What was cryptocurrency mining in 2019 and what to expect in 2020?

2019 is coming to an end. What was this year like for miners, what difficulties did they have to face, andwhat has changed compared to previous years in our final material.

Hashrate Records

In the summer of 2019, the hashrate of the first cryptocurrencyupdated the historical record. At the end of June, Bitcoin's mining difficulty, a metric that shows how difficult it is to solve a mathematical problem and record a block of transactions on the blockchain of the world's largest cryptocurrency by capitalization, reached 7.93 trillion. The hash rate exceeded 66.6 exahash per second.

Bitcoin did not stop at this record. The complexity of the hashrate continued to grow and in early September rose to 87 exams per second. On October 23, 2019, the Bitcoin network reached an absolute record: the total processing power of miners grew to 114.34 exams per second.

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Hash rate — main indicatorprocessing cryptocurrency transactions. The higher the computing power, the more miners are connected to the network. Traditionally, an increase in hashrate coincides with an increase in the price of Bitcoin, which attracts new miners, or encourages those who have stopped mining BTC to turn on their computing machines again.

The growth of the hashrate was also facilitated by the appearance on the market of new powerful mining equipment with high energy efficiency, it will remain effective in the event of a rollback of the bitcoin exchange rate.

“There are not many alternatives for the SHA256 algorithm, if you do not take into account the BCH,— notes co-founder of 51ASIC Evgeny Fedin.

Now there is an upgrade of equipment on farms. Considering energy efficiency, the new Bitmain S17, S17 Pro devices are capable of delivering a much higher hashrate than previous ASICs.

In addition, many pieces of equipment turned on, which turned off during a period of low bitcoin value. ”

However, by December 2019 the total computingThe power of all devices on the Bitcoin network has dropped to 94.7 exahash per second (EH/s). Following this, the difficulty of mining — was recalculated downwards. up to 12.8 trillion. There may be several reasons for reducing computing power in the Bitcoin network.

The co-founder spoke about one of them, seasonalPoolin mining pool Chris Zhu. He noted that in China, one of the largest regions in terms of the number of mining enterprises located, the rainy season has ended, which means that now hydroelectric power stations in Sichuan province will not be able to produce a large volume of electricity, and the energy that is produced is sold at an increased tariff — $0.05 instead of $0.04 per kWh, added Hashage CEO Sun Zheng. Even such a small increase in the cost of electricity could prompt miners using old equipment to shut down their farms.

Hashrate is greater than — energy consumption is less

When Bitcoin prices fall, producersmining equipment are forced to adapt to market needs and develop more energy-efficient equipment, because it is the electricity bill — the main expense item when mining cryptocurrency.

Cryptozyme 2018 led to the creation ofseveral powerful computers that appeared on the market in 2019. In 2019, the Chinese manufacturer Bitmain launched the Antminer T17, followed by the S17e and T17e. If the T17 hashrate in normal mode is 40 Tx / s, then this figure for the newer Antimner T17e reaches 64 TH / s with a power consumption of 2880 W and the ability to work in power saving mode.

Even with the cost of electricity at$ 0.06, which is not such favorable conditions in China, Russia or Georgia, such a miner will bring in more than $ 230 per month (minus the cost of electricity, but not including the cost of buying equipment, renting a room, and so on).

At the same time, other older ASIC models continue to work on the bitcoin network.

“Now T17 — one of the most popular ASICs on the market. Mainly due to the price/quality ratio. But Antminer S9 is still very popular among miners.”, — says Evgeny Fedin.

Other manufacturers of mining equipment do notlag behind Bitmain and also launched in 2019 several new, more powerful and energy-efficient ASIC models: new versions of the T3 and G32 from Innosilicon and Ebit E12 from Ebang.

GPU mining will never die

This is not the first year that they have been talking about the death of mining on video cards. Nevertheless, he continues to live, although one can speak of business and profitability regarding GPU mining with a big assumption.

“As before, this is more for computer enthusiasts,— Fedin notes.

The main distribution of GPU-power falls on the networks of Ethereum and Monero. "

The latter makes a lot of efforts toResist more powerful ASIC mining. The last upgrade on the Monero network took place at the end of November. Hard fork, after which the Monero network switched to the RandomX PoW algorithm, occurred on December 1 and was intended to eliminate the possible threat of ASIC miners, while preserving the profitability of mining using video cards and processors.

