Back in the 00s, powerful video cards were reserved for one group of people – gamers, who needed them to play the latest titles. Companies like Nvidia and AMD were no different – they produced their most advanced chips, which allowed you to immerse yourself in realistic soundscapes and stunning 3D graphics. Ten years have passed since then – the prices of video cards have gone through the roof, but why? There is one reason – Bitcoin.
What made the price of graphic cards so expensive
The rise of blockchain technology has made cryptocurrency mining more profitable than ever before. As crypto fever spread, the demand for graphic cards soared, leading to an inflated market price of graphics cards.
But what is the correlation between blockchain and video cards? It is simple – for blockchain technology to work, there should be computing power that backs the whole process. And this power comes from video cards.
Bitcoin mining – what is it and how it works
When you mine bitcoins, your computer—or rather, the computer that is mining for you—solves complicated math problems. Bitcoin mining is the process of verifying and adding transaction records to the public ledger, known as the blockchain — and then receiving a small reward in Bitcoin for your work. This process is necessary to make sure that each user has not only an accurate copy of the ledger but also that all transactions are verified and agreed upon by all users. This prevents hackers from spending any Bitcoins twice and ensures that no new Bitcoins are created, thereby maintaining the currency’s integrity.
Is Bitcoin mining still profitable?
While some argue that crypto mining has passed its glory days, we see examples of many people that keep making money from it.
How exactly did Bitcoin miners make a whole lot of money – The First Wave
With the birth of the first cryptocurrency, people with a passion for computing and an interest in money began to find their way into the world of digital currency. These early adopters wanted to create a community that shared their ideas and beliefs — and they wanted to reap the financial benefits as well. Miners held on to their rewards for long periods before selling at a high profit. And indeed, many of those early adopters became millionaires overnight, once the Bitcoin (and the other cryptos) peaked in 2017.
The sharks smelled blood – The Second Wave
Soon after its release, Bitcoin began to skyrocket in value. Investors poured money into mining equipment, hoping to cash in on the new, digital gold rush. As soon as the first wave of entrepreneurs realized that it was possible to make money off of Bitcoin, they invested their time, effort, and money into powerful machines. Mining equipment has since become an integral part of the cryptocurrency ecosystem, supporting all services surrounding Bitcoin.
The more Bitcoins are made, the harder it is
While small miners were waiting for Bitcoin price to rise in order to cash out, entrepreneurs didn’t waste time and invested more and more into machines. As more people join the mining process (which requires powerful computers), the hash rate increases. The algorithm does this to challenge miners with increasingly complex problems, which means they need to buy more powerful computers to solve them. It is a measure to control the creation of new coins and protect Bitcoin users from cyberattacks.
As the cost to mine Bitcoin increases, it’s becoming unprofitable for everyday people to mine cryptocurrency. Because mining requires electricity, it’s also an expensive investment. In countries that have cheaper power, it may be profitable, but in most places of the world, it’s not. You’d have to spend a significant amount of money on the equipment and the upkeep of your computer just to break even. The good news is that the cryptocurrency market offers many coins which can still be mined easily and give ordinary people a good ROI.
Developing countries – Bitcoin mining paradise
This shouldn’t come as a surprise, but it is interesting to note that some of the cheapest electric bills in the world are found in some of the poorest countries in the world. However, these prices are far from stable due to political unrest and currency fluctuations. Countries like Iran and The Russian Federation have become a haven for crypto miners who can make an incredible amount of money while only paying pennies for their energy usage. There is an interesting case in Abkhazia (the capital of South Ossetia, part of the Russian Federation). Bitcoin miners are guilty of regular blackouts in the city.
Bitcoin Cash – is it an alternative
Bitcoin mining has become less profitable due to increased competition. Mining Bitcoins now requires more computing power and electricity, which means big businesses are the only ones who can afford it. Smaller miners have moved over to Bitcoin Cash, which is easier to mine and is increasing in popularity. More and more people buy Bitcoin cash, as the transactions with BCH are cheaper than BTC, and at the same time, it still has a lot of room for growth.
Bitcoin mining future
Almost 90% of Bitcoins have already been mined. And as we learned, the more are mined, the harder it becomes to mine additional ones. While it is still profitable for some, there’s no need to start mining if you’re a newbie who wants to get in early. It won’t be worth the time and investment.
What will happen next
Bitcoin has a finite supply. After the 21st million are mined, no more will ever be produced. Some people are hesitant about this limit, but it’s one of its greatest strengths. As Bitcoin becomes more valuable, the incentive to hoard the currency will increase within the community. This demand will spur innovations and inspire developers to create new applications to help Bitcoin gain mainstream acceptance as a currency and asset class.
Even though Bitcoin mining is becoming less lucrative with every passing day, this is not the end of cryptocurrency! A growing number of cryptocurrencies are hitting the market, creating a whole new market for miners to explore. When Bitcoin mining ceases to be profitable, these alternative coins will allow miners to continue working at their machines.