Cryptocurrency Mining Competitive Analysis: Past, Present and Future Outlooks
Cryptocurrency mining is an industry that continues to expand amid the bear market in virtual currencies. Nevertheless, it is not easy to start mining cryptocurrencies. Users need graphics cards or sophisticated CPUs (ASIC miners) that might be very expensive. Additionally, it is important to have cool temperatures during the whole year to be even more efficient. Cheap electricity is also an important thing to take into account.
Companies and individuals entered the crypto mining market with the intention to profit with the growth of virtual currencies. But as the industry became really popular, the competition has also increased. As the number of miners increases, the difficulty to find a block automatically increases. That means that it is more difficult to receive rewards with the same amount of energy.
Nowadays, mining is a very expensive business. Miners that want to be profitable need to spend thousands of dollars to set up a profitable mining rig. In the past, Bitcoin mining activities were much more profitable than what they are now.
It is also possible to make some profits with other consensus algorithms such as Proof of Stake (PoS). It is possible to stake a specific amount of coins in order to validate a new transaction. Those that hold the largest amount of coins have a bigger mining power.
Ethereum wants to change its consensus algorithm to PoS since developers claim that it is more effective to secure the network. At the moment, miners can process ETH transactions to win Ether (ETH).
It is not easy to improve mining efficiency. During a bear market like this one, it is necessary to reduce the rate paid for electricity and maintain hardware devices cool to work more efficiently. It is also possible to purchase new hardware miners that can cost several thousand dollars and would improve efficiency. Nevertheless, crypto miners are waiting for a new bull trend in the crypto market.