Image credit: Marco Verch, CC BY 2.0
The current situation in the cryptocurrency mining market is quite complicated. Reports project its value to grow from $610.91 million in 2016 to $38.38 billion by 2025 (more than 29% annual growth). According to current statistics, miners hold between 20 and 30 percent of all Bitcoins.
Numbers show that there is some room for new players and those who want to earn on mining. However, with growing competition and the complexity of popular coins, mining profits of private miners are shrinking. They are forced to constantly work on current costs — say by relocating to locations with cheap real-estate and low electricity costs (such as in already famous Springfield, Missouri), or by joining mining pools.
Entering the mining market in 2018 is not an easy task. Today we will examine current opportunities and the best strategies for doing so.
Private mining: a shrinking pie
To mine popular cryptocurrencies like Bitcoin you will have to build your own infrastructure of powerful hardware, or so-called ASIC devices. Prices of such devices can vary from several hundred to thousands of dollars, depending on technical characteristics. This hardware will also need electricity for its work and cooling. According to Crescent Electric Supply Company’s estimates, the electricity costs for mining a single Bitcoin can cost between $3,224 to more than $9,000.
To compete with companies working in this market, private miners have to constantly fight for cost-efficiency. They are constantly searching for ways to reduce costs. While you can’t find hardware for cheaper than the market price, you can still find a place where it will be cheaper to rent space for its placement and where electricity is cheaper than in big cities.
Not long ago, a Politico media outlet published a story about a crypto boom happening in the Mid-Columbia Basin located three hours east of Seattle. The area is famous for having the nation’s cheapest electric power which is produced by hydroelectric dams on the Columbia River. As a result, more and more miners are heading to this region to set up their farms and try to earn something — just as in the age of the gold rush.
This constant fight for survival makes it harder for small private miners to focus on development. They rarely have resources to diversify their efforts — statistics show that while 27% of large miners engage in three or more value chain activities, small miners can only handle one.
The Bitcoin mining difficulty has continued to increase steadily over the past few months:
Another graph shows this huge growth (700% in 2017) in recent times:
The difficulty of mining other popular cryptocoins such as Ethereum or Litecoin is also growing steadily. The number of players in the market is so high that earning anything at all is hard. But moving from building your own farm to cloud mining rarely helps, as the contracts for such mining often have restrictions that limit potential profits (such as high commission on money withdrawals).
In contrast to private mining, the industrial segment showed good stats recently. However, this niche also has its own problems.
What’s wrong with industrial mining?
Growing expenses create a situation where only big companies can earn on mining. There are a number of reports that are finding that Bitcoin mining alone consumes more energy than 159 countries, which is about 0.13 percent of total global electricity consumption.
The complexity of mining is also growing (as shown above), which makes an entry into this industry more expensive. As a result, industrial mining companies flourish. According to statistics, miners hold between 20 and 30 percent of all Bitcoins, and a huge chunk is in the hands of corporations. Bitfury alone has mined more than 1 million Bitcoins according to what analysts have told Bloomberg.
The trend is that big miners are getting bigger. For example, an industry leader, the Bitmain company, is expanding worldwide adding new facilities to its big Bitcoin-mining facilities in China. Bitfury is planning to produce portable server farms and open their own new farms in different regions.
As a result, the market will become more centralized. There are even concerns that soon big miners will control enough cryptocurrency hash rate to perform a so-called 51-percent attack and push the development of the blockchain in the needed direction.
It is clear that the current format of the cryptocurrency mining market is far from optimal. Both private and industrial mining have their own problems and flaws. This means that there is room for improvement — and this is something the team behind the Atomine project is working on right now.
The future of mining
Our goal is to find new funding opportunities both for private and industrial miners. The current situation leaves little chance for private miners to earn anything. But this could be fixed by introducing new approaches to fund such activities. For example, private miners could use crowdfunding to invest in the construction of mining facilities and receive a share in the revenue of a company that will run this infrastructure.
This is what we are offering during the Atomine ICO — token holders will have an opportunity to receive a share of the business’ total profit and affect management decisions.
For industrial mining, another way for improvement is finding cheaper energy sources. One such source is atomic energy. Yes, we have managed to sign an agreement with a Russian state-owned corporation managing nuclear power plants. This has given us access to a stable and almost inexhaustible source of energy, which does not depend on climate, weather, and other natural factors.
Kalininskaya nuclear power plant — one of the facilities available for mining purposes according to the signed contract
We’ve signed a long-term contract for the provision of a power supply at a tariff of ~$0.038 per 1 kWh. Under the terms of the agreement, Atomine can already use the allocated capacity up to 25 mW with the possibility of increasing to 50 mW at several sites.
As a result, the cost of mining can be significantly reduced, making it a real opportunity for new players to take their piece of the mining pie and fight industrial market centralization.