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Challenges of the Cryptocurrency Mining Industry



The process to obtain cryptocurrencies like Bitcoin and Etherum is different from how you can get other currencies. These digital coins have to be mined using the blockchain system, and as other assets that need mining to get them, like precious metals, it comes with different challenges and complications.

Today, mining cryptocurrency is one of the most profitable businesses through the network; at the beginning, it was easier and something that very few knew they could do it. As the number of miners grows, it becomes more complicated to obtain, and the amount of cryptocurrency that you get is lower than it used to be.

Challenges of the Cryptocurrency mining industry

  • Energy spent. The need to mine through the blockchains and be profitable quickly gave birth to cryptocurrencies mining farms, which are big spaces where hundreds of ASIC systems work daily and non-stop. Most of Bitcoin mining farms today are located in China, where the cost of power can be negotiated with power companies, to reduce the fee or even get it for free. That measure is necessary because these mining farms consume vast amounts of energy, almost comparable to 150 countries. This equipment and machinery can’t be turned off, or they will stop producing. Besides the power that the devices need to keep working, the owners of mining farms have to invest on cooling devices to maintain the temperature of the place low, or the equipment can get damaged by heat. All these machinery can lead to significant power bills.
  • Centralisation of the cryptocurrency. One of the most appealing features of blockchains is the possibility to have a decentralised system so everyone can have access to mining. Still, in the previous years, different cryptocurrencies have started to use ASIC miners, which means that those companies that work in the manufacture of ASIC systems are obtaining more benefits from it. It is developing into the centralisation of the cryptocurrency through those companies.
  • Security vs cryptojacking. It comes as a problem generated by loads of power that mining consumes, where the blockchain systems stop being as secure as it was promised in the beginning. It becomes vulnerable to these attacks. On top of that, the new digital thieves are more intelligent and create malware and spy programs that are evolving as time goes by, infiltrating into the network more effectively.

Is it worth mining bitcoin at such a low price?

Mining Bitcoin is becoming an activity that only those who can afford the appropriate equipment can do. The high costs of power that the machinery needs to work correctly make it almost impossible for people with low resources to enter the mining industry, unless they have access to free power or if they pay small fees for it.

To make matters worst, in a few months, the Bitcoin is going to experience a halving, which means that the miners will get half of what they used to get during mining, but they will need to spend the same amount of time to get it. After some calculations, you can see that even if the price of Bitcoin rises after the halving, it may lower first for some time, making it unappealing to miners and traders.

When this situation happens, the bitcoin will not be as profitable to mine, because the cost of the mining will exceed the value of what they will obtain. However, some countries like China, where the companies can negotiate access to low-cost power, will be able to keep mining and getting benefits from it, without having to make significant investments.

Mining equipment manufactures current situation: their financial strengths and plans

While many traders and investors are considering the future of the bitcoin industry after the upcoming halving, the most crucial mining equipment manufacturers are taking advantage of this event to produce and promote new mining programs. These devices will run at a faster speed, allowing miners to go through the blockchains and obtain benefits in less time.

One of the principal manufacturers is Bitmain, which is a company focused on mining equipment that is located in Beijing, China. Recently, the company launched its new mining devices under the names AntMiner S19 and S19 Pro, which are the fastest mining equipment currently. Many other companies, like MicroBT, are also promoting their devices into the market.

All this movement in the mining equipment manufacturers is related to the fact that once the bitcoin halves, the miners will need more potent devices and programs to mine faster. In case they don’t upgrade their equipment, the possibilities to regain what they had invested before will lower to the point that they will not see any winnings. Currently, the sells of these companies are rising exponentially. Many of them promised to have the devices delivered to their customers before May when the halving is meant to happen; some others won’t be able to access their new equipment before June.

However, the sudden outbreak of the COVID-19 has also affected the mining equipment manufacturers industry, which will delay a significant part of the deliveries. Although it is a small obstacle in the way, the manufacturers seem to have found a way to benefit from the programmed reduction on bitcoin mining. If there are enough people that can purchase their product, they will rise over the problems as one of the most competitive markets.

Conclusion

The Bitcoin Halving is something that was announced a few years back; it is not the first time that happens. Many experts are confident that this event will only boost the Bitcoin, but at the same time, miners will be significantly affected by it. New technology needs large amounts of energy, that can be very expensive in some countries.

Also, if this problem continues, blockchains won’t be a decentralised system. Currently, those companies that provide ASIC programs and mining devices are the ones seeing more profit from the current circumstances, becoming the owners of more than a half of the bitcoin and other cryptocurrencies that use their equipment.

Image by InstagramFOTOGRAFIN from Pixabay



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