How Green Cryptocurrency Mining Will be Key for the Industry?
The cryptocurrency mining industry had an incredible year in 2017 and the very beginning of 2018. But the situation changed in March this year. Why? Well, Fortune released an article in which it explained that mining a Bitcoin (BTC) could cost as much as buying one in a cryptocurrency exchange. But Green crypto mining was not a choice at the moment and most virtual currency users and investors did not know about it until that moment.
Morgan Stanley, an important multinational investment bank unveiled in April that miners would be losing money if Bitcoin slipped under $8,600 dollars. At the same time, they mentioned that not even low electricity prices could help with this situation.
Coinbase has shown that the numbers related to the crypto mining industry have also been exaggerated and that energy consumption is 50% of the 70TWh some analyst talk about. But of course, the numbers are still high and the environmental impact of the industry is still alarmingly high.
The only solution to this problem is related with green crypto mining. It will be able to solve the diminishing returns issue related to more costs and less rewards. This situation would only lead to an abandonment of the activity, which can be compared with what happened to gold miners in California back in the 19th century.
The solution is linked to four different points: a lighter consensus algorithm, cloud-based crypto mining activities, renewable and cheaper energy sources, and brutal consolidation in the mining industry.
Cryptocurrency Mining Activities
Bitcoin uses a mechanism to process transactions known as Proof-of-Work (PoW). Blocks of data with transactions are parsed containing 1 MB of data. After it, each block is then locked and coded.
Miners need to compete and solve the puzzle providing a 64-digit hexadecimal key code that needs to match with ‘nonce’ numbers that have been used only once in order to claim the reward and unlock the block to mine the Bitcoins.
Bitcoin Mining Is Expensive… But Why?
At the very beginning, when Bitcoin was just created, mining activities were really easy. A desktop computer was able to mine over 200 bitcoin per day. But competition in the market created an arms race as Bitcoin price skyrocketed for the first time.
Companies such as Bitmain, Bitfury and Vogogo decided to enter the market and make it more professional than before. And yes, new and super fast mining rigs could outperform casual miners without the required equipment.
Other firms like Nvidia and AMD had a very important demand in 2017 for their graphic cards (GPUs). Some used GPUs were sold for higher prices than new devices. The problem was that there were no more available. The demand was very high but the supply was not enough.
As in other technological fields, the block production should get smaller, slimmer and, why not, lighter?
Blockchain needs to be slimmer without having to sacrifice security or usability. In the next 20 years, new technologies will help that to happen. Proof-of-Stake consensus algorithms are also very helpful due to the fact that they help reduce the crypto’s carbon footprint. Instead of competing for block rewards, stakers will earn a number of tokens and coins according to the size of their stake in the network.
Ethereum is moving into staking from Proof of Work, that means that there are some cryptocurrency users that are convinced about the viability of PoS.
Cryptocurrency Mining Activities On The Cloud
There are important mining farms that are investing an important number of dollars in equipment and other costly expenses. Cloud mining is completely different and could change this reality.
Cloud-based crypto mining companies are already working in the market selling packages to general public, something that increases security, speed and a small pat of the world’s computing power.
Cloud mining solutions could help speed up calculations and reduce the costs that companies need to spend in order to run their own mining farms. Furthermore, this is very good for the environment that will be experimenting a decrease in the use of inefficient energy sources. Companies will be located near places with lower energy prices.
Renewable Energy For Bigger Miners
It is also important to mention that cloud-based crypto mining will be reducing the costs of running a mining company. With cheap land and free energy, the hardware would be the major cost to take into account.
State-sponsored mining firms in small nations could also use hydroelectric or solar energy to mine virtual currencies and reduce costs.
And… Brutal Consolidation
Using Cloud computing or giant mining farms, mining virtual currency at home will not be profitable anymore.
This is similar to what happened in the traditional mining industry when drilling and excavation machinery replaced the old pick and shovel. Indeed, they were looking a little bit ridiculous. This evolution is arriving at the crypto mining market.
In the future, competition will continue to grow and margins will drop even more. They will have to adopt some of the green cryptocurrency mining strategies if they want to keep competitive and running profitably.
Bil Tail, Chairman of Hul 8, the North American arm of Bitfury Group, mentioned to Bloomberg:
“It’s totally different this year. The bitcoin mining industry was this mysterious, dark, cottage industry. It’s about to grow up and scale institutionally.”
We will experience how the market will move into some mining companies dominating the industry.
It seems that there are not so many options for crypto miners to follow. Indeed, Green Crypto Mining seems to be the only option for the future. We will have to reduce the energy use, and put our home miners to the trash. The market will evolve into something better and reach over $38 billion dollars by 2025.
Big business do not want to be out of the market and they will be the first to invest and be ahead of competitors. It seems that a cleaner cryptocurrency mining market is just around the corner, something that will benefit the whole crypto market.