How Is the Future Shaping up for Bitcoin Mining?
It is believed that a programmer, or a group of programmers, under the assumed name Satoshi Nakamoto discovered bitcoins in 2009. Bitcoins are a type of cryptocurrency. Cryptocurrency, on the other hand, is an online, decentralized currency with no physical token. In other words, bitcoins are intangible.
The very first bitcoin software was made available to the public around the same time bitcoins were discovered. That was when bitcoin mining started, and as you probably already know, bitcoin mining is the process through which nodes verify bitcoin transactions by solving an encryption or computer puzzle and recording these on the blockchain network. New bitcoins are likewise minted through bitcoin mining. Incidentally, bitcoin is one of the few ways you can acquire bitcoins aside from buying and trading.
Bitcoin was first traded the following year after its discovery. Do you know how much bitcoin was traded and what it was traded for? Laszlo Hanyecz traded 10,000 bitcoins for two boxes of pizza. Little did he know that three years into the future, by 2013, one bitcoin will be valued at $1,000! And while bitcoins suffered a dramatic crash shortly after, bitcoin prices have since gone up. Price per bitcoin currently stands close to $35,000, so Hanyecz is probably berating himself right now for enjoying his pizza dinner 11 years ago.
It’s evident that the future is looking bright, at least where bitcoin valuation is concerned. Hence, it’s not surprising that more and more people are trying to dip their hands into bitcoin mining. These people are probably anticipating how high bitcoin prices will go up in the future, so they want to stock up their e-wallets.
Bitcoin Mining at a Glance
There are two ways you can mine bitcoins. The first is by investing in a hardware mining system, and the second is by signing up for an account with a bitcoin mining service provider. With the first option, you will buy your computer hardware, mining software, cooling system, and other peripherals to set up a mining rig. In contrast, you will not be shelling out a considerable amount of money for the second option. You only need to pay for the registration/sign-up fee, and since the mining rigs of such providers are already up and running, you can start mining right away.
Regardless of the method you choose, bitcoin mining can be a profitable undertaking. However, it is common knowledge that there is only a limited supply of bitcoins. It has been established that there are and will ever be only 21 million bitcoins. That was a significant stipulation in the bitcoins ecosystem when it was founded. Hence, each time a new bitcoin is obtained after a complicated puzzle is solved, the encryption algorithm becomes even more complicated, requiring more computing power to solve it. Such is set up that way to limit the number of bitcoins in circulation.
Now, a question deserves to be asked. With the limited supply of bitcoins, what does the future look like for bitcoin mining?
Peering into the Future of Bitcoin Mining
Thus far, we have established three critical truths about bitcoins and bitcoin mining:
- Both bitcoin cloud and hardware mining require using computing rigs that include expensive hardware.
- Bitcoins are acquired through mining as rewards for verifying transactions (by solving complex puzzles) and adding them to the blockchain network.
- The encryption algorithm becomes more complicated every time a node solves a puzzle; thus, the mining process becomes more difficult. That is necessary to limit the number of bitcoins in circulation to 21 million (in its lifetime).
It is impossible not to wonder whether bitcoin mining is still profitable, bearing in mind that its future hinges on its profitability.
If you’re mining bitcoins using a hardware system you set up yourself, then you will have to factor in four things to determine whether bitcoin mining will be profitable for you:
- How much will the cost of your electric consumption be (powering your hardware system is no joke!)?
- How much will your overall investment in your hardware mining system cost?
- How complicated will the entire process be as you progress (remember, the degree of difficulty changes as more miners join in)?
- What will the price of bitcoins ultimately be in comparison to traditional currency?
If you’re an analytical thinker, you’ll see that you’re most likely to gain more profits if you go the cloud mining route. Doing so will put you toe-to-toe with other miners who have massive computing power, and what’s even better is you don’t have to factor in electricity costs.
Nevertheless, even after we’ve tabled the issue of bitcoin mining’s profitability, the question still looms: what does the future look like for bitcoin mining? It is worth ample consideration given the looming demise of bitcoins.
As mentioned earlier, the source code of bitcoins stipulates that it should have a finite supply. On average, bitcoins are brought into the supply at a fixed rate of one block per ten minutes. Moreover, the number of bitcoins released into the previously mentioned blocks goes down by 50% every four years. From a high of 50 bitcoins rewarded to miners when they were first launched, the number has gone down to 6.25 bitcoins.
As of November 2020, around 18.5 million bitcoins have already been mined since 2009. So that means with less than three million bitcoins waiting to be brought into circulation, miners are living in the final stages of bitcoin mining. Once the magic figure of 21 million is reached, the bitcoin supply will be exhausted. Where will that leave bitcoin miners?
However, miners should expect the rewards to still drop by 50% every four years. By 2140, there may not be much left to reward bitcoin miners. Still, that’s 120 years from now, give or take, and protocols for the bitcoin protocol may change between now and then.
Given the massive technological jump that the bitcoin mining industry experienced in the last two to three years, mining outputs have transitioned from short-term, quick profit pursuit to a slower and steadier enterprise. Those who operate efficiently are likely to yield high profits in an extended period. And given the potential for further technological development, the trend is expected to continue, thereby painting a bright future for bitcoin mining and miners alike.
