cryptocurrency mining

Over the last few years, cryptocurrency mining has become a profitable trend. However, it has also been the main factor affecting the worldwide GPU (Graphics card) shortages. As a result, various Chinese markets have seen accusations claiming they have been “trying to kill the GPU market again because they are greedy”. Despite GPU-based cryptocurrency mining taking the backseat in 2013, operations were restored in 2014 following the development of cryptocurrency 2.0 applications inspired by bitcoin. These cryptocurrency 2.0 apps apply several underlying features provided by bitcoin to many new developments.

GPU Mining

For the last few years, GPU supplies have seen a steady decline following crypto mining’s popularity. As a result, ASICS has decided to leverage this opportunity, constructing an environment (albeit endangered) for GPU-based investments. As GPU-mined cryptocurrencies are running on borrowed time, ASIC-based altcoins could see a boost in price as miners adopt them.

However, the current blockchain consensus mechanism (the computation process required for proof-of-work) could eventually be replaced by systems that don’t need any equipment or specialized computer systems in order to mine. Ethereum released their ‘Byzantium’ blockchain software upgrade in 2017. This made improvements to the Ethereum network, preparing for a seamless replacement of the Proof-of-Work mechanism. Ethereum is working toward using a proof-of-stake mechanism instead. As a result, many Ethereum minors around the globe feel as though these changes are a cause for concern.

But the question still remains; Is cryptocurrency mining dying? Are mining farms a waste of money?

The end of crypto mining?

Recently, Stephen Young stated:

Mining has become big business and there are significant advantages to economies of scale. This is one of the reasons we are seeing so much miner centralization. If you want to take mining seriously you would need some serious network administration and data center management skills. You also need access to very cheap electricity as the cost of power is the biggest expense for miners

Though many people continue to take interest in mining cryptocurrency, it’s clear to see that mining crypto is not getting any easier, nor cheaper. Blockchain developers have stated that the engine is far from perfect condition. An example of this would be the technical restrictions on systems presented by ICOs.

Other factors affecting the value of cryptocurrency mining:

  • Difficulty: The mining algorithms used to mine cryptocurrency are becoming increasingly more complex as time goes on
  • Growth: How stable your cryptocurrency mining goes is determined by the number of participants in your mining pool. Because of this, GPU mining is slowly dying as miners switch to the Proof-of-Stake mechanisms
  • Exchange Rates: Cryptocurrency is generally a volatile asset. To continue making a profit from mining, the exchange rate of cryptocurrencies to fiat currency will need to rise as fast as the processing power of the network is.
  • Electricity: The energy used to mine cryptocurrency is becoming scarce. It costs a lot of money to have something running for extended periods of time, especially when it uses high energy rates. When mining, all prospects work toward solving the same task. The return is given to whoever solves it first. Everyone else’s mining results are discarded.
  • Expenses:  As of late, the price of crypto mining hardware is at premium rates. With high demand and low supply for this specialized hardware, high entry prices are inevitable
  • Profits: Mining rigs that use the correct hardware (Such as Nvidia’s GTX 1080 ti GPU) cost well over 1,300. These rigs earn their user’s a daily rate of $10 based off of cryptocurrencies current valuation. This means that it will take months, sometimes even years depending on your electricity cost to break even. Only after you break even, will you start making a profit from your mining investment.

GPU Manufacturers pulling out?

Many GPU manufacturers such as Nvidia or AMD are also pulling out of the crypto mining industry as a result of unexpectedly low profits. According to Coininsider;

Nvidia, the world’s foremost GPU manufacturer, has confirmed that it will no longer compete in cryptocurrency mining markets

Nvidia’s Chief Financial Officer Collete Kress also stated;

We believe we’ve reached a normal period as we’re looking forward to essentially no cryptocurrency as we move forward. Our revenue outlook had anticipated cryptocurrency-specific products declining to approximately $100 million, while actual crypto-specific product revenue was $18 million, and we now expect a negligible contribution going forward.

Cryptocurrency’s December 2017 rally prompted thousands of investors all over the world to build mining rigs at their homes. As a result, Nvidia had no choice but to counteract the heavy GPU demand by requesting their retailers to keep a reserve supply pool of graphics cards for gamers. After Nvidia pulled out of GPU mining, lower mining profits came about as a consequence.

Goodbye mining, hello cryptocurrency exchanges

The cryptocurrency price shock in 2017 created traction across the globe. A result of this was the mining upsurge that resulted in a global shortage of Graphics Processing Units (GPUs) in its wake. At this rate, it has become apparent that cryptocurrency mining is dying. But if mining dies, cryptocurrency will continue to thrive regardless. Coins like Ethereum, Bitcoin, Neo, Bitcoin Cash, Litecoin and more will continue to stay relevant on the market. Mining isn’t the main way people earn money from cryptocurrency, it’s mainly for enthusiasts. Cryptocurrency exchanges such as iCE3X offer their users ways to get their profits up, without investing in specialized equipment.

One of, if not, the best ways to make money from cryptocurrencies is to trade them on cryptocurrency exchanges and peer-to-peer marketplaces.

On our exchange, users are able to trade crypto in real time against fiat currency, and other digital currencies. The iCE3X exchange allows users to deposit fiat currency directly from their bank account to their account on our exchange. If you’re a miner, and you’re considering becoming a trader instead, this may be a great solution for you. We provide some of the lowest fees on the market, and you will be buying and selling your digital assets with other local traders. Here’s how you should start your journey if you’re considering making a bitcoin investment.

Do you think mining is dying? If so, why? Let us know your thoughts in the comments below.

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Disclaimer Notice:

This article is intended to educate and should in no way be seen as investment advice or an enticement to use the platform. Bitcoin is highly volatile with big profit opportunities but you should also remember that you could lose part or all of your investment whenever you take part in any high risk investment. Bitcoin trading is not a regulated industry in South Africa, which in itself carries additional risks. IF YOU ARE NOT AN ASTUTE BITCOIN TRADER, SEEK INDEPENDENT FINANCIAL ADVICE BEFORE MAKING ANY INVESTMENTS.