Cryptocurrency miners are power-cycling their machines as the rising bitcoin price provides a vital lifeline for cash-strapped businesses.
The value of the token has emerged from its doldrums, surging more than a quarter against the dollar this year, giving owners of huge warehouses of mining servers an incentive to accelerate their use in the fight for more security. is giving Bitcoin.
The average hashrate, or computing power dedicated to mining Bitcoin, climbed to a record 280 exahash (K) operations per second on January 20, according to data from mining information service Hashrate Index. Did.
A surge in activity Sector in tatters After being plagued by high energy costs and a cryptocurrency slump, it may start moving again. Activity levels have more than doubled since their low point in July when the crypto market was hit by a credit crisis.
Miners compete against each other to solve cryptographic puzzles that validate batches of transactions and create new blocks on the blockchain, the ledger of transactions. This makes it a guarantor that Bitcoin transactions can be trusted in systems that bypass third parties such as banks and exchanges. The winner is given new coins.
Many are sitting on a ton of mining equipment and capacity bought with cheap money in early 2021 and early 2022 in hopes of profiting from the coin’s rising price. Prices fell 65% last year, and soaring energy prices have forced many companies to turn off servers to save money. Other companies, such as Core Scientific, could not withstand the pressure and filing for bankruptcy.
“Miner sentiment is better than it used to be,” said Hashrate Index analyst Jalan Mereld. It’s a lifeline.”
The recovery underpins investor optimism for listed companies such as Marathon Digital Holdings, which is up 155% this year, and Hut 8, which is up 134%.
But miners still face a long way from the brink. Powering up a server costs money. The algorithm adjusts the “difficulty” of mining Bitcoin as new computers enter and leave the network so that tokens are mined at regular intervals of about every 10 minutes.
The influx of miners has increased its level. According to BTC.com, losers are expending more energy than ever before for free, as miners now have to make a record 37 trillion hashes or guesses before a block can be verified. increase.
They are also facing pressure from politicians around the world who believe miners’ computers are consuming too much power, depleting local resources and destroying the environment. A person considers the profits they earn as a taxable asset.
The Canadian provinces of British Columbia and Manitoba have banned new connections to the grid for 18 months, and Quebec’s public utility, Hydro-Québec, has submitted a request To redistribute the 270 megawatts of power set aside for mining.
In December, the lower house of Kazakhstan, the world’s third-largest host of mining activity, approved a bill to impose a corporate tax on miners and reduce energy use.
Paraguay, rich in cheap hydropower, has rejected a bill that would limit the tariffs imposed on miners to 15%.
Joe Burnett, analyst at mining advisory firm Blockware Solutions, said: “A few years ago, people were just looking at cheap power, but now it’s more important to consider which political jurisdiction is more favorable and not close our business. I have.”
Miners say they have become unfair targets. The Bitcoin Mining Council, an industry body, estimated in July that just under 60% of global mining energy use is sustainable, while the Cambridge Center for Alternative Finance puts the figure at around 37%. .
“There is a fake environmental argument being waged against the mining industry,” said Samir Taber, chief strategist at Bit Digital, which has operations in New York, Texas, Nebraska and Georgia. Whatever we do, using 100% renewable energy, nothing seems to matter.”
Ercot, the organization that runs the Texas power grid, will allow large energy consumers like Bitcoin miners to cut power use during periods of high demand until it creates a permanent regime to address the shortage. We will start a voluntary reduction program to
However, the pinch may be an unexpected opportunity. Miners with power purchase agreements can sell power back to the grid by fixing the price they pay for the energy. Riot and Hive Blockchain each earned $4.9 million and he $3.1 million in December.
“Reduction is the future of mining,” says Burnett. “If it doesn’t make financial sense to me, you should sell it.” [energy] give it back to someone ”