How Bitcoin Mining Evolved To Be the Most Profitable Business in the World
The human race has always ascribed high value to specific assets.
Some go out of fashion in a few generations while others endure. Precious metals naturally come to mind because they have a track record dating millennia. The emergence of these valuable commodities and assets has often brought great euphoria.
California’s gold rush in the mid-19th century and the oil drilling boom that came in the subsequent decades are testament to this desire for seizing these pivotal moments.
In the past ten years, one asset has evoked such sentiment in financial markets. Bitcoin’s unprecedented rise will be a tale for posterity. Consequently, a fringe asset has now become the hottest thing in the investment scene.
This unorthodox industry is now the most profitable in the world. That turnaround is remarkable, considering the sector rose from obscurity with no government support.
Bitcoin Miners Living In the Golden Era
Gerson Martinez, a former derivatives trader and market maker for Morgan Stanley, believes that we are in the golden age for Bitcoin mining.
Speaking to Yahoo News, he outlined his plans to incorporate a company called CLM21 Ventures to build the first geothermal “pilot” mining operation in El Salvador.
Renewable energy is an emerging theme in the mining sector, with VBit Inc being one of the pioneers. Mining will be more challenging for his company because of the warmer climatic conditions in El Salvador.
At press time, the month of April 2021 still represents the peak for Bitcoin prices. It was the culmination of several months of an impressive rally that saw Bitcoin break record after record. Prices briefly topped $60,000 before retracing somewhat due to concerns about China’s crackdown on the asset and Tesla pulling a plug on accepting Bitcoin payments.
Miners are not only breaking records in the Bitcoin they mine but also the transaction fees they earn. In Q2 2021, miners collectively increased transaction fees by 750 percent year-to-year, with $416.6 million paid out in Q2 2021, which is a considerable improvement from the 48.5 million paid out in the same period last year.
Mining has reached these heights because computers do all the work. The process requires setup and regular maintenance, but the rest is up to specialized equipment.
Top cryptocurrencies like Bitcoin generated more income through transaction fees than some of the World’s more valuable companies. For an industry that emerged as a direct challenge to the all-powerful financial system, those margins are astonishing. It is no surprise that institutions are seeking to acquire or mine cryptocurrencies, which was sporadic, at best, two years ago.
Bitcoin Mining Figures through the Roof In 2021
The numbers are otherworldly. Even when prices were in the low $30k, miners still had much to work with. Before the rally in 2020, Bitcoin had never crossed the $20k. Therefore, even when Bitcoin looked like it was stuttering, it was still 50 percent bigger than it ever was.
In April, Bitcoin generated nearly $3 billion for miners!
These are numbers that only the very top multinational corporations report. Miners collectively help ensure that the network is secure and prevent double-spend. This role is not for pure philosophical pursuit because miners get handsome rewards for their efforts.
Mining has its costs, primarily high consumption of power and cooling costs for mining equipment. Bitcoin mining can only be profitable when prices are reasonable.
Therefore, $60k was like having a double injection of Nitrous fuel into your engine. Miners collectively made billions, with large-scale institutional miners making tens or hundreds of millions.
Statistics Don’t Lie
The best way to illustrate Bitcoin’s rise is through the numbers. Cryptocurrency started from nothing. Yes, one person (or more like one person who recognized the need to revolutionize finance) decided to implement a vision of decentralized finance.
Bitcoin launched with little fanfare, and it was close to two years before the first significant transaction took place.
On May 22, 2010, Laszlo Hanyecz bought two pizzas using ten thousand Bitcoin. This transaction is today celebrated as Bitcoin Pizza Day and heralded an era of Bitcoin commerce.
Hanyecz does not regret the amount he spent on those pizzas. After all, he became somewhat of a celebrity in the years since. Additionally, he had no way of knowing that 10,000 Bitcoin today is worth approximately $3 billion depending on spot rates.
Therefore, a lot has happened in the intervening time.
Bitcoin has risen by a percentage in the millions since its infancy years. Its appreciation since mid-2020 is close to 400 percent. Such margins are absurd by average business standards and present an opportunity not seen since phenomena like the gold rush.
Bitcoin Mining Is Not a Static Activity
One might be forgiven for thinking that Bitcoin mining viability has everything to do with prices.
It is a lot more complicated than that. See, Bitcoin was profitable to miners even when prices were below $1,000. It was certainly more beneficial to solo miners. What has changed?
One word: competition.
Bitcoin mining follows the supply-demand rules of commerce. There is a fixed quantity (21 Million Bitcoin) and an ever-larger pool of miners. As Bitcoin prices continued to crush records, more miners got onboard.
Therefore, more miners battling for increasingly fewer resources means the difficulty of Bitcoin gradually went up. There are occasional pitfalls, but the general rule is that the strongest miners survive.
Along the way, Bitcoin mining equipment for ever more specialized. PC mining soon became a bygone era as specialized Application-Specific Integrated circuits took over.
That said, the competition also has geographical dynamics. In June 2021, China decided to implement a nationwide crackdown on Bitcoin miners. This move obliterated almost half of global mining and resulted in a mining difficulty plunge unseen for years.
Miners outside that jurisdiction saw a boom. With the same equipment, they were making considerably more. Accordingly, miners in North America, Europe, and other Asian countries seized the opportunity to ramp up operations. The U.S. could become the single biggest mining nation in the World now that China will cut more than 90 percent of its output.
The quality of equipment also plays a role. Newer equipment has a significantly higher processing power and can generate more. The significant decline in network hash rate and mining difficulty since June has made some outdated equipment viable. However, this is only going to last for a short while.
VBit Mining Saw the Potential before Many Others
It is easy to say you saw something coming.
If you have the track record to back it up, the credibility is there.
VBit Technologies has a team that believes in the value proposition of Bitcoin. Additionally, we made an early call to take our mining operation green. Our data centers in Colorado and Alberta, Canada, utilize cheap renewable energy and natural cooling.
Electricity costs are a fundamental variable in the viability of Bitcoin mining operations. The nature of this activity is that it uses electricity at a high clip. Mining at home is possible but unlikely to be profitable.
Accordingly, we provide hosting facilities with the optimum conditions. The conditions can vastly improve the viability of a Bitcoin mining enterprise. Our website offers an array of options for prospective miners looking for ways to get into Bitcoin mining.
Visit VBit Mining Shop to learn more about Bitcoin mining!