Bitcoin Hashrate Reaches All-Time High
But China’s mining practices threaten climate targets
Crypto platforms keep seeing a growing popularity. As Bitcoin hashrate reaches an all-time high, mining practices and hardware supply companies struggle to keep up— demanding more sustainable support systems.
Bitcoin, and a number of other cryptos, have been virtually impossible to ignore this year. As markets began to surge in Q4 of 2020, the entire globe looked toward blockchain technologies and digital currencies on their journey to the top of the investment landscape. Speculations ran wild— with opposing views and wild predictions covering seemingly every corner of possibility, from bullish outlooks suggesting crypto could hit up to $500K by the end of this year to the doomsayers suggesting the bubble was just about to burst.
However, crypto, it seems, has instead decided to stabilize— wedging itself nicely into the portfolios of retail and institutional investors alike, with each staking their trust into a favoured crypto platform and eyeing any new news hungrily.
The coin has taken over the imaginations and conversations of those in the environmental sector, energy industry, and the IT crowd as well. With strong themes relating directly to each of their respective interests. Mainly focused on how Bitcoin is being mined and how it will be mined in the future.
Hashrate at an All-Time High
Bitcoin’s hashrate— or its measure of shared computation power across the Bitcoin network— has hit an all-time high, ripping through previous heights seen to date. Crushing through a whopping 179.4 exhales per second, nearly seven times the size of the hashrate seen in 2017, a year that heralded the first “Bitcoin Boom”. While this is a good sign for Bitcoin users, as it can suggest that more people (investors and miners alike) are engaging with Bitcoin’s network. But the surge coincides with a precarious time in related markets.
ASICs, or Application-Specific Integrated Circuits, are the hardware behind what runs much of the Bitcoin networks mining processes. These specialized semiconductor microchips are in high demand, not only for the Bitcoin mining community, as a shortage rocks the entire consumer sector, from cars to mobile phones and, yes, to Bitcoin mining.
Nearly all electronic devices in the world, those that will be built and those that have been, use these microchips. At the beginning of the coronavirus pandemic, supply and manufacturing chain disruptions caused a shortage throughout the market, which has become a crisis when measured against the increasing demand for all things digital.
A crisis felt even by multi-trillion-dollar companies like Ford and Apple, as delays in product launches have stalled from weeks to months. To the point wherein the Bitcoin mining world, computer hardware circa 2014 is even considered a profitable rig— a thought that would have been laughable just over a year ago.
But this upset in the supply and demand paradigm has turned out favourable for many miners. They are once again able to utilize what would typically be considered outmoded systems—allowing the miners that have survived the shortage to be running at an estimated 85% and above mining margin.
Where is Bitcoin Mined?
Despite this new window of opportunity for miners that would have been otherwise outperformed, most Bitcoin mining in the world is still performed in China. With the country supplying nearly 80% of the global Bitcoin hashrate. With cooler ambient temperatures, access to cheap energy, and a direct line to the biggest tech manufacturers on the planet, China is ideal for mining Bitcoin.
This easily explains why the country hosts several of the world’s largest mining farms, behemoth warehouses fitted with row upon row of ‘mining rigs’, mini, caseless computers that only a true IT geek would recognize. They are situated between mountains of snaking cables and floor space that rivals even the biggest Home Depot.
Because of the sheer amount of energy these computers take to run, alongside the heat generated from their fevered pace, China has recently been under fire for the possibility that this global (literal) powerhouse could be undermining the nations climate goals.
Mainly because an estimated 40% of all the country’s mines are powered by coal. A non-renewable, carbon-spewing antiquity that has been hotly contested as a terrible, albeit cheap, power source. A study published in Nature estimated that China’s Bitcoin mining rigs could potentially generate a debilitating 130.5 million metric tons of carbon emissions by 2024, an amount that rivals that of some of the Carbon-dirtiest countries.
Growing Greener Options
As Bitcoin steadily gains mainstream adoption, many users and proponents are hoping for greener options when it comes to Bitcoin’s mining practices— a demand that they could reasonably see in the short-term future. Because of the need for a high hashrate coupled with the necessity of progressively more difficult mathematical algorithms, Bitcoin mining is a certainty and main staple of the network.
This means it’s unlikely that the process could ever be removed from Bitcoin’s process. However, there may be better ways to sourcing both the energy and the hardware required to mine efficiently, as one Canadian company hopes to create.
Fortress Technologies is a Canadian company looking to work hand-in-hand with the Great American Mining company, wants to turn stranded gas into Bitcoin mining power. Stranded gas, natural gas fields that are primarily untappable, or the captured flare gas from oil wells, is a type of natural gas that is otherwise unusable. Choosing to use these stranded gas fields allows companies like Fortress Technologies to harness power that would otherwise be wasted. These, along with other types of untapped energy source, such as municipal sewage systems, could prove to be the fuel that keeps Bitcoin going and keeping it green.
Renewable energy sources for Bitcoin mining have become of particular interest to miners and everyone else, not only because of their more carbon-friendly paradigms but also because they can keep associated costs of mining down— which means higher returns for miners. These renewables systems in the mining industry are of keen intrigue because as Bitcoin ages, the block reward, or the amount of Bitcoin miners can expect in return for their efforts— diminishes.
With a reward that halves once roughly every four years, this means that financial incentives for miners also dwindles. So the invested parties have to find ways to cut the costs associated with mining (i.e., hardware, coolant systems, and energy costs), else the industry itself quickly becomes cost-prohibitive.
So, while mining will always be a part of the Bitcoin networks’ functionality, rampant energy consumption doesn’t have to be. As miners become further incentivized to reduce operational costs, waste of energy and hardware will become outmoded naturally.