I have read a lot about mining recently and tried some calculators. It seems that the cost of electricity is a key part of calculating profitability? As difficulty increase so will the need for more efficient hardware, e.g. from CPU to GPU to ASIC. There is a claim that bitcoin-mining consumes as much electricity as Ireland?!
Would it be fair to say that the cost of electricy is comparable to the value created by mining, considering how difficult it is to make a profit mining? And if so, the access to cheap electricity would then be the key to profit?
Hi WouldBe HobbyMiner,
Yes, everything you say is absolutely correct. The major recurring cost of mining is indeed electricity. Each modern ASIC consumes nearly as much power as a kettle boiling constantly.
In terms of profit, those with low power and ASIC hardware costs certainly come out ahead. If these companies were profitable at a Bitcoin price in the 100s of USD, you can be assured they are doing just fine with prices in the 5 digits.
Major players are entering the market this year, such as Japan’s GMO corp. who are setting up miners in Scandinavia as well as one of Putin’s advisors (iirc) being behind a big Russian endeavour to setup mining in one of their low cost of power regions. I’ve even seen rumours that the nation of Belarus will dedicate the output of an old nuclear reactor to mining!
China is also clamping down on Bitcoin mining, as it seems their govt. believes too much power is being drawn by these companies. This will force these companies to diversify geographically, which is a win for the resilience of the Bitcoin network in my opinion. Right now, too much mining power is concentrated in China. These Chinese companies are looking at relocating all around the world – but they’re certainly not throwing in the towel and shutting down, as mining remains far too profitable at that level.
So yes, for those with a lot of investment capital, mining can still be a highly profitable endeavour, even though difficulty is increasing at a steady clip.
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