Cambridge Bitcoin Electricity Consumption Index estimates that mining consumes around 67.29 terawatt-hours per year. In fact, the global electricity consumption rose to an all-time high of 141.25 terawatt-hours for Bitcoin mining.
Many crypto experts believe that crypto mining has the potential to drive more economic growth for any country. And that’s because more mining operations lead to more investment and employment. In 2021, more countries want to leverage economic activities and crypto-mining is at the center of it.
What Exactly Is Bitcoin Mining?
Contrary to naïve misconception, Bitcoin mining doesn’t refer to the Western fantasy that involves dirt and pickaxes. Instead, it is an analogy that points out the mining of digital space. Now, in order to perform Bitcoin mining, it takes high-powered supercomputers to solve complicated computational problems.
In fact, these problems are complicated enough that no average computer or individual can solve them on its own. The objective of Bitcoin mining is to maintain transactions on the ledger. Over the years, Bitcoin miners have become more sophisticated using advanced machinery.
Bitcoin Mining Key Challenges
Here’s an overview of operational challenges Bitcoin mining continues to face:
Lack of Capital
Bitcoin mining requires significant capital and access to suitable investments can hit the fourth wall. Sourcing ideal locations, suppliers, and energy to keep minimum costs is one of the main challenges of Bitcoin mining. Usually, the cost spirals out of control in long-term contracts and innovation cycles.
Without hardware, mining operations wouldn’t be fast and up-to-date. Since technologies are always changing, it has become imperative for Bitcoin miners to opt for the most efficient, profitable, cost-effective, and fast technology.
Besides, the fastest chips in the market have a short supply that compromises innovation. When something like Bitamain ASIC shortage occurs, miners struggle to get their hands on the newest hardware. Hardware inaccessibility boils down to how miners anticipate changes and make advances.
Price volatility refers to a dramatic Bitcoin price fluctuation that can happen with a single Facebook post or a tweet. The challenge is to maintain balanced profitability while the price drops. Typically, price drops occur when miners start to leave the crypto sector for good. It requires a lot of efficiency and patience to get through significant price drops and wait until the next Bitcoin price jump.
Lack of Talent and Energy
There is no generalized formula as to how Bitcoin miners should run and optimize operations. And this is where access to top-tier talent and sufficient energy creates issues. Without technical expertise, Bitcoin mining is a serious challenge. It is the main reason most platforms are open-source to train new talent.
The curse of Bitcoin mining is the constant need for energy to ensure smooth operations. But lack of energy often adds up a lot of expenses that turn Bitcoin mining not so profitable. In fact, using old school energy sources is more common than you realize. But the miners that find cheap energy sources are able to make Bitcoin mining a profitable endeavor.
Each year, the objective of Bitcoin mining is to accelerate overall operations. But the fact remains that it requires thorough understanding, skill, and flexibility to perform Bitcoin mining. In 2021, Bitcoin mining continues to play an integral role in revolutionizing technology, exchange value, and money.
It is hard to separate Bitcoin mining from electricity costs. The future outlook should revolve around renewable energy sources like solar panels to make Bitcoin mining more cost-effective. Bitcoin mining is still evolving and more awareness will make it easier to address its key challenges.