So far this year, many countries and regions have intensified a crackdown on Bitcoin mining, causing hashrate fluctuations in the global Bitcoin network. Meanwhile, the recent approval of Bitcoin futures ETFs has pushed BTC price to a new high. Under such circumstances, what changes will happen to crypto mining, the upper reaches of the industry chain? Below are the viewpoints of ViaBTC Pool on these issues.
1) Since June, some countries and regions have intensified crypto mining regulation, which has caused hashrate fluctuation in the global bitcoin network. How does the new policy affect Bitcoin miners, mining pools, and the whole Bitcoin industry?
This June, China’s provincial and local governments ordered a halt to all cryptocurrency mining operations in a response to the country’s carbon neutrality commitment, triggering a hashrate tumble in the global Bitcoin network. According to historical data, in early May, the global hashrate once reached 190.55 EH/s; however, by June 27, it fell to 57.47 EH/s, causing the block generation rate to prolong to nearly 25 minutes, 2.5 times longer the normal.
This vertiginous drop also led to Bitcoin’s most significant difficulty reduction in early July, by much as 27.94%. In conclusion, the policy changes have directly led to the hashrate fluctuation and difficulty plummets of the entire Bitcoin network in a short period.
The blanket ban also sent Chinese miners scrambling for another operation site, shifting the global hashrate center elsewhere. According to Cambridge Centre for Alternative Finance, China’s hashrate share declined from 44% in May to 0% in July, the United States’s share of global mining shot from 17% in April 2021 to 35% in August, and Kazakhstan now accounted for 18% compared to 8% before the crackdown.
In the long run, the crackdown policy is in Bitcoin’s favor. The mining activities have undergone adjustments in the geographical distribution, and the hashrate is more decentralized and dispersed to regions that are not subject to regulatory restrictions. The global hashrate is gradually picking up: on October 25, the hashrate of the entire network has reached 181.69 EH/s, slowly approaching the record high. This figure also suggests that the negative impact of the nationwide crackdown are basically resolved as Chinese miners have upped sticks and operated elsewhere with their mining rigs.
Among the mining pools, when hard-hit by the policy, the industry leaders such as F2pool, BTC.com, Binance, Huobi, and Antpool suffered a 15% to more than 20% drop in hashrate due to the banned share contributed by Chinese miners.
In contrast, ViaBTC Pool staved off the crypto crackdown, and managed to stabilize block generation and miners’ income amid the regulation. Thanks to its far-sighted, decentralized layout, its hashrate is more dispersed than its peers’, thus eluding the hashrate tumbles caused by regional policy tightening. Considering all the above, after the crackdown, the hashrates of mining pools will be more decentralized across the globe.
2) It seems that the global hashrate is gradually de-sinicized, and Chinese miners are still looking for new mining farms. Which countries are the best choices right now?
Miners need to consider data from multiple sources and make “field visits” when choosing a new mining farm. Before they pick a new hosting service, a pilot run is suggested to investigate the mining farm’s operation stability and the local mining procedures. Then, when everything is ready, they can expand the mining scale. Currently, the United States, Canada, Russia, and Kazakhstan are the most preferred locations. Separately speaking, the U.S. and Canada are under stable political and policy environments, with sound infrastructures and technical maturity.
However, the operation and maintenance costs and electricity prices there are relatively high, and their taxation and other policies may even push up overall costs. In contrast, although the political and cultural environment in Russia, Kazakhstan, and other regions foresees potential instabilities and risks, their abundant power resources could save much cost, which makes these areas more miner-friendly than the United States and Canada.
3) Carbon neutrality has heated discussions around the world. How should the crypto mining industry, which has been criticized for massive resource consumption, respond to such changes?
Indeed, since the birth of Bitcoin, the total carbon dioxide emissions generated by crypto mining have reached 67.23 Mt, with a total power consumption of 141.54 TWh. Each year, electricity consumption in this field exceeds the annual power usage of Ukraine.
Nowadays, due to the worsening environmental degradation, there have been more in-depth discussions on the carbon neutrality strategy worldwide. That is why many energy-intensive companies are transitioning to clean energy to reduce carbon emissions, lest they violate “carbon neutrality” policies in the future.
Many mining companies in North America are experimenting with clean energy mining. According to the first voluntary survey by Bitcoin Mining Council (BMC) on July 1, which has successfully collected information on renewable energy usage from networks occupying 32% of the total Bitcoin hashrate, 67% of the electricity resources used by BMC members and survey participants are renewable energy, and the renewable energy utilization rate can increase to about 56% by the second quarter of 2021. It can be seen that clean energy mining represents a trend in the future, but it is still in the nascent stage.
At the same time, in North America, much renewable energy equipment is ready for installation, while Bitcoin mining, with its enormous energy demand, can be the launch pad for the installation of such equipment, thus reducing the application cost of solar and wind power. So from this perspective, Bitcoin mining could minimize the cost of renewable energy and lower its price, thereby expanding the industrial scale of green energy. That also explains why many governments support mining with renewable energy.
4) Nowadays, the much-anticipated Bitcoin futures ETF has been approved and listed in the United States, which has pushed Bitcoin to the traditional financial market. What trends do you see in Bitcoin mining as it starts to face a broader investor base?
Bitcoin recently hit an all-time high above $66,000 after the long-awaited approval of a Bitcoin futures ETF in the U.S., which sparked the global interest and pushed the cryptocurrency further into the mainstream. The approval will also gradually widen Bitcoin’s user base and put it on the radar screen of more VCs.
The crypto mining industry, in the upstream of the Bitcoin industry chain, is also favored by many VCs. North America already sees some Bitcoin mining-based funds with the capital size between $100 million and $200 million. At the same time, many listed companies are also buying in Bitcoin and even joining Bitcoin mining, building large mining farm facilities as an asset allocation.
It is both an opportunity and a challenge for former cryptocurrency practitioners. The capital flowing into the market not only increases Bitcoin’s investor base and its intrinsic value, but also makes the Bitcoin mining industry more specialized, institution-oriented, and fund-oriented. But at the same time, the growing number of institutions that just join the race are squeezing out retail investors. Moreover, the threshold to the crypto industry may also be lifted over time.
5) With the development of public chains and related ecosystems, the public attention towards PoW mining seems to be running low. How do you think of the future of PoW mining?
In general, the PoW consensus mechanism has been long criticized for excessive resource consumption and low transaction processing speed. Ethereum 2.0 is changing the consensus mechanism from PoW to PoS, whereas many public chains will stick with PoW due to ecosystem development.
However, as the benchmark representative of cryptocurrency, Bitcoin still offers considerable income to PoW miners. For example, the hashrate of an Antminer S19 is 95 TH/s. According to the total hashrate and BTC price on October 26, the daily mining rewards are around 0.00060325 BTC, worth $37.44. For a miner with 100 sets of Antminer S19, the daily income can reach a considerable $3744.
Moreover, in the face of fierce competition, many traditional financing instruments are introduced to mining activities. A good example in point is ViaBTC Pool’s staking and hedging services. Derived from conventional financial products but innovatively combined with PoW mining, these services allow PoW miners to expand mining scale or realize asset appreciation with better use of financial instruments. With all the new attempts above, we believe PoW mining will remain a pillar of the cryptocurrency ecosystem in the long run.