This industry, which is now active in over a hundred countries, is actually the oldest industry to break out from the innovation that is cryptocurrency.
Formally referred to as mining, this industry has grown to become the backbone of Bitcoin’s network, tirelessly at work confirming transactions from across the globe.
What is cryptocurrency mining?
Going on the recent popularity of Bitcoin and other cryptocurrencies, it is safe to assume that the greater portion of us have come across terms like Bitcoin mining or cryptocurrency mining farms. But what exactly is the act of mining Bitcoin or other cryptocurrencies?
Cryptocurrency mining is the process of solving a complex computational equation, in return for a crypto reward upon completion of the given mathematical problem.
In the early days of crypto mining, one could mine Bitcoin using their home computer. However, as the industry has grown and the network expanded, we now see purpose-built equipment on sale.
As cryptocurrency has gained popularity and the networks seeing more use, the algorithmic problem-solving required to confirm transactions will too become more difficult to solve.
In a nutshell, the worldwide network of computing power that runs Bitcoin and other cryptocurrencies essentially does the same job that companies like VISA and Master Card do.
The process and record transaction data, the most telling difference in the case of crypto mining is that the data is stored on a ledger that is open to the public.
That said, it is important to note that the process of mining cryptocurrency has very high energy demands. Couple this with the variation in electricity cost and supply from country to country, and it becomes easy to see why some countries have emerged as preferred locations for digital asset mining.
What are good locations for cryptocurrency mining?
As mining start-ups like Bitmain continue to expand their reach, the saying that goes location, location , location has never rung truer. As the game has heated up, a mining farms geographic location now is the difference between profit and losses.
“North America is one of the best places in the world for mining, thanks to low-cost electricity, cool temperatures, and high-speed internet.”
This is according to Patrick Grey, CEO of HashChain Technology inc, a blockchain solutions and crypto mining operation based in Vancouver. The company’s main mining focus is on DASH.
Canada itself is relatively young in this space, but that did not stop service providers on the other side of the country lowering electricity prices in a bid to attract miners and data centers.
This state, though small in size, has a healthy appetite for risk. As many countries like India and China have been very wary of cryptocurrency, Georgians can boast widespread use of cryptocurrencies.
In addition to that, BitFury, which is said to have mined more than 600 000 Bitcoins, has partnered with the state to create a property title registry to be verified and stored on the blockchain.
There is no real indication of BitFury’s electricity costs. What is known is that the company pays no tax on its Tbilisi operation’s 18 hectares.
“We can reduce our energy costs and maintain a low-cost advantage as we grow our mining operations. We have just launched a new product platform and mining is an area we expect to see continued growth.”
Alex Karis, CEO of the very first crypto company to get listed on a notable stock exchange, DigitalBTC.
The company itself no longer mines cryptocurrency, however, the low-cost geothermal energy and cool climate have caused many new age prospectors to flock to Iceland.
As a result, Iceland is home to the worlds largest Ethereum mine, operated by Genesis Mining. This runs on what is called cloud mining, and the company is fast expanding into the mining of other cryptocurrencies like DASH.
The former USSR now comes in as a very capable competitor. On offer is some of the most affordable and most environmentally friendly electricity supply.
In Russia, coal accounts for roughly 18 percent of the country’s power grid. The country has done well at putting a focus on hydroelectric and nuclear power, with a cool climate to add to it, we could have a winner.
Gazprom, Russia’s number one energy provider, entered a partnership with EuroSibEnegro that could see the provision of excess power to cryptocurrency miners in the Ural and Siberia and European portions of the country.
What equipment does one need for cryptocurrency mining?
As mentioned by many before, the rise in crypto’s popularity has had one of the widest felt ripple effects in recent history.
For early cryptocurrency miners, this meant a shift from dependence on CPU power to GPU power. This move saw graphics card maker, Nvidia, realize a revenue increase of over 50 percent in the second quarter of 2017.
Other start-ups like Bitmain created more purposefully designed equipment. The Application Specific Integrated Circuit (ASIC) was born. There is now a vast array of such equipment available on the market. Specific models are designed to mine certain crypto coins, however, they do not come cheap.
Is cryptocurrency mining sustainable?
At this point in time, it is very hard to tell. A more fitting way to ask the question would be asking whether or not popular cryptocurrencies like Bitcoin are scalable.
If the whole world had to adopt Bitcoin as a singular currency in its current state, mining might in that case not be a sustainable option.
As more and more people and organizations start to actively interact with cryptocurrencies, the natural assumption would be that the demand for computing power will mirror the growth.
The aforementioned companies have sought to get ahead of the possible future demand for mining power and finding innovative ways to make mining more sustainable.
They must navigate the notoriously unpredictable cryptocurrency market, it is up to time to reveal the winners and losers of this new frontier.