Mining, in crypto terms, means bringing new crypto coins into existence. Bitcoin mining is the process of verifying new Bitcoin transactions and then recording the verified transactions on the blockchain. Bitcoin uses a proof-of-work (PoW) consensus mechanism that rewards miners for solving mathematical puzzles to verify blockchain transactions.
Bitcoin creator Satoshi Nakamoto mined the first Bitcoin block, known as the genesis block, on a CPU. A CPU miner will be almost worthless in 2022, as mining has evolved from CPU to graphical processing unit (GPU) and then to ASIC as the computing power of the Bitcoin network continued to grow. The process of verifying blockchain transactions in a decentralized and secure manner is vital to the security of a proof-of-work (PoW) blockchain.
The PoW system was the first consensus mechanism developed for blockchain networks and is still used by many networks today. This system uses a large amount of computational power to verify new transaction blocks and add them to the blockchain. New crypto coins are minted by PoW blockchains to expand supply and reward miners for verifying transactions. Bitcoin mining can be profitable when crypto rewards exceed operating costs. Crypto mining is becoming more accessible and efficient as the mining process is evolving.
Bitcoin mining profitability and returns
Some aspects of Bitcoin mining are similar to mining gold or other physical assets. The higher the asset price, the more profitable mining becomes; this applies to Bitcoin as well. There are other factors affecting Bitcoin mining, such as rising energy and transactional prices. Bitcoin mining required nearly 140 terawatt-hours (TWh) of electricity in 2020. This is more than the annual energy consumption of countries like Norway. The more expensive electricity gets, the fewer profits Bitcoin miners make. Conversely, as technology improves and mining becomes more efficient, the cost of creating new Bitcoins reduce, thereby improving the profitability of miners.
Read more: How to Build a Crypto Mining Rig
The future of Bitcoin mining
Today, many crypto companies are using energy for their operations from sustainable sources like wind and solar. They are also improving their operational efficiency and using carbon offset credits to maintain net-zero carbon emissions. Carbon-zero means no new carbon dioxide gas is produced during crypto operations.
Crypto-mining computer chips need a large amount of power to function. The performance of these chips are measured in terms of hash rate per kilowatt. The power requirements of ASIC chips have increased as they become more capable. Manufacturers are producing compact ASIC chips, improving their power efficiency and performance.
Bitcoin mining and renewable energy
Many have raised concerns regarding the sustainability of crypto mining, as it requires lot of energy. As a consequence, crypto companies are shifting to sustainable sources for their energy needs. According to a report from the Bitcoin Mining Council, 58% of crypto miners use renewable energy, such as wind, solar, hydro, or carbon generation with offsets. There is still a major push to transform the entire crypto-mining process into a fully renewable model. Many crypto companies around the world are moving to renewable mining facilities. For example, Block and Blockstream use battery technology and Tesla solar arrays to power their mining facilities. Due to regulatory pressure, many mining firms are moving their current or future operations to go green and use renewable energy.
Conclusion
Many questions have been raised about the energy-intensive proof-of-work consensus process. But regardless of the amount of energy it takes to mine, Bitcoin’s fundamentals are rock solid. Bitcoin’s security, decentralization, and scarcity make it one of the most desirable crypto asset on the market today. It is still hailed as the king of crypto with a market capitalization of more than $500 billion.
Read more to know How to buy bitcoin in India on ZebPay.
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