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[Update] Bitcoin Brothers Aim To Disrupt Bitcoin Mining With New, More Powerful, Supercomputers

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[ Update: This post has been updated to reflect that the 25 Bitcoin reward is not for one transaction, but the reward for a block, which contains many transactions.]

After over two years in stealth mode, the bitcoin mining supercomputer manufacturer, Bitcoin Brothers is launching its hosted bitcoin mining services, powered by what the company claims are better, stronger machines to make the mining of bitcoin more efficient.

Bitcoin mining is the process by which a transactions are approved in the bitcoin ledger known as the blockchain and how new bitcoins are minted. For every successful verification of a block of bitcoin transactions the “miner” is rewarded with 25 bitcoin (currently worth about $8,100).

The new services means that bitcoin miners don’t have to invest in their own hardware, and can instead mine using the latest and greatest (at least according to the company) in bitcoin mining technology.

While the explanation is simple, the process of validating transactions has become increasingly complex as the blockchain grows. And as the price of bitcoin has plummeted, margins are shrinking for miners, who have to buy costly computing devices purpose-built for mining, and base them in some far-flung locales.

Founded by an ex-German military cryptologist Mark Welle and his brother Maik, the Berlin-based company is offering to sell mining services using its supercomputers that have processing capabilities of over 6 petahash (bitcoin mining is measured in petahashes, which is the amount of computing power used to verify transactions on the network).

Financed in part by money the Welle brothers made as bitcoin miners in the technology’s early days, Bitcoin Brothers is working with TSMC to manufacture its proprietary 3D 16nm FinFET application-specific integrated circuits (ASICs), which the company designed itself. They’re basically, smaller, more powerful chips designed for very specific functions. And while there are a number of companies that are already active in cloud mining, Bitcoin Brothers assert that their machines are the fastest in the industry.

The number of bitcoin equipment manufacturers has been steadily shrinking, with players like KNC Miner getting out of the market of selling hardware and others, like Butterfly Labs, getting shut down by the U.S. Federal Trade Commission.

“We basically have a business model in different stages,” says Thomas Ackermann, the chief technology officer at Bitcoin Brothers. “The first stage is selling people services for bitcoin mining. People can rent portions of the machines — starting at gigahashes, terahashes up to petahashes.”

Currently, the bitcoin network has the capacity to process roughly 250 petahashes, using equipment that Ackermann said was outmoded and ready to be upgraded. “Once we hit the market, these existing 250 petahashes will be turned off.”

If the first phase of the company’s business plan is selling cloud mining services, the second is providing priority services for transactions, so that certain customers can get their transactions approved ahead of others in the blockchain. If a network can manage to control a large chunk of approvals, they can add additional fees to prioritize transactions, Ackermann says. In the future, the chief technology officer envisions selling its ASICs in 10nm format for mobile devices to Apple, LG, and Samsung to support NFC replacement in mobile devices to enable crypto authentication at registers. And finally, if the blockchain becomes the backbone for the internet of things, then processing transactions explodes, and powerful mining technologies become even more valuable.

Each of the company’s supercomputers contains 256,000 of its ASICs, a lower energy, more powerful chip and the banks of computers the company is building can scale up to a point where 1.5 exahash is contained on a single console.

“To put our machines in perspective,” said Ackermann in a statement, “while SHA256 integer calculations are hard to compare to floating point operations, on the common LINPACK Rpeak and Rmax benchmarks each of our MSEMs outperform the worlds’ fastest supercomputers. If you compare hasher gates to cores, each MSEM has double the number of the 3.1 million cores in Tianhe-2, the No 1 on the PetaFLOP list: and comes at a fraction of the cost, the floor space and 1/20th of its 18 MegaWatt power draw. Our Bitcoin supercomputers with a quasi-opportunistic massively parallel computing model for job scheduling establish a new exascale class – well beyond FLOPS and MIPS.”

Bitcoin Brothers aren’t the first company to tout a new innovation in processing power aiming to reduce mining costs. Asicsrising GmbH made similar claims earlier this year around its new chip technology. According to an article in the Wall Street Journal, the company, which was changing its name to CoinBau, claimed it had developed an energy-efficient, low-voltage chip that could reduce the energy needed to mine bitcoin by half. Called the Wolfblood Extreme Efficiency, the chip would require only 0.19 joules of energy for a gigahash, which is a mathematical equation of bitcoin mining computing power. The current standard is 0.376 joules per gigahash, according to the WSJ report.