I used to wonder, why don’t miners HODL, this was one of those thoughts that clouded my mind when I had the dream of being a bitcoin miner. Sometimes when trying to venture into an investment or a business, instead of buying the product second hand and waiting for it to increase in value, why not get it from the source directly. Bitcoin and Ethereum are the top 2 cryptocurrencies that work on the proof of work mechanism. This means that you have to get a mining machine, complex super computer that runs on electricity.
It sounded like a great idea to me, I wondered, why haven’t I thought of this idea before? It felt like the perfect idea to buy a mining machine, mine bitcoin and sell it or HODL it, depending on what you choose to do with your Bitcoin. Mining bitcoin is not as easy as I thought it was, it doesn’t just involve buying a mining machine, plugging it to a wall socket and you are good to go.
Energy Consumption
The energy required by these machines to mine bitcoin is really high. Except you produce your own energy yourself, like getting electricity from solar panels, wind turbines or get electricity for free, but if you are mining bitcoin and you are paying for the electricity, you will feel the electricity Bill. Oh!! I forgot to talk about the price for buying a bitcoin machine.
The time I wanted to buy a bitcoin mining machine in 2020 the price was about $2,300. There are different mining machines and hash power, and these differences come with different prices. Some bitcoin mining machines don’t even give you up to $1/Day earning using them. So you have to get higher Hash power mining machines to earn higher. This is due to the competition in blockchain validation between other miners.
To get full mining optimization, your mining machine needs to be on constant power supply, while also being on constant power supply, they get heated up so you have to provide a cooling system for them to avoid break down. Living in Nigeria, constant power supply is not guaranteed, I couldn’t afford to buy the mining machine and provide constant power supply. According to my calculations, I will be mining bitcoin at a big loss. Bitcoin was $4,000 then.
This was 2 years ago, bitcoin rose from $4,000 to $69k in a year, most Bitcoin miners must have found it more profitable mining because it was high and it could pay for electricity and still let them have some extra profits. But then, the competition grew higher and they needed more updated hardware to earn higher and this means more energy consumption.
The Drop In Price Might Just Help Make The Climate Better
Remember when Elon Musk stopped the use of bitcoin to buy Tesla because he wanted greener mining of bitcoin. Well, lots of people use the regular ways of producing electricity to mine bitcoin which is not good for the environment. But using a greener way, which is renewable and not bad for the environment is the best way to mine bitcoin. But I don’t think it’s cheap to build, might be renewable and sustainable but not cheap to build. These ways include solar energy, wind energy through turbines or using energies gotten from factory plants that was supposed to get wasted.
With the rate at which the price of bitcoin is dipping, more miners are beginning to quit mining and look for a cleaner and cheaper source of electricity since it’s costing them more to mine. This will hopefully help the environment.
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