How Bitcoin mining will look like in 2022?… New potential markets and less risks
Buckle up now!… The mining profitability of the best efficient ASIC miner is currently around 0.39$ per kwh (in Jan 2022), but this income will be shrinking later on with electricity cost and Bitcoin difficulty increase during time. So the more discount you take for your energy price now, the more secured you are in the tough competitive market situation in the following year.
As the price of bitcoin hit historic heights in 2021, mining profit margins were as high as 90%. The industry entered a “gold rush” period, said Amanda Fabiano, the head of mining at New York based Galaxy Digital. “As more miners enter the sector, margins will likely shrink, particularly for new entrants, as long as the bitcoin price stays stagnant,” Fabiano added.
Hashrate increase and more secured network
In fact, some industry participants are calling for hashrate reaching within the range of 300–350 exahash/second (EH/s) by the end of next year, which will be 70%-100% higher compared to around 179 EH/s as of Dec. 2021, according to data from analytics firm Glassnode.
At the same time, a subtler change took place. “Mining seems to have crossed the line where it was very risky and uncertain,” said Didar Bekbau, co-founder and CEO of Kazakhstan-based miner Xive. The global industry is now becoming more like traditional business, where risk is lower and investors are throwing money in and are ready to wait two or three years to get their return, he added.
However, the landscape for the digital asset mining industry in 2022 is shaping up to change significantly once again, as the delay in supply of new mining rigs starts to normalize and competition becomes more intense. As the hashrate and difficulty increase consecutively, miners will have to try harder to remain profitable, as long as there are no dramatic fluctuations in the price of bitcoin.
Mining Pools
The more hashes per second a miner can perform, the more likely they are to find a valid block and broadcast it to the network, and receive the block rewards in return. Actually, they are trying more to find some puzzle combinations each second to solve the block. But it needs you to join a pool of many miners, mining pools, so that you stand a chance to win a block and share in the rewards! However, small miners can still hit the jackpot! In a surprising incident in the beginning of 2022, a solo miner with only 116 TH of hashrate capacity found a valid block on Thursday to take home a 6.25 BTC reward worth over $267,500 at the time of writing. Only a couple of days after, another individual miner had made the same achievement! That’s the probability of hitting a meteor in front of your feet! Both miners are part of the Solo CK bitcoin mining pool. They have been astronomically lucky!
Although significant ban & unfair regulations from some countries jurisdiction in 2021, like China, Bitcoin industry has very well kept up its way to new markets. For instance, Bitcoin hashrate, which took a hit after the China ban, has fully recovered making the network more secure. Moreover, many reckon that Bitcoin’s computational power may double in and make the market more secure in 2022!
China cracked down on its domestic crypto mining industry in May 2021, but many miners have figured out ways to continue operations and evade detection by going underground. Experts estimate that as much as 20% of the worldwide bitcoin network still remains in China.
Furthermore, Data from Chinese cybersecurity company Qihoo 360 shows that underground crypto mining appears to be alive and well in China. In a November report, the research group estimated that there are an average of 109,000 active crypto mining IP addresses in China on a daily basis. Most of those addresses, according to the report, are in the provinces of Guangdong, Jiangsu, Zhejiang, and Shandong. Despite the government’s significant and growing efforts to weed out all crypto miners, many, have found ways to survive undetected.
Publicly-listed mining companies
As time goes on, we see more and more mining companies turn into public companies by IPO and shares distribution in stock markets. For instance, Bitcoin Miner Rhodium’s Planned IPO Values at Up to $1.7B. While we already had several companies listed on world stock markets in 2021 such as:
· Riot Blockchain (NASDAQ: RIOT)
· Marathon Patent Group (NASDAQ: MARA)
· Canaan (NASDAQ: CAN)
· HIVE Blockchain Technologies (OTC: HVBTF)
· BIT Mining Ltd. (NYSE: BTCM) — Hong Kong-based
· Bit Digital Inc. (NASDAQ: BTBT)
· Bitfarms (CVE: BITF) — Canada
· Hut8mining Corp. (TSE: HUT) — Canada
Steve Barbour, CEO of Upstream mining, believes that Bitcoin mining is destined to be one of the least profitable businesses on the planet, simply due to how easy it is to start. There are few barriers to entry and will be even fewer as time goes on and competition in manufacturing heats up. This is very bullish for bitcoin, he said.
