Eco-friendly Bitcoin mining is gaining popularity offering lucrative post-halving opportunities.
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The popularity of cryptocurrencies, such as Bitcoin, presented challenges to the energy sector and raised concerns about environmental sustainability due to hight energy consumption needed for mining. The technology underlying virtual currencies is blockchain - a digital distributed ledger that enables to agree on the current ownership and distribution of digital assets. For Bitcoin, new blocks are added to the blockchain through a Proof-of-Work (PoW) algorithm.
Proof-of-Work mining requires energy to operate the devices which are performing the cryptographic calculations. The power requirement for Bitcoin mining has increased significantly within last 5 years. The Bitcoin network is designed to cut the number of Bitcoins rewarded to miners by half approximately every 4 years. The event is called halving. The next Bitcoin halving is expected to happen on May 12, 2020. Recent research by CoinShares reported correlation between the hash rate, the Bitcoin (BTC) price as well as other macro trends relating to the mining industry.
The technology used by miners has advanced over time. Early miners were able to earn Bitcoin relatively easily with a personal laptop or desktop computer. As more sophisticated equipment has been adopted, miners have also moved away from working individually to working in larger groups.“Mining pools” were created including for the purpose of coping with the constantly increasing cost.
In order to remain profitable, miners are seeking the new solutions in renewable energy sources for mining cryptocurrency today.
Oil and Gas
Bitcoin mining suggests a solution for excess gas eminence from oil mining fields. Experts predict oil and gas sector dominating Bitcoin mining ecosystem because setting up mining operations in containers at the fields, there is no need to pipe or transport excess gas. The operations simply turn the surplus gas or oil into electricity to power the mining rigs. It’s also predicted that oil and gas producers that consider turning to Bitcoin mining will take significant advantage in reducing wasted energy and operation costs in comparison to their competitors.
Green mining and renewable energy sources has also been a hot topic discussed in crypto circles. The Bitcoin network SHA-256 hash rate is climbing exponentially, pushing operators toward greener energy solutions. It’s said that currently it’s more profitable to mine Bitcoin over selling the cover generated with solar panels to the grid. Solar farming, in general, can be profitable for those simply selling to the grid but it depends on the land’s rental costs, geographic location, and the size of the solar installation.
The research by Tam Hunt, the founder of Community Renewable Solutions, claims that the “solar-plus-Bitcoin operation pays for itself in about two years” and after the return-on-investment (RoI) is completed “there is minimal risk remaining.” This is because if the price of bitcoin suddenly crashed below profitable levels, the operation has a backup plan of going back to selling energy to the grid.
Right now, certain miners in China and Canada are using hydroelectric energy to help offset electric costs and other mining operators use low-cost geothermal power in Iceland as well. The majority of miners are still mainly based in regions using cheap hydroelectric power, according to CoinShares.
“Miners need to first and foremost survive in a highly competitive industry so they search out the cheapest energy. It just so happens that the cheapest energy on the planet is renewables.” - Christopher Bendiksen, the head of research at CoinShares.
According to the research group, the power of water is and most likely will remain the most popular and effective solution for Bitcoin mining.
Proof of Nature
Eco-friendliness of crypto mining is also seen is new approaches to validation algorithms. The green paper released by the San Francisco-based tech firm Chia Network introduced Proof-of-Space and Proof-of-Time consensus mechanisms. Chia proposed to “farm” rather than mine. Using the verifiable delay function described as Proof-of-Time Chia’s blockchain takes a shot at solving both Bitcoin’s sustainability and centralization problems.
Please note, that the article is a part of BTCMEX Blog, the views and opinions expressed here are the contributing author’s only, and do not necessarily represent the views of the company.
Julia Bulakh for BTCMEX