Bitcoin mining has taken the world, particularly the cryptocurrency world by a storm. The global attention the currency is currently receiving has led to many investors turning to bitcoin mining and more research and analysis to be conducted. Well, this is a good thing as far as we can tell, and it gives bitcoin a promising future for sectors such as logistics and banking. However, many people are turning to bitcoin mining without a proper understanding of how things run. For instance, bitcoin mining or cryptocurrency mining requires a significant amount of computing power, which means that you need to seriously consider power efficiency when mining. Otherwise, your mining profits may end up being munched by your power bills.
In the early days of mining, things were smoother and more straightforward, and many people could make huge profits just mining from standard computers. Today, a lot has changed as mining has become more complicated for average machines to handle. A bitcoin miner now needs more specialized hardware with dominant computing power, stable internet connection, and a reliable source of electricity for efficient mining. If your equipment is not power-efficient, you may suffer shutdowns or high energy bills, which can easily equal your profits. Therefore, when purchasing mining hardware, you need to focus on buying a model that maximizes your mining profits.
Why you should care about energy consumption
As more people join the cryptocurrency industry, the mining difficulty, as well as the need for power efficiency increases. Bitcoin specialists and data consultants have a mutual opinion that the amount of energy consumed during mining is worrying for any bitcoin miner aiming to make good profits from the venture. A single bitcoin transaction consumes about 300 kWh and the rate at which new miners are joining the industry; this is only going to get worse in the coming years as the level of difficulty increases. Here is the reason.
Higher energy consumption only leads to the development of more powerful, super-efficient tools to handle complex algorithms. In simple terms, it creates a do or die situation where only the strong wins the battle. The rising difficulty is a significant problem that affects all miners from prominent veterans to small scale miners and wannabes. For instance, if your bitcoin miner can’t cope up with the growing difficulty, then it is rendered obsolete. That means you need to get better performing hardware to mine efficiently. With the hopes of better bitcoin prices in the future, you buy another machine which is more powerful but is not power-efficient, you end up making more significant losses in the long run. Such situations happen when a miner has little or no experience in bitcoin mining. Large scale miners who host multiple bitcoin miners also face the sword of high energy bills as their hardware requires vast amounts of power to run the miners. So, it becomes extremely important for every bitcoin miner to observe their energy consumption.
How to counter energy consumption when mining
Financial experts say that for you to make money, you have to use money. That means you should have starting capital if you decide to mine cryptocurrency. While your primary focus should be tools, internet, and power, there are other considerations to make to ensure that you stay low on energy bills. One of those steps includes skipping or moving away from proof of work (PoW) validation. While it’s more rewarding, PoW takes a toll on power as it uses large amounts of computational power to solve complex mathematical problems as well as validating blockchain. Miners are now turning to proof of stake and proof of authority as alternative ways of PoW as they are significantly less power-intensive than PoW. Proof of stake involves offering people mining privileges that correlates with how many currency coins they have. Participants have to surrender their cryptocurrency, which is held in an escrow account. Poof of authority then allows the selected number of miners–typically less than 25 people to validate blockchain transactions. According to the consensus of everybody who is able to access the blockchain, these individuals are considered trustworthy. This type of consensus method is most prevalent in private blockchains.
Another culprit that consumes energy is blockchain. Everything is with regards to how blockchain operates. However, part and parcel of reducing blockchain energy consumption requires an entirely different approach. Developers have to go back to the drawing board and create blockchains that work slightly differently from the current blockchain that uses a lot of energy. This route is probably the best way to cut energy costs. The new blockchains are expected to be speedy in performing thousands of transactions every second. The current blockchains only handle fewer than 20 transactions at a time. It’s a good thing that researchers have recognized the need to regulate the blockchain energy problem. These blockchains will likely take over and become the new norm.
As we scratch our heads to figure out how to cut energy consumption, we also need to focus on sustainable ways to mine cryptocurrency. The present bitcoin miners come with large computing systems that are responsible for the high power demands. Bitcoin miners in countries with cheap electricity; however, don’t feel the pinch. These are countries that have invested in renewable forms of energy like hydro, wind, and solar. Countries that depend on coal may not be in a position to provide sustainable energy when massive energy-intensive proof of work methods are being used.
Bitcoin mining is quickly becoming a survival for the fittest kind of game, where a miner can only win bitcoins if they manage to make the other miners lose. While the energy consumption in the cryptocurrency industry remains unknown, miners have an enormous task of making sure they use power-efficient hardware in order to make profits. Energy-efficient alternatives such as lighting networks and proof of stake, which are still in the stages of development, will be highly beneficial once developed. For now, the war is still on, and only the large-scale miners with more power-efficient hardware are winning.