However, mining on video cards requiresthe owner of greater involvement in the process and a greater amount of knowledge than from those who are ready to invest in ASIC and pay specialists for service. Already at the beginning of 2019, the demand for video cards from miners decreased significantly, as reported by the manufacturers of GPU equipment themselves. In the final report for 2018, video card manufacturer AMD noted that in the first quarter of 2019 it expects almost no significant income from sales of video cards for mining.

“Amateurs and newcomers left the industry by virtue ofthe difficulties of working with this equipment. And the industry has stopped in the development of this direction - just look at the branches of popular miner developers on Github », — Fedin adds.

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Consolidation Course

Leading cryptocurrency market trends thatoutlined in the past year - this is a course towards enlargement and legalization. Calculations in blockchain networks in recent years are concentrated in specialized data centers. For a small and medium investor, the best option for mining are contracts in cloud services.

Refusal to install computers invacant rooms of apartments or utility rooms of offices are associated with high risks of using such premises, where, in addition, it is impossible to organize large-scale farms with a large turnover. Computing power centers can be divided into several categories:

“Home” unit: micro farms in homes and offices. Even if such microcenters operate in a legal field, their insignificant production volumes make it possible to classify this as a hobby rather than a professional activity.
"Shadow" block: Attempts to place the server at industrial sites in Russia without permits carry the risks of initiating criminal and administrative cases and litigation. Often we are talking about illegal electricity consumption, illegal financial flows and the installation of equipment imported with violations. The organizers of such computer centers often do not comply with the construction and electrical safety standards, and during inspections they try to negotiate with RosTechNadzor “on the spot”, receiving a denial of service in response. The risks of seizure or death of equipment are high, which is not permissible in the case of installing new, efficient, but expensive computers. In 2019, several similar cases occurred in Russia, which clearly demonstrated the failure of such a business model.
“Legal” block: the centers of cryptocurrencies belonging to this category can be divided into virgin subcategories:
Classic — data centers working withwide range of calculations. They are profitable during the growth of the cryptocurrency market, but in conditions of crisis and the fall of the crypto market, and, consequently, the fall in the revenue of owners of computers, the conditions for dislocating capacities in such data centers become less profitable and force the owners to look for new sites.
Cryptocurrency-oriented data centers inother jurisdictions that already have an appropriate legal framework. It allows you to build a business with a completely legal cycle from investing to the sale of produced cryptocurrency assets.

Possibility of completely legal connection toelectricity, working communication channels, transparent contractual relations with the lessor or land owner, qualified personnel, a well-thought-out security system, developed general infrastructure and the ability to optimize data centers — the most important indicators of data centers belonging to the legal block.

“Most have already found“ cheap sockets ”, — notes CEO of the LAZ project Philipp Modnov.

Now, mainly work is underway to link customers and investors with the realities of the law. ”

According to him, if with expenses for entrepreneursmanaged to figure it out — conclude agreements with data centers or organize their own data centers, then the legalization of assets received from mining is still open for discussion and optimization. The list of unresolved issues also includes the problem of legal import of equipment at minimal cost, or even without VAT at all, the export of computing services and working with pools and legal asset exchange companies.

Service Demand Growth

Development of service support and toughcompetition in this market — another trend that rules the mining industry and will only progress in the near future. This is facilitated by the consolidation of business, its concentration in data centers, and the entry into mining not so much of enthusiasts as of entrepreneurs for whom mining — Another type of income generation, and they don’t have time to understand the technical nuances. In this regard, the operation and support of mining machines is often outsourced. This is one of the most growing segments in the mining market.

“Competition between service companies has grownvery much. Now it is required to provide a full range of services, from the supply of equipment for the company to the provision of services for the repair and maintenance of equipment. Having your own computing power is welcome. ”- notes Modnov.

According to his forecasts, 2020 will be a year for miningquite eventful: halving next spring will noticeably change both the structure of miners’ income from block mining and the composition of the computer network. Regulatory pressure will force the issue of legalization of the entire process to be resolved, and the lack of realistic technologies for revolutionary efficiency growth will force one to look for optimal technical solutions (after all, we are talking about 10-12 GW of electricity in the world).

A possible tightening cannot be ruled out.legislation regarding miners in China, although such rumors have been circulating in the market for several years, earning the status of FUD (Fear, Uncertainty, Doubt).

At the same time, other countries should havegreater legislative certainty regarding mining income. Macroeconomic factors will also play a role — Investors' concerns about another financial crisis and the tightening of the confrontation between China and the United States may lead them to the cryptocurrency market and mining, among other things.

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