Bitcoin mining is fast becoming a difficult proposition due to multiple factors such as presence of multiple blocks, extremely volatile pricing, high electricity costs, and growing instances of criminal activities just to name a few.
Criminal events and Icelandic Bitcoin mining
You might wonder how a Bitcoin mining venture can be impacted due to crime. According to a recent news item, there was a theft of hundreds of Bitcoin mining computers suggesting an involvement of an organized gang of criminals.
There are a number of factors that have contributed to Iceland’s involvement in Bitcoin mining. It would be interesting to know how the country has become an ideal Bitcoin mining destination.
In spite of a major downfall in the price of Bitcoin, Iceland is found to be engaged in large-scale Bitcoin mining as if it is oblivious to the major and negative events that have been responsible for the downfall of the world’s leading Cryptocurrency.
Factors that boost mining
You only have to compare the volume of domestic energy consumption with that of Bitcoin mining in order to understand the scale of mining in Iceland. The energy consumed by Bitcoin mining is more than domestic energy requirement as per Icelandic energy authorities.
Geographical location is the single most significant factor for the popularity of Iceland as the most attractive Bitcoin mining destination. Iceland is blessed with several volcanoes that boost generation of huge amounts of renewable energy. This is evident with a large number of hydel and geothermal energy plants in Iceland.
This has to lead to a steep decline in the cost of power, thereby boosting ROI in a Bitcoin mining venture that heavily depends on energy consumption. Add to this the perennially cold climate that further drives down cooling costs and improves ROI. One can come across huge farms of Bitcoin mining across Iceland.
Such encouraging environment has also resulted in a growth of organized crime. The recent theft of Bitcoin mining computers underlines the fact the highly expensive Bitcoin mining hardware is an attractive booty from criminal’s point of view. The costly equipment can be put to use easily for mining of Bitcoin.
Growing level of difficulty
Mining has always been the most attractive option to own Bitcoins. In fact, the process of mining has assumed a status of a multi-billion industry. However, along with the growth of mining and number of Bitcoin transactions, the overall dificulty7 level has grown exponentially.
Blockchain offers a secure resource for maintaining the public ledger of Bitcoin. It is also the most trusted option for confirmation of transactions that are taking place through the transfer of Bitcoins. Bitcoin mining process is facilitated by Bitcoin miners through the process of solving extremely intricate mathematical calculation by using expensive mining hardware.
By the addition of a new block for sustaining the blockchain’s security, Bitcoin network makes sure that no duplicate spending can take place.
Competition and uncertainty of price
Cryptocurrencies are influenced by extremely volatile prices that can register significant sways within a considerably shorter period. Prices of Bitcoin can also be influenced by the forces of demand and supply. Since the level of difficulty is directly proportional to the price of Bitcoin, miners can expect to invest more in terms of efforts and expenditure due to price rise brought about by the widening gap in demand and supply.
Another factor is in the form of growing competition due to rising popularity of Ethereum coin. Ethereum has a block time of mere 12 seconds as against 10 minutes of Bitcoin. This leads to more rapid payment confirmation in case of Ethereum. Miners are earning as many as five Ethers for completion of a single block.
Bitcoin mining may lose its shine if the Cryptocurrency is saturated by reaching its limit. This will shift investors’ attention to next most attractive Ether cryptocurrency.
Crumbling under own weight
The amazing popularity of Bitcoin has to lead to an extremely complex situation as the massive volume of transactions has increasingly become unmanageable. Add to this the one megabyte limit of block size to make things further complicated and resulting in delays in the processing of payments. The hard fork situation is forcing a vertical split namely Segregated Witness and Bitcoin Unlimited.
Miners need to choose between these two and it is obvious that majority of them select Bitcoin Unlimited for exercising greater control over the network. In contrast, the community of developers and other experts favor Segregated Witness to make sure that miners are not allowed to take reins of Bitcoin network in their hands.
The tug of war can continue unabatedly I the race to gain total control and legitimacy of Bitcoin network. The situation will end in complete elimination of either BU or SegWit because the two will never be able to exist together.
Although the future remains to be unpredictable on the Cryptocurrency horizon, one has to understand and analyze merits and demerits of Bitcoin mining before taking a plunge.
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