“This is sort of obvious. Everyone can mine bitcoin, not everyone can cook and cooking is one of the most widely accessible skills on the planet. The restaurant business has very low margins in aggregate.”
He also added up, When ASICs are a mature commodity, they will be dirt cheap. Most will be offline for most the year, only dusted off when there’s a bull run especially in period of fee congestion. They will last 20 years! Today we still use motors that were designed almost 50 years ago (5.7L small block Chevy).
Meanwhile, Square, Jack Dorsey’s company, is considering building a Bitcoin mining system based on custom silicon and open source for both individuals and businesses worldwide. “If we do this, we’d follow our hardware wallet model: built in the open way in collaboration with the community.” Jack said in his tweet.
“Mining needs to be more distributed. The more decentralized this is, the more resilient the Bitcoin network becomes. Mining needs to be more efficient. Driving towards clean and efficient energy use is great for Bitcoin’s economics, impact, and scalability. Energy is a system-level problem that requires innovation in silicon, software, and integration.”, He said.
New potential markets
Paraguay’s Senate recently approved Bitcoin mining and trading regulations. Paraguay has a lot of renewable energy potential for Bitcoin mining. Paraguay only uses 1/3rd of the energy they produce. They have the highest per capita surplus in the world. All from green energy sources! Their Senate just passed a bill to allow Bitcoin mining in the country.
Kentucky is a champion for crypto! Kentucky has embraced bitcoin mining and other crypto businesses and it’s interesting to know that nearly 20% of America’s hash rate comes from Kentucky!
With a low-carbon energy mix, Kentucky offers a greener option to power the blockchain. Kentucky supports innovative solutions, like Bitcoin, to bring new industry to the State, Soluna CEO said. “Soluna is proud to be scaling in Kentucky. With nearly 50 MW and 21 employees and staff located at our facilities Project Sophie and Project Marie.”
Now here’s a novel idea: use gas that would otherwise be flared to generate electricity in the field and use it to mine bitcoin! Believe it or not, it is being done. In North Dakota, Equinor and Enerplus are among the operators using the process. New companies like Crusoe Energy have sprung up to provide the in-the-field equipment. Crusoe has some 40 mobile generating units in oil shale basins and plans on increasing that number to 100. A recent conference in Houston on the subject saw 200 oil and gas execs and bitcoin miners in attendance.
natural gas flaring has resulted in an environmental calamity and a multi-billion-dollar loss to the oil and gas industry. In fact, natural gas flaring was itself, a “solution” to the problem of unusable and stranded natural gas and now it’s climate issue! For instance in the United States, thousands of OAG (oil & ga) producers without access to natural gas pipelines are forced to flare away gas that could have powered thousands more homes and businesses.
According to the world Bank, the seven countries that flared the most natural gas in 2020 were:
Russia
Iraq
Iran
The United States
Algeria
Venezuela
Nigeria
EZ Blockchain is a Chicago-based mining company which has exactly targeted this issue and tried to solve this by deploying what they call EZ Smart Grid containers. Currently they have 55 Mw mining capacity installed and 20 MW under operation. Their EZ Smart Grid is a unique solution for the existing wasted energy problem in oil fields. It consists of a mobile gas engine generator which converts wasted, flared gas into electricity which is immediately used onsite to power the mobile data center, EZ Smartbox.
Therefore, despite the heavy arguments against Bitcoin mining climate issues, this flare-gas mining can bring on new windows to resolve environmental pollutions and benefit climate change! Even more, it introduces new economical option for utilizing waste energy and converting it into a valuable asset so that it can easily be sent wirelessly to another place in the region, without any subsidy!
By: Mehran Fani
References:
1) https://ezblockchain.net/article/what-are-the-alternatives-to-gas-flaring
3) https://www.coindesk.com/business/2021/12/15/8-trends-that-will-shape-bitcoin-mining-in-2022/
4) https://www.solunacomputing.com/news/cryptohelpskentucky/
5) https://www.cnbc.com/2021/12/18/chinas-underground-bitcoin-miners-.html
7) https://www.coindesk.com/business/2021/12/15/8-trends-that-will-shape-bitcoin-mining-in-2022/
8) https://bitcoinmagazine.com/markets/another-solo-bitcoin-miner-finds-valid-block
9) https://www.oilandgaslawyerblog.com/mining-bitcoin-a-solution-to-gas-flaring/
