is also known as a “host” device since the miners need a software application to tell them what to do.

Source: www.coindesk.com