Why, despite the advent of POS mining and other algorithms, Bitcoin continues to work on the POW algorithm and burn megawatts of electricity? Maybe you should switch to another algorithm, turn off mining farms and enjoy the silence and the environment?
In this article, we explain why miningBitcoin is important and it will continue to evolve. We will also figure out if there is still an opportunity to enter this market for private miners. Is it worth it to mine bitcoin or is it time to turn your eyes to other cryptocurrencies? We will separately discuss what mining prospects are for 2020 and beyond.
Bitcoin mining difficulty
Let's start with the Bitcoin network hashrate (BTC). We open the chart and what do we see?
After setting a new record at 114 EH / s, the network capacity literally collapsed to 78 EH / s, however, then it recovered slightly. Let's think, why did it happen?
The bitcoin hash is constantly jumping and this is normal. The fact is that miners do not mine only Bitcoin, on the same ASIC miners, you can also mine, for example, Bitcoin Cash with the same success.
The main thing is that the hashing algorithm matches,and switching to mining another cryptocurrency will not be difficult. Which, in fact, is done by many of them, especially those that are tied to the mining giant Bitmain, because this company has long and openly supported Bitcoin Cash. Therefore, as soon as the price of one or another cryptocurrency with similar algorithms goes up or down, miners simply choose the network in which you can make big profits at the moment.
Another reason for such a sharp decrease in hashratethere could be some kind of natural disaster or other reason that led to the shutdown of a large mining farm, most likely a Chinese one. After all, the main world bitcoin mining capacities are concentrated there.
It already happened when the flood washed away a bigmining farm or when one of them was destroyed by a fire. This time there were no reports of such natural disasters, but we do not forget that in China they were going to withdraw all the miners from the shadows, for which they were satisfied with the checks, maybe some objects temporarily turned off their power for this purpose.
But in general, and this is both good and bad, the development of the mining industry is in full swing. The good old Cihan Wu returned to business again and again took over as CEO of Bitmain:
According to public record, Jihan Wu took over Micree Zhan as the legal representative of Bitmain in China
Under China law, this means he serves as the legal embodiment of the company, which is a crucial role
Bitmain obviously can’t sit still while Canaan filed IPO
- Dovey 以德服人 Wan? ? (@DoveyWan) October 29, 2019
As they say, less than six months have passed, although approximatelyso much time has passed since Jihan left this position. At that time, the company was thinking of switching to developments in the field of artificial intelligence, but now the course on the production of new ASIC devices has again been announced. In addition, the company again decided to issue shares and become public, for which it applied for an IPO in the USA and even attracted the German financial holding Deutsche Bank as support.
This behavior of Bitmain can be called expected,after all, competitors from Canaan Creative swung at their leadership on the market. At first, they boasted that they had pre-orders for 500,000 new ASICs of their own production. And then they applied for an IPO in the United States, they plan to bid on the NASDAQ stock exchange and are going to raise $ 400 million.
Well, the main news from the world of mining. Most likely, you also heard a story about how the Russian Internet ombudsman Dmitry Marinichev helps to build the largest mining farm in the country on the basis of a non-working aluminum plant in Karelia. I wonder what relation the Internet ombudsman has to mining, which is in the country on unclear what rights. Hmm ... the roof?
And really the main latest news from the worldMining, we will call the statement of an influential Chinese official that in the Sichuan province, where the most bitcoins are mined, there are still reserves in the form of an excess of generated electricity.
This fundamentally crosses previous news aboutthe desire of the Chinese authorities to squeeze miners out of the country. Apparently, they decided to use the principle that if you can’t stop, then it’s worth leading. And now, from the TOP-1 miner in the world, China can try to become a monopolist in this market.
Private Mining - Three Earnings Strategies
Is it possible to compete with those whose mining farmsoccupy areas comparable in size to industrial plants? It is clear that no. And no matter how sad it was, but Satoshi Nakamoto conceived everything in a completely different way.
Initially, it was believed that everyone would mine onyour home PC, thereby supporting network security. But as the price of the first cryptocurrency increased, there were those who made mining their business, as a result of which the industry came to the appearance of ASIC devices. These powerful processors are no longer capable of anything other than calculating the hash of the next block of bitcoin, but they are doing just fine with this task.
And what about those who have worked in this market before or just now found out about it and decided that they want to try? There is an answer and it may well be profitable.
To begin with, there are mining pools. After all, a lone private miner does not shine to get a block of bitcoin, and with other less popular cryptocurrencies, the same ether or lightcoin situation is about the same. You can’t survive alone, but you can connect to the pool and receive a part of its earnings, depending on the share of your mining farm in the total capacity of the pool.
That is, work is still real, but importantprofitability issue. Therefore, in 2020, a modern miner will definitely need the skills of a businessman who will calculate how much to invest, what will be the cost price and what kind of profit can be obtained at the exit.
As for the earnings strategy, there are actually three of them:
- The first is to constantly switch fromone cryptocurrency to another, depending on the current capacity of their network and market value. Minim what we profitably sell right now and right there. In this case, we collect the farm from video cards in order to have maximum flexibility in the selection of the extracted cryptocurrencies.
- The second strategy involves working onperspective and suitable for those who believe in the same Bitcoin, Ethereum, Litecoin or Bitcoin Cash in the long term, even if your farm is now working in the red and you provide it at your own expense. But then, after the growth of the cryptocurrency market, all this will be compensated with great return. Of course, such a strategy is suitable if your farm does not make a profit, but you still get cryptocurrency cheaper than it costs on the exchange. And if suddenly not, then unplug from the outlet and just invest in the HODL strategy.
- The only optimal mining optionCryptocurrencies for private investors for 2020 became cloud mining, due to the flexibility of contracts and more favorable working conditions than mining on their own equipment.
Mining won't die
And in conclusion, let's talk about why you should not write off mining and give in to the promotion of ideas that it is expensive, we spend a lot of electricity and in general it’s time to change something for a long time.
So, here are three reasons why classic mining using the Proof-of-Work algorithm will not go away:
- Firstly, Bitcoin clearly proves that this is the most reliable defense mechanism against possible attacks on the network.
- Secondly, the issue of cryptocurrency through POW mining- This is actually the generation of its value from recycled electricity, for which you have to pay. You can consider this the biggest stone for cryptocurrencies using the Proof-of-Stake algorithm, but where do the new coins come from? Just because you're done, do you have cryptocurrency on your account and now do you have more for it? Only this resembles the printing of paper money by the Central banks, because they have such a right, that’s what they print.
- And the third argument in favor of mining. When once again they will tell you how much it requires electricity. Remember that in the world it is now produced more than consumed. And everything is known by comparison, because lighting and household appliances in bank branches spend much more electricity, but for some reason no one blames them for the unnecessary consumption of resources. And how much electricity do we spend on servicing the offices of officials? ... but this is a completely different story.
The best option for cryptocurrency mining onThe end of 2019 is cloud mining, due to the flexibility of contracts and more favorable working conditions than mining on its own equipment. The rating of reliable cloud mining services can be found here.