Bitcoin and crypto mining has evolved since the days of CPU mining, but what does the future holds for this growing industry? Read on to find out.
It was Jan. 3, 2009.
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It involves using vast amounts of computational power to discover new blocks which can then be filled with transactions and added to the blockchain.
But the mining industry is still evolving.
Cryptocurrency mining is becoming more efficient, more accessible and more sustainable — and set to hit a second wind thanks to the advent of a number of new innovations, which will be explored in this article.
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Cryptocurrency mining can be an incredibly attractive way to gain exposure to new PoW cryptocurrencies, without needing to purchase them on secondary markets like exchanges.
The problem is, there is an incredibly high barrier to entry to begin mining. Whether it's the high equipment costs and long delivery delays, the expertise and maintenance required to operate mining hardware, or the highly variable electricity costs that can make mining simply unprofitable, most miners have to jump through more than a few hoops to run a profitable mining outfit.
Learn more about cloud mining and how it works.
However, cloud mining providers may not provide an ideal return on your investment. History shows that most cloud mining contracts are unlikely to be profitable even over the long term, unless the coin you are mining appreciates considerably during and/or after your mining term. Because of this, it is generally more profitable to simply buy the coin you want and hold it long-term, rather than accumulate using a cloud mining contract.
Mining Gets Gamified
Right now, if you want to participate in cryptocurrency mining, you’ve essentially got two main options: either set up your own mining operation (a potentially complex and expensive process) or take out a cloud mining contract.
These issues have made cryptocurrency mining less accessible than it should be, limiting the number of nodes and miners helping to secure each PoW network.
One of the ways to potentially address this challenge is with gamification. By gamifying the mining process, it may be possible to expand cryptocurrency mining to a much larger audience by making it fun and easy to get started. This process has already helped to disrupt the fitness, education and retail banking sectors, and is now making its way into the cryptocurrency mining industry.
Until recently, games have only allowed users to mine in-game assets using simulated mining. But the first game (potentially of many) to tie true cryptocurrency mining with gameplay is currently in development.
In recent years, concerns have been raised about the sustainability of cryptocurrency mining — with many detractors arguing that proof-of-work cryptocurrencies alone use more power than a small country.
Despite this, there is still a major push to completely eliminate the economic burden of the cryptocurrency mining industry by moving to a 100% renewable model. In line with this, a large number of 100% renewable mining facilities are going online across the globe. This includes a joint venture between Blockstream and Jack Dorsey's Block, which uses Tesla solar arrays and battery technology to power its new Texas-based mining facility, as well as the aforementioned Nova Hydromining plant.
Given the immense regulatory pressure mounting against mining firms, there is a strong incentive for both current and future operations to go green. And sustainable mining initiatives will likely become the norm, rather than the exception in the years to come.
Mining Companies Go Public
Right now, the vast majority of cryptocurrency mining companies are privately owned. This includes the world’s leading ASIC hardware manufacturers, Bitmain and Bitfury, as well as major cloud mining outfits like Bitdeer Group and Genesis Mining.
Many of companies have conducted sizable private funding rounds, but none have succeeded in going public through an IPO. Nonetheless, several major cryptocurrency mining firms have announced plans to go public with an initial public offering (IPO).
Arguably the most prominent example of this is Bitmain’s failed IPO attempt in Hong Kong. Despite being valued at ~$1 billion during its September 2017 Series A funding round, Bitmain sought to go public at a valuation of more than $15 billion. However, it then failed to move forward with its IPO. Its application lapsed in March 2019 and hasn't re-applied since.
But given the costs associated with manufacturing, operating and distributing next-generation mining hardware, it isn’t unreasonable to assume that several major mining operations will go public in order to get a fresh injection of capital.
Several IPOs for Bitcoin mining companies are already planned for the near future. This includes a $60 million IPO from the enterprise blockchain firm Applied Blockchain, Inc., as well as a $100 million IPO from Bitcoin mining firm Rhodium Enterprises — which was recently postponed.
More Energy Efficient Chips
An example would be the Antminer S19, which outputs around 31.67 TH/kW whereas the newer S19 XP has an efficiency of around 21.5J/TH.
As ASIC chips have become more capable, their absolute power requirements have also increased, while their efficiency has been slowly improving as manufacturers move toward smaller chip designs — with previous generation miners using 7nm chips while the current generation uses 5nm.
But though switching from a 7nm to 5nm (and eventually smaller) design process generally yields improved power efficiency and faster performance, it isn’t the only way to provide improved efficiency to miners.
Another way to accomplish this is with a more energy-efficient design and improved production at scale. This includes Intel's recently released Blockscale chips, which offer up to 26 J/TH of performance, with an absolute performance of 148TH/s per complete mining rig (with 256 chips).
Though this still places it behind Bitmain’s S19 XP in terms of pure efficiency, Intel’s chips cost around half as much as Bitmain’s latest offering, with the Blockscale systems coming in at around $5,625 per unit compared to roughly $11,620 for the S19 XP.
That said, Bitmain is known to offer substantial discounts for bulk purchases and advance orders, which may balance the scale — at least for well-heeled miners.