Bitcoin mining was started with a small effort by a few people converting home computers into virtual currencies, which were nearly useless at the time. Fast forward to 2020, and Bitcoin mining (BTC) has grown into a massive industry that is constantly growing and developing alongside Bitcoin itself.
Bitcoin’s network hash rate today is around 129 EH / s and is trading at the same price as Bitcoin, even after it was cut in half in October of this year, cutting the mining reward in half. James Bennett, CEO of cryptocurrency provider ByteTree, told Cointelegraph that this trend is likely to continue: “Investments in Bitcoin network infrastructure are ready. You just have to look at a series of spikes at all in network woes to see how quickly new mining capacity is being added. “Here the mining industry is changing and maturing.
Public companies join
There is a trend that large investors, both companies and individuals, are investing in Bitcoin and other digital assets. This also applies to Bitcoin mining, as public companies, including Bit Digital, registered on the Nasdaq and others, have begun to engage in industry and related activities.
When the profit from Bitcoin mining rises to a level before it halves, it becomes clear why companies and individuals want to invest in Bitcoin mining as an additional stream of income, especially as it has proven that it is completely immune to the problems of the Coronavirus pandemic. And castles are everywhere. Whit Gibbs, Hashr8 podcast host, told Cointelegraph about the case:
“A number of large companies have been mining bitcoins for quite some time now. The most prominent one is loyalty. Not only have they set up mining operations, but they have also been actively advocating for research and education in the industry. Another well-known company with an active interest in mining is Horizon Kinetics.”
Get the capital
With new entrants joining the industry, access to capital is crucial and many digital asset liquidity companies like Blockfills, Nexo, and others are now serving bitcoin miners. This allows miners to expand their businesses and have little room to maneuver when they don’t want to sell bitcoins at a low price.
For example, Blockfills announced in May that it would provide financial solutions to mining companies looking to purchase the next generation of ASIC mining equipment in North America. Since then, Blockfills has provided nearly $ 50 million in financial support to these miners. Neil Van Hoyes, Partner and Director of Blockfills, told Cointelegraph:
“Financial support is an essential feature of any growing asset class. Our goal is to continue to introduce the traditional approaches to our fast-growing sector that fills the blanks and promotes space development. $ 50 million is just the beginning. We have another $ 50-70 million to be completed in the next few months and we expect to achieve 250 million. Another million dollars by May 2021. ”
Additionally, miners were exposed to Bitcoin volatility. Hedging options weren’t available before, and while bitcoin derivatives now allow miners to protect their games, hash derivatives are improving them and providing users with a mining product they can benefit from.
Sam Chwarzynski, CFO at Blockware Solutions and Managing Partner at Blockware Mining, a mining equipment and services company, explained that retail derivatives are still a new product and two variants are becoming popular. There are basic “sky mining” contracts as well as “hard to supply” contracts that allow miners to block some network problems for a specified period of time, usually six to nine weeks. Khvarzynski added:
“For a small premium, Difficulty Hedge allows miners to hedge their production costs in the same way that traditional producers / farmers hedge their production with futures and other derivatives. As Bitcoin mining continues to market, we expect the hemp derivative market to mature as well.”
Governments get involved
Bitcoin’s reputation has changed a lot over time leading governments to take a more relaxed or regulated stance toward the cryptocurrency industry. Countries like Portugal and others have cut taxes on activities like cryptocurrency trading and mining as a way to boost growth. Gibbs told Cointelegraph that, “In addition to self-mining, many countries actively support bitcoin miners through energy subsidies and tax exemptions. Now I think they know it’s important to make sure that as much fragmentation as possible is within their borders.”
Other governments have started investing in bitcoin mining, as Kazakhstan has opened 13 bitcoin mines in the country and four more. However, not all governments have a positive attitude towards cryptocurrencies and mining is still illegal.