The profitability of mining cryptocurrencies has plummeted at the same speed as it did in the previous crisis, that of the pandemic. The volatility in this market is not only in the price, but that instability exists in another aspect, in the process of issuing new tokens. Profits depend on the and the , a now losing combination, although not entirely impossible. One escape route for miners is emigration.
The solution to part of the problem is in the hands of the miners themselves: to get cheaper energy -the price will depend on the market-. And it is necessary to look for alternatives at a time when all bitcoin miners, who use proof of work as a protocol, are underpaid or extremely underpaid, as explained to Julio Moreno, senior analyst at CryptoQuant.
“Electricity is a very important part of the operational costs of mining, something that makes a difference and a reason why you see many miners go hunting for the most competitive prices. As it is a global and flexible industry, you can see statistics of how miners move from one region to another, whenever there are regulatory changes or opportunities to find cheaper energy,” Pierre Samaties, a partner specializing in ‘crypto’ at the strategic consulting firm Roland Berger, tells this medium.
The analysis firm estimates that miners do not find it worthwhile to start up their equipment at the average price of electricity in the world, at 100 dollars per megawatt hour (MWh), but it does compensate them at 30 or 40 dollars. the MWh. For this reason, they usually look for regions with attractive prices on the electricity bill. “It doesn’t make sense to undermine the average price that consumers pay, but it does make sense if agreements are closed with energy companies or if they use their own energy sources,” explains Samaties.
This is what the American electricity and gas company Black Hills Corporation proposes. It offers a specific rate to an industrial client that is dedicated to mining cryptocurrencies, whose name it has not revealed. It is a five-year agreement in which it will provide between 45 and 75 megawatts to said company with a flexible supply blockchain contract, as detailed by the provider in a statement. The Black Hills itself proposed this rate to the local government of Wyoming, which was finally approved. And with it, he now wins his first client in the interruptible mode.
Flexible Supply Blockchain Contract
In addition, the US company has assured that the agreement to provide energy to a mining farm will not affect the price paid by retail consumers, since Black Hills can interrupt the energy load that it provides to this client if there is no . The approach is to sell energy when it is left over and at more competitive prices.
“Energy companies and mining companies can form a beautiful symbiosis. On the one hand, it allows you to take advantage of excess energy and adjust for variations in demand. If you have 30% extra energy that the grid doesn’t need, you can convert that surplus in money,” says Roland Berger’s partner on how the electricity sector can benefit from ‘crypto’ customers.
For the miners, closing specific agreements with energy companies is one option and resorting to green energy, which is one of the cheapest along with nuclear energy, is another. According to the Bitcoin Mining Council report for the first quarter of 2022, 64.6% of the energy used to mine this cryptocurrency is sustainable. “That figure is going to increase because the miners are going to look for the cheapest energy, which is renewable,” says Roland Berger’s partner.
However, it should be remembered that this industry generates significant emissions. With the crisis that these risk assets are going through, energy consumption has dropped to 130 TW/h per year, a figure that, in any case, is equivalent to . At times when cryptocurrency prices are high, emissions generated rise because more miners find it worthwhile to issue tokens.
In the current downtrend of the ‘crypto’ market, what affects miners’ rewards the most is the crash in the price of bitcoin -more than energy prices-, a reason that has caused them to lose more than 70%. of its income in dollars, according to the CryptoQuant analyst.
Moreno calculates that the hashrate, the network’s computing capacity, has fallen 12% since the beginning of June, when Satoshi Nakamoto’s brainchild was worth $28,000. A setback that also shows the disconnection of the miners.
Those that are still active are taking more cryptocurrencies to market, which they put up for sale to offset operating losses, the analyst explains. This phenomenon can also be extended to ethereum, the second ‘crypto’ by capitalization.
Where is the most bitcoin mined?
The Cambridge University bitcoin electricity consumption index shows that China and the United States are the countries that use the most energy, more than half of the total, 21% and 38%, respectively. This index is also taken as a reference for the mining fee of the cryptocurrency. Spain has 0.02%.
Making the is essential for the miners themselves. Only then will they be able to minimize costs and cover their rewards from the volatility of the bitcoin price.
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