The concept of cryptocurrency, which blew up the Internet public, gave birth to a new industry in making money – cryptocurrency mining. Today, every second person in the world has heard about cryptocurrencies. The number of crypto miners steadily grows daily, and digital assets mining is getting harder financially and technically. Some time ago, it was possible to mine at home with a home PC and earn a decent amount of coins, but now you need special and expensive equipment for mining crypto. But what is the future of mining, and what changes are on the way?
This article will explain what crypto mining is and give some information about the current state of the mining industry today. In addition, you will learn about the future of digital asset mining and its development prospects.
- Mining is the process of creating individual blocks and adding them to the blockchain network while solving mathematical algorithms and getting a reward in the form of crypto coins.
- According to many crypto experts, artificial intelligence will play a major role in the development of future mining.
What is Cryptocurrency Mining?
Mining of digital assets refers to a type of activity to create new blocks on the blockchain to ensure the functioning of the cryptocurrency network, i.e., mining is directly linked to the creation of digital currencies, although crypto coins can also be created outside the framework of mining operations.
Mining is carried out through chains of individual Bitcoin miners and nodes that hold copies of the mining “public ledger”. Each node in the chain independently verifies any new transaction data to maintain network stability. All transactions are publicly accessible and stored in a distributed database (blockchain), which is used to validate transactions and prevent the problem of double spending.
Cryptocurrencies are generated within the mining framework as a verification fee for any transaction, ensuring a stable and secure flow of payment funds from the payer to the recipient. Since many miners try to find the next valid block at intervals of every 10 minutes, the fee essentially becomes a payment to the miner in exchange for creating a block in the agreed-upon chain.
Overview of Today’s State of Mining
Bitcoin mining today is a market for big players. There are many mining farms in the world today, the largest of which are located in China, Russia, the USA and Europe. They annually consume more electricity than would be enough to light several countries combined for several months. Logically, it follows that the bigger the mining farm, the faster it earns, and the bigger the investment at the start, the faster it will pay off. Many companies are looking for a cheap source of electricity, which often leads to years of video card shortages and very unfortunate environmental consequences.
The economy itself pushes miners to grow to a scale that may seem insane. In America, a company bought out a coal-fired power plant to mine Bitcoins. Ten years ago, the bankrupt owner of the Greenidge plant in Dresden, N.Y., turned it over for scrap and relinquished his rights. The building has stood abandoned for seven years, but now Bitcoins are being mined there.
Environmentalists saw this event as a powerful precedent: Dozens of abandoned power plants could be converted into mining farms with catastrophic emissions. According to estimates by the environmental association Earthjustice, if the Dresden farm becomes fully operational, its carbon dioxide emissions will rise to 1.063 million tons per year, 65% higher than the permitted norm. Environmentalists sent an open letter to the governor of New York. Still, the state Department of Environmental Protection has ruled that Greenidge meets all requirements and can continue to operate.
Today, despite the growing popularity of the crypto space, and especially mining, the environmental aspect is the most painful topic for both environmentalists and organizations involved in the production of Bitcoin mining industry equipment, its maintenance, and disposal. The need to control energy consumption and the creation of measures aimed at preventing the negative consequences of crypto mining activities imposes severe restrictions on the operations of such companies, forcing them to reduce the capacities of mining or look for alternatives, like renewable energy sources, to make this process more environmentally friendly.
- Today, there are distinct kinds of mining which include solo mining, cloud mining and mining in pools.
Future Prospects of Cryptocurrency Mining Technology Development
Mining may become much more than a coin-mining process. A new understanding of the well-known consensus mechanism is gradually being born. What might be some new applications of the algorithm? In the future, mining and its infrastructure may become a meaningful industry far beyond its original use case.
Today, there are already existing services for the purchase and sale of computing power from mining. They solve different problems, with most of them related to additional convenience of mining or optimization of investments in mining, for example, receiving rewards in fiat or bypassing the stages of withdrawal and exchange of mined cryptocurrency. In addition to convenience, this method is relevant in jurisdictions with complex or unfinished regulation of cryptocurrency activities, where legislation makes it difficult to obtain legal income from mining. Selling hash rate allows you to stay in the legal field, receive legal remuneration in fiat currency, and pay taxes quietly on the sale of computing power, not on the turnover of cryptocurrencies.
On the other hand, artificial intelligence (AI) today is quickly entering almost all areas of the economy and everyday life, including the crypto industry. This pace of development will require a huge amount of computing power from cloud mining companies to conduct mining. And there are already examples of successful applications of mining equipment not only for cryptocurrency mining but also for high-performance computing operations with AI. Events in recent years, such as crypto winter and Ethereum’s transition from Proof-of-Work to Proof-of-Stake, have prompted miners to try to diversify their activities using mining equipment.
The future of mining lies in the use of renewable energy. Since the construction of green energy on a global scale is quite expensive, it is necessary to eliminate the emergence of excessive power capacity. To do this, it is necessary to find energy consumers with oversupplies. This is where power-intensive mining comes to the rescue. Thanks to the very flexible ability to turn mining systems on and off, they can act as buyers of excess power. With mining, it will not only be possible to use electricity rationally but also to make a faster profit from renewable sources, and such examples already exist.
One of the promising areas of the mining industry will be cloud mining, which, despite its shortcomings, has good prospects for the future. The first perspective is the increasing number of users attracted to cryptocurrency mining using cloud mining. Due to the growing interest in cryptocurrencies, more and more people want to start earning from them. Cloud mining provides the opportunity to make digital money without purchasing and setting up specialized equipment. The second prospect is an improvement in mining technology. Cloud mining companies are constantly working to improve technology to increase the efficiency and profitableness of crypto mining. This can be achieved by using new mining algorithms and improving mining hardware and software.
The popularity of mining constantly fuels public interest, contributing to its rapid development. Artificial Intelligence and similar technologies are anticipated to significantly enhance mining operations by increasing the speed, efficiency, and convenience of mining new coins on different blockchain networks.