24.10.2020

How Miners are Preparing for Lower Block Rewards

On this week’s episode of “Bitcoin Halving 2020: Miner Perspectives,” Kristy-Leigh Minehan and Pavel Moravec give an in-depth explanation of what miners are doing to maximize profits and increase operational efficiency.

As the latest Bitcoin halving approaches, miners are upgrading equipment, optimizing arrangements, conserving power and more in the race to dominate.

How are bitcoin (BTC) miners strategizing for the upcoming halving event, in which block reward subsidies will be cut by 50 percent?

Since October, Minehan explains, bitcoin mining farms have been getting on “the upgrade train” and purchasing state-of-the-art ASIC machines such as the Antminer S17 and S19. Moravec says bitcoin miners have also been looking at creative ways to cut electricity costs by leveraging surplus energy from certain cities’ power grids.

What started primarily as a hobby in 2009 has flourished over the years, gained broader adoption and ultimately evolved into a new, professional industry.

“We’ve gotten to a point in bitcoin’s history where the government is paying attention and has started to realize bitcoin isn’t going away,” Minehan said. “Mining is not going away. And it’s in their best interest to start working with miners.”

Teaming up with local governments and utility providers is another miner strategy both Minehan and Moravec have seen on the increase in recent years. This is why Minehan believes even the geographic distribution of miners, which was discussed in depth in an earlier podcast episode, may further stretch the industry into North America and Europe. (China remains the dominant locale.)

Bitcoin Halving 2020: The ‘Arms Race’ for Miner Efficiency Intensifies

In lead-up to the next bitcoin halving event in May, some bitcoin miners are looking at leveraging what Moore and Carlson describe as “surplus energy” to make operations even more cost-effective.

In this episode of the Bitcoin Halving 2020: Miner Perspective podcast series, we take a trip down memory lane back to the early days of bitcoin when miners first began competing for network rewards.

“I think the introduction of [Application Specific Integrated Circuits] was a watershed moment in terms of changing the way bitcoin was mined and secured,” said Galen Moore, senior research analyst for CoinDesk. “If you know that a more powerful machine will get you more reward, make your business more profitable, you’ll be looking for the next more powerful machine all the time, knowing that your competitors are doing the same.”

Dave Carlson, who participated as a bitcoin miner in the arms race for more advanced cryptocurrency mining machinery back in 2012 and 2013, admitted that at the time “the Chinese engineering firms and Chinese producers of this technology far surpassed our ability and speed to get something to market.”

However, there was a turning point in 2015 and 2016 when mining operations in China started to subside and coalesce in other regions parts of the world such as North America. More efficient power production, Carlson said, was the primary motivation for this shift.

Leading up to the next bitcoin halving event in May, some bitcoin miners are looking at leveraging what Moore and Carlson describe as “surplus energy” to make operations even more cost-effective. Surplus energy is the run-off, or waste fuel, released by natural gas and hydro power plants that can be repurposed to mine bitcoin for zero cost. This could be a major technological breakthrough for mining if proven to work at a large scale, Carlson said.

For more information about the bitcoin halving, download the free CoinDesk Research explainer report, which features over 30 different charts and additional commentary from mining industry experts.

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