Tag: Mining

High Hopes as Third Bitcoin Halving Approaches

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There is currently a lot of chatter in the Bitcoin community and the crypto industry at large as Bitcoin’s third-ever block halving nears. Set to take place this month (May 2020), there has been a lot of speculation regarding what will happen to the digital currency’s price.

What the Halving Means

In essence, the bitcoin halving means that the reward for mining a block of bitcoin will be divided by two. When the network finally hits block number 630,000 the amount will drop from 12.5 BTC to just 6.25 BTC. This will be the third time that a halving will be happening since the Bitcoin network went live over a decade ago.

Halving is one of the things that set bitcoin apart from all other digital currencies including other popular digital currency networks such as Ethereum’s. In many ways, it is one of the things that drive the price and value of Bitcoin.

As for the impacts, some of them are already coming into play.

Mining Machines Become More Valuable

Needless to say, the halving will have a huge impact on the companies that depend on bitcoin mining. While the systems themselves will not be affected much, their value is a totally different thing altogether.

Now even mining rigs that were previously said to be obsolete have become profitable again. For instance, mining rigs such as the AntMiner s9 and the Avalon A851 are now able to generate between 10 percent to 20 percent gross margin at an average electricity cost of $0.05 per kilowatt-hour (kWh). These margins could increase to as much as 30 percent to 40 percent to miners who adopt more efficient methods.

Even so, considering the dynamic nature of bitcoin mining, this might not be sustainable in the long term. As bitcoin’s halving approaches it is likely that many of the people relying on the older equipment will eventually be squeezed out by people using newer and more efficient mining rigs.

The Current State of Bitcoin

Over the past week, Bitcoin’s price has surged towards the $10,000 mark – this impressive rise has seen the cryptocurrency’s market return to its pre-coronavirus bull run. In fact, the crash losses that experienced because of the impacts of the pandemic have almost been completely erased.

“The interest in cryptocurrencies is now building as investors  look to the month-end and forward to May and June.”

-Marcus Swanepoel, chief executive of London-based bitcoin and cryptocurrency exchange Luno.

In general, members of the bitcoin community are pretty optimistic about the future of bitcoin’s price even after the supply squeeze that will take place this month. However, the actual impacts remain to be seen.

Cryptocurrency Mining Creates Huge Energy Demand in Iceland

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This year Iceland is likely to use more energy in mining digital currencies than what it will use to power homes in the country. Considering the large amounts of electric energy required by computers to mine the precious bitcoins, many prominent cryptocurrency mining companies have found Iceland to be the perfect spot for their operations thanks to the countries abundant geothermal and hydroelectric power plants. With this development, the current energy consumption by virtual currency mining companies is expected to double to 100 megawatts this year which is significantly higher than what all the island nation’s households will use collectively.

There are other factors that have attracted miners to the country. The first is that the companies do not need to pay taxes but given the buzz that their power consumption has been attracting, this will definitely not last long. Other important attractions for cryptocurrency mining companies is the natural cooling available for computer servers as well as the quite competitive prices for the available renewable energy. Obviously, this soaring demand for energy is a culmination of the equally soaring cost of digital currencies and Iceland seems to be the go-to place for companies that are seeking to optimize costs or get away from oppressive laws such as the ones in China following the crackdown on mining companies and ICOs.

As mentioned earlier, mining companies being exempted from taxes does not sit well with everyone in the country. Smari McCarthy, a lawmaker for Iceland’s Pirate Party has made the first step by proposing that the profits amassed by bitcoin miners should be taxed.

“Under normal circumstances, companies that are creating value in Iceland pay a certain amount of tax to the government,” McCarthy said. “These companies are not doing that and we might want to ask ourselves whether they should. We are spending tens or maybe hundreds of megawatts on producing something that has no tangible existence and no real use for humans outside the realm of financial speculation. That can’t be good.”

Mining Fees Surge as China Intensifies Crackdown on Bitcoin

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This week, the Chinese government intensified its efforts to stop bitcoin mining by calling for all the task forces to “actively guide” in the closure of bitcoin mining operations. According to a Wall Street Journal report, the notice by Chinese authorities called for an “orderly exit with no specific deadline. The report further stated that the reason for the intensification of China’s efforts against bitcoin mining was because it “consumes a large amount of electricity and also encourages a spirit of speculation in virtual currencies.” On the same note, the Chinese authorities believe that bitcoin mining is among a host of activities that are not particularly in line with the needs of the real economy.

Chinese government officials have been asked to wield a policy ax on bitcoin which implies that they will be required to cite or promulgate regulations to limit aspects of bitcoin mining such as land use, electricity consumption, environmental regulation and tax collection.

The Role of China in the World of Bitcoin

To put the importance of China in the bitcoin ecosystem into perspective, we can take a look at the last month of 2017 when China accounted for 80% of all the bitcoins mined in the world. These impressive percentages are mostly attributed to the numerous advantages that the country offers to bitcoin manners including cheap electricity as well as centralized mining operations, both of which are key sustainers of the price of bitcoin.

Will Global Bitcoin Mining Operations Take a Hit?

Regardless of all the perks of operating within China, bitcoin mining operations will not have a lot of trouble once the crackdown begins.

In fact, a number of renowned bitcoin mining operations have already exited China and moved to other areas that offer nearly the same advantages that China offered.  A great example is Bitmain, which is considered to be the largest bitcoin mining pool in the world, that recently set up shop in Inner Mongolia.

Some other mining operations are moving to cooler climes and according to numerous reports, Canada seems to be one of the locations that will benefit from the migration of mining operations. Meanwhile, since the Chinese government did not issue any strict deadline pertaining to the “orderly exit,” the price of bitcoin will not experience any radical volatility.

Over $60 Million Emptied from NiceHash Wallet by Hackers

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Cryptocurrency mining marketplace NiceHash on Wednesday was hacked and its wallet emptied of over $62 million worth of Bitcoins (4,449 BTC). In a statement posted earlier today, NiceHAsh officially halted operations and is currently carrying out investigations into how the security breach occurred. In the statement, the company said:

“Unfortunately, there has been a security breach involving Nicehash website. We are currently investigating the nature of the incident and, as a result, we are stopping all operations for the next 24 hours. Importantly, our payment system was compromised and the contents of the NiceHash Bitcoin wallet have been stolen. We are working to verify the precise number of BTC taken. Clearly, this is a matter of deep concern and we are working hard to rectify the matter in the coming days. In addition to undertaking our own investigation, the incident has been reported to the relevant authorities and law enforcement and we are co-operating with them as a matter of urgency.”

NiceHash further added that other than the obvious probe into their own employees and internal investigations, they had gone ahead to employ the expertise of “relevant authorities and law enforcement agencies” to assist in rectifying the situation as soon as possible. NiceHash also advised its users to change all their passwords with immediate effect since they are still unsure about what exactly the hackers obtained from the hack other than just the huge loot of Bitcoins.

NiceHash which was launched in 2014 allows its users to trade and sell hash power via its online marketplace by matching people with spare computing power with Bitcoin miners in need of the extra computing to create more crypto coins. Users can, therefore, reap the benefits of Bitcoin mining without having to invest fortunes in purchasing equipment or operating them. This is perhaps the biggest cloud mining hack of all time and considering how events play out after this, it is quite apparent that it will affect the cloud mining market from here on out. Already, questions are being raised about the essence of using cloud mining services instead of buying and operating machines personally, the latter being considered to be the safer option despite its cumbersome nature.