This is a high level overview of mining. It's intended for those who are brand new to Sia or need a refresher.
When you mine on a cryptocurrency network, you are contributing computing power to help process and verify transactions on that network. On the Sia network, the blockchain contains not just Siacoin transactions, but also the smart file contracts between renters and hosts. Miners are the backbone of the network, verifying the integrity of the blockchain. On Sia, miners are rewarded with Siacoins for their service.
The Block Reward
The block reward is the miner's incentive to contribute their computing power and electricity cost to the network. When a block is successfully verified, or solved, an amount of Siacoins is paid out to those who mined the block.
When the Sia network launched, the block reward was 300,000 Siacoins. This decreases by one every block, with a floor at 30,000 – which was reached at block 270,000 (300,000 - block height).
Unlike Bitcoin and some other cryptocurrency blockchains, the Sia block reward never stops. This means that miners will always have an incentive to be part of Sia. Once the block reward reaches 30,000 coins, it stays there forever.
The Sia blockchain runs on something called Proof of Work. Blockchains are an amazing thing, and they are versatile enough to power different platforms. They might power money, like Bitcoin. They might power utility and smart storage contracts, like Sia. No matter what the blockchain is in charge of, you need to be sure that the money you send or the contracts you enter into never change.
A blockchain needs to be correct. There's no bank to record a transaction, and no third party to verify the validity of a contract. The whole reason anyone trusts a blockchain is because you don't need to trust anyone – you can be sure that the Bitcoin you receive is really yours; that the storage space you've rented on Sia is really there for your data.
A lot of cost and resources go into verifying the transactions of a blockchain. Proof of Work provides a powerful stamp that says ‘this history cannot be changed without doing a lot of work and spending a lot of money’. In practice, that is a powerful deterrent.
The Current State of Sia Mining
A Short History
Until January of 2018, the Sia blockchain was mined almost exclusively with GPUs, or the graphics cards inside a computer. Building a mining rig was easy, and could be done using parts from Amazon or a local computer shop.
The graphics card is the component in a computer that processes the visual output of your machine. High-end graphics cards are typically used by gamers or design professionals so they can render complex video, but they are also pretty adept at mining cryptocurrency.
Shortly after, the first ASICs were introduced into the Sia ecosystem. An ASIC, short for Application-Specific Integrated Circuit, is a computer whose sole purpose is to mine cryptocurrency. Because it doesn't have to worry about the many other things a computer might do, it can focus on one thing and do it incredibly well.
Imagine you bought a computer whose only function was to search for and download pictures of red cars. A team of engineers could program it to very specifically search for red cars, download them, and put them in folders based on how many doors they had, or if they were light red or dark red. And it could ignore pictures of blue cars and yellow cars very easily. This is what an ASIC does for cryptocurrency mining.
Because of ASICs, GPU mining is now no longer profitable.