Bitcoin mining was a profitable business once, and it was very much like getting free money. You plugged in your PC, which start solving complicated mathematical problems on the Bitcoin ledger, and for the service provide, you were provided with Bitcoin. Now, after a decade since the first Bitcoin was mined, competition to solve these puzzles on blockchain ledger has increased, making that free money not so free.
According to a report from Diar, a blockchain and data analytics firm, the market is so saturated now that retail miners who were using their personal computers, hoping to earn a quick buck are now losing money instead of making any profits. The company suggest that institutional miners have access to cheaper electricity options and have squeezed retail miners margins. Diar suggest that Bitcoin miner revenues in the first 6 months of this year has surpassed full year of 2017’s profit. The Company add further, “To date, revenues have exceeded last year by a whopping $1.4Bn. But the record hash rate hit at the end of August saw miners paying retail electricity prices move to unprofitability for the first time in September.”
One Bitcoin transaction consumes as much energy as a normal house consume in a week. Bitcoin’s computational power is extremely high. Global Bitcoin mining represents a minimum of 77kwh of energy consumed per transaction. As Price of Bitcoin rises, so its electricity consumption and therefor its overall carbon emissions. As the competition is increasing, hash rate is also ranging at high level. The hash rate is a measure of the computing power required to confirm a valid Bitcoin transaction.
These costs have reached at heights where only institutional companies can afford huge electricity bills. Diar research suggest that the investment proposition for smaller miners held true throughout most of this year. In may, an Elite Fixtures survey was conducted. The study found that the average cost to mine a Bitcoin in the U.S was $4,758 but as the hardware cost and electricity prices goes up, the average cost has climbed.
“With big mining operations on low electricity costs running at anywhere between 50-60% gross profit from bitcoin revenues, the market has a lot of room left to grow and, profits to squeeze, But bitcoin mining has, at least for now, and most likely in the future, moved into the court of bigger players with deep pockets. ” said Diar.