While bitcoin price is prospective for the investors, bitcoin mining is showing promising potential. As per the revelations of Coin Metrics, all-time bitcoin mining industry has successfully generated $14 billion in revenue. Surprisingly, it took about 8 years since the inception of bitcoin to surpass the $5 billion threshold. Following that, bitcoin mining took just another 8 months to generate another $5 billion in revenue to reach $10 billion in August 2018. Now, BTC mining revenue is all set to break $15 billion mark in early 2020.
In August 2018, bitcoin reached the $10 billion mark and by 2020, the overall revenue generated is expected to be around $15 billion. Unexpectedly, the business of bitcoin mining had turned out to be profitable despite increasing hashrates. A high hashrate is usually not a good sign for the miners aiming to make profits.
Basically, Hash is an output of a hash function whereas the hashrate is the speed at which a mining machine operates and functions. In the procedure of crypto mining, complex computations are needed to solve problems and puzzles. Finding the solution to the puzzle holds extreme significance because miners have to get the block and the reward of mining before some other miner completes the block.
For completing the process, the miner has to ultimately find the right answer to the block. Once a miner is successful in finding the block and adding it to the bitcoin blockchain, the entire procedure of finding block starts again from scratch.
As the task in hand is quite challenging, the computers needed for mining have to undergo thousands or even millions of computations per second to find the right answer. In simple words, the number of attempts taken by the miner per second is said to be the hash power or hashrate. That’s why the unit for measuring the hashrate is hashes per second (h/s). So basically, a hashrate of 85 (h/s) means 85 guesses per second.
After successful mining of a block, the hash power of bitcoin network alters because the time for completing a bitcoin block should remain constant. Therefore, to accommodate different factors affecting the time for block completion, the hashrate is varied.
As the difficulty of the bitcoin network increases, high hash power is needed for a block and as computations increase, chances of successfully hashing a block becomes low. This explains why an increase in hash power is not ideal for miners seeking profits. However, as the revenue of bitcoin mining increased in accordance with the hash power, mining was beneficial and profitable for bitcoin miners.
Previously, bitcoin mining difficulty broke the previous record of 7.45 trillion and attained a new high record of 7.93 trillion. Bitcoin was designed in a way to readjust its mining difficulty so that the time required for completing a block production revolves around 10 minutes.
Bitcoin mining difficulty, the measure of how hard it is to earn rewards after successfully mining a block, is readjusted after every 2,016 blocks. The number of miners participating, impacts the difficulty of the bitcoin network.
Besides profitable business for miners, bitcoin mining is very important for maintaining the health of the bitcoin network. During mining, miners confirm bitcoin transactions and provide security to the bitcoin network. In the absence of miners, the bitcoin network can be easily attacked and the transaction details on the bitcoin’s blockchain can be changed.
Although mining activities were proving to be profitable for the mining industry, it might not continue to do so. With increase in hashrate and stable bitcoin price, bitcoin mining could be negatively impacted with miners on stake.
With the increase in global crypto adoption, countries such as Iran and Venezuela are recognizing the perks and returns provided by the bitcoin industry. Iran even authorized bitcoin and other cryptocurrency mining as an industrial activity.
In the crypto space, the phenomenon of bitcoin halving holds great importance. Taking place every 4 years, due to the halving, the reward of bitcoin miners cuts down by half. At the moment, miners are awarded 12.5 bitcoin but after next year’s halving, 6.75 bitcoin will be the award for miners upon completion of a block. This explains that as the reward of miners is dependent on bitcoin’s price, the mining industry is overall reliant on digital asset’s price.
In the future, it would be of interest to see how the price of bitcoin and the bitcoin halving will affect the bitcoin mining industry. Apart from that, steps taken by countries for the adoption of bitcoin mining and supporting the ecosystem are also equally important.