Mining cryptocurrencies can be a contentious subject. Whether it be the profitability of mining or the environmental impact, there are always different views.
With Bitcoin’s recent price troubles, there were many suggestions that it would enter a “mining death spiral” whereby there would be little profit in mining so many companies would simply shut their mining rigs off. This never came to pass however.
More positive notes soon came out that profitability in mining was on the rise. With that being said, here is what you need to know about cryptocurrency mining rigs and their history.
Bitmain and Jihan Wu
As an individual, it has become extremely difficult to mine Bitcoin and turn a profit. This is due to the rise in large companies dedicated to mining Bitcoin. Long gone are the days when you could mine Bitcoin on your CPU. Instead, companies such as Bitmain or even CoinGeek have attempted to create large mining structures. Bitmain is known for the cryptocurrency mining rig called the Antminer.
Bitmain is perhaps the largest of such mining companies, although it has been going through a rough time recently. Its main advantage was in creating ASICs – specific chips solely for mining cryptocurrencies. Being one of the first cryptocurrency mining companies, Bitmain came to dominate a large portion of the market. Fears soon arose over how much of Bitcoin’s hash rate was controlled by Bitmain. These fears were eased with the hard fork of Bitcoin and Bitcoin Cash in 2017.
Even despite depressing prices in 2018, Bitmain was still able to make $742 million in the first half of the year. This is in spite of the company holding 30% of its assets in cryptocurrencies and betting big on Bitcoin Cash. Since then however, rumours have spread of Bitmain being in turmoil, with Jihan Wu allegedly being given the boot and the company’s IPO looking on unsteady ground. Though the 2018 profits were impressive in the first half of the year, Q3 reports showed a $500 million loss.
Resistance from cryptocurrency communities
Some cryptocurrencies have since made their blockchains ASIC-resistant. Their fear was that without this, Bitmain or other big mining companies could control too much of the hash rate of their cryptocurrencies, giving them undue influence. Monero and Siacoin are two such cryptocurrencies that have hard forked to stop the possibility of ASIC mining.
Siacoin is a particularly interesting case in that the developers in charge chose to invest in creating their own mining rigs for public sale. According to the Obelisk website, they created three different versions – two for mining their native currency Siacoin and one for mining Decred – though none of these are for sale anymore. However, there is another miner in the pipeline that is expected to ship in October 2019 specifically for mining Grin.
Some cryptocurrencies avoid mining altogether. Instead, they premine the cryptocurrency before its release. Whilst this can stop the centralisation of mining, it can also lead to a centralisation of holders of the cryptocurrency. XRP is one such premined cryptocurrency whereby Ripple (the parent company) owns a large holding of the XRP token. Some believe this is evidence of centralisation, an accusation the #XRParmy is always keen to refute.
Nations and citizens
With the competitive nature of the mining industry, it would appear difficult for individuals to become miners themselves. All hope is not lost, but it is still difficult. Many individual miners now choose to mine low market cap coins. Because of their size, they usually have a small hash rate and algorithmic difficulty, meaning that mining is still possible for anyone. Whilst profit may be minimal in the early days, the hope is that you can mine a hidden gem that may pump in price in the future.
The costs of mining depend on your location and the cost of your electricity. Initially, China became one of the central hubs for mining Bitcoin, although research showed that it wasn’t the cheapest nation. As it turns out, Venezuela was the cheapest nation if you wanted to mine Bitcoin. At the other end of the spectrum, South Korea, a country known for its cryptocurrency enthusiasts, was one of the most expensive.
Conclusion
If you are interested in the possibility of mining, then pursuing the idea initially as a hobby whilst you learn the ropes is a wise idea. Much like trading cryptocurrencies, there isn’t a guarantee of profit. With the mining landscape having become much more competitive as the popularity of cryptocurrencies has risen, the task of entering the mining market is much more difficult and expensive. Competing with the big boys is never going to be likely as an individual, but if you can mine hidden gems, there is a chance for a healthy profit. As with anything related to cryptocurrencies, doing your own research and never gambling more than you can afford to lose is essential.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.