Current State Of Crypto Mining Industry In 2018
As cryptocurrencies have changed and adapted, the crypto mining industry has naturally followed the example.
However, in an industry that changes so rapidly, it’s often difficult to keep up with the trends. As more and more roadblocks begin to appear, some firms find themselves struggling.
What is Crypto Mining?
To fully grasp the concept of crypto mining, it is important to understand that blockchain is a public ledger that contains information about every single transaction that has ever been carried out in that cryptocurrency.
All of these transactions are grouped into linked ‘blocks’. Crypto miners are required to check these blocks to make sure that they are legitimate, and they are also responsible for adding new blocks to the blockchain.
To prevent cryptocurrencies from becoming devalued by simply allowing miners to build lots and lots of new blocks, the process is made more difficult. Many cryptocurrencies have a limit on the number of units that can be mined. For example, Bitcoin has a limit of 21 million. After 21 million Bitcoins will be created, mining a new block will no longer produce a reward.
The success of crypto mining is highly dependent on several factors, such as facility costs, hardware, and computer processing power. Many cryptocurrencies, including Bitcoin, use the Proof of Work (PoW) protocol. This means that computers race to be the first to solve a mathematical equation. The first to solve the equation will receive the reward.
The Ordos Mine in China Accounts for Over 4% of the Power on the Bitcoin Network
China is said to have one of the biggest Bitcoin mines in the world. The machines in this building power through billions of calculations per second, twenty-four hours per day.
The staff live on-site. Their building includes a dormitory, offices, a canteen, and a repair center.
The factory’s daily electricity bill amounts to $39,000. However, when over $7 million Bitcoins are mined around the world every single day, this seems like a relatively low price to pay.
This mine is owned by BITMAIN, which currently controls approximately 42% of the mining power of Bitcoin.
Genesis Mining Firm Closes Unprofitable Contracts
Unfortunately, some blockchain companies aren’t quite seeing the same level of success.
Despite the potential of blockchain technology, Bitcoin is no longer everywhere in the headlines. As a result, we’ve noticed a steep decline in the popularity of cryptocurrencies amongst the general public over the past few months.
As a result of this decline, a cloud mining service known as Genesis Mining announced that it would be putting an end to the open-ended contracts owned by users that are not earning enough to cover maintenance fees. Those who would like to keep using the services will be required to upgrade to a new premium account.
In a statement, the company said:
"Unfortunately, bitcoin went into a downward trend around January. This trend combined with the heavily rising difficulty around April and May reduced mining outputs even further. As a result, some user contracts are now mining less than the daily maintenance fee requires to be covered, and thus they entered the 60 days grace period, after which open-ended contracts will get terminated."
Potential Solutions to Improve the Crypto Mining Industry
The crypto industry has never stood still. It’s one of the fastest moving industries of our time, and what worked one moment can be rendered completely useless the next. ‘Adapt or stay behind’ has never been more appropriate.
However, there is already an increasing number of companies offering solutions to some of the problems currently presented by the crypto mining industry.
Proof of Assignment (PoA)
IOTW has created its own mining protocol known as Proof of Assignment (PoA). Its primary purpose is to combine the growing IoT industry with the growing blockchain industry in a simple, sustainable way.
This protocol requires no entry fee beside owning an IoT device and consumes significantly less processing power than alternative protocols. As a result, there is no need to buy expensive rigs or ASICs, and there are no high electricity costs.
In addition, the network is very secure, and supports instant transactions.
Perhaps even most important is that, unlike Bitcoin which is currently being dominated by giants like BITMAIN, there is no monopoly on mining. The IOTW blockchain is developed with the ‘common user’ in mind, and can be used by anyone around the world with ease.
Proof of Burn (PoB)
Other companies such as XCP (Counterparty) and Slimcoin are using alternative protocols such as Proof of Burn (PoB). This involves ‘burning’ tokens in a way that is unrecoverable, easy to verify, and difficult to undo.
This protocol consumes significantly less energy than alternative protocols such as Proof of Work. This is due to the fact that it consumes no resources other than the burned coins. Proof of Work, on the other hand, requires huge amounts of energy.
However, it does share many of the similarities with Proof of Stake (PoS) in that it mostly benefits those who are already rich and can afford to ‘burn’ tokens.
The Crypto Mining Industry Is In Dire Need of Change...
Bitcoin mining consumes a huge amount of energy.
To put it into perspective, the amount of electricity required for a single Bitcoin transaction is enough to power just over 31 US households for a single day.
The amount of electricity consumed by Bitcoin in a year is enough to power the entirety of Austria for a year.
In fact, right now, 0.33% of the entire world’s electricity consumption is dedicated to Bitcoin mining.
Obviously, this is extremely damaging for the environment, and these levels are not sustainable long-term.
The big question now is, how do we make a change?