The Future of Mining: Is Private Mining Dead?
At the beginning of 2021, amid the proliferation of cryptocurrencies, interest in mining digital money has become explosive. This trend has persisted over several months. However, not all users wishing to mine cryptocurrencies had adequate resources to set up their own mining rigs. And the solution was obvious — to deploy home mining farms that enable even low-scale crypto mining.
This led to another trend — the increase in at-home cryptocurrency mining and the emergence of private miners. In practice, such small mining farms had great prospects, and in theory, they could even compete with large data centers in terms of returns, as they did not require capital investment and operating costs. Nonetheless, global economic and political conditions have recalibrated these perspectives. Now, the prospects for private mining no longer look so bright, and some experts take a firm position in addressing the future of small mining farms. However, everything is not as simple as it may seem.
Let’s talk about what’s brought about those changes, analyze the world’s political and economic aspects, find out if it is still viable to have a small mining farm, and what are the alternative solutions to private miners.
The stance of the Chinese authorities as an overture to restrictions on cryptocurrency mining
China used to be home to the major miners’ hub. However, a few months ago, miners were forced to leave China due to the tough stance of the local authorities. The imposition of restrictions by the Chinese government and the tightening of policies regarding the mining and trading of digital coins were caused by the fact that mining consumes a lot of energy, which is inconsistent with China’s goals to reach carbon neutrality.
The position of the Chinese authorities to tighten regulation of digital currencies led to a drop in bitcoin’s price, as well as a decrease in the mining capacity of cryptocurrencies. The cracking down on cryptocurrencies in China affected not only the ability of Chinese citizens to trade and mine digital assets, but also caused collateral damage to the global market. Following the introduction of a strict China’s ban on crypto mining, other countries started replacing China as the world’s giant in digital asset mining.
Review of new locations of the miners’ concentration
Since China was the former world leader in the cryptocurrency market, companies were forced to either shut down completely or move to other countries. The US has been the main beneficiary of China’s efforts to move crypto mining, but many large companies like Huobi Mall and BTC.TOP have announced that they will be moving their mining rigs to other countries. So, although the United States was the best choice for Chinese cryptocurrency mining companies, Kazakhstan took hold of the leading position. It’s currently ranking third in the world by the extraction of cryptocurrency and is projected to rise to the second position any time soon.
The success of this country is attributable to legalizing crypto mining as a way to diversify the economy and develop its cryptocurrency sector. In addition, the government has also introduced one of the lowest tax rates among all countries where cryptocurrency mining is allowed. This is why a number of Chinese cryptocurrency mining companies have chosen Kazakhstan as a place to move their business, hoping the country will continue to grow and become one of the leading cryptocurrency hubs in the future.
Such support from investors meant a positive future for Kazakhstan, but restrictions were soon imposed there as well. At the end of June 2021, the President of Kazakhstan signed a law on the taxation of miners since, according to the country’s authorities, the cryptocurrency mining market should bring in revenue to the state.
Meanwhile, after the introduction of the ban, mining was allowed in Iran. That prompted Iran to become a major base for mining cryptocurrencies, and 4.5% of all Bitcoin mining in the world was concentrated in this country by then. However, Iran is not the only promising place for crypto mining. Among the other, potentially friendly countries for mining are Kuwait, Venezuela, Iceland, the USA, Sweden, Russia.
The future of private miners and the prospects for small mining farms
It’s definitely too soon to spell the death of at-home mining. However, we can’t deny that private miners are forced to adapt to rapidly changing conditions and find new options and opportunities for their crypto activities. And although there are certain challenges and difficulties caused by economic and political factors, there are alternative solutions to small mining farms.
One of them is the rental of mining equipment. This enables private miners to have a passive source of income by receiving commissions from large companies. The first service to become a matchmaker between large mining enterprises and individual miners was the Bitcoin mining company HASHR8. It has launched the Compass platform, which is a search engine, service, and product for synchronizing miners with hosting providers.
The initiative was born with the view to ensuring that small miners can remain competitive. And while bitcoin mining is more profitable for large miners in terms of scale, this does not mean that private mining is dead.
Crypto mining is still one of the most lucrative businesses, but some miners are more successful than others due to equipment costs, electricity prices, as well as global political and economic factors. And this means that private miners must quickly adapt to the current circumstances and look for alternative options for earning money in this highly profitable industry.
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