Bitcoin has a massive spike in mining this year. There are certain things we can see as an outcome, so let’s check it out!
If we know anything about Bitcoin, it is the fact that there is a limit to how many can be mined. To be more precise, there are 21 million. Why? Because more than that would cause inflation, and when Bitcoin reaches its “end,” you can certainly expect to benefit from it, especially investors.
Bitcoin mining takes a lot of energy (literally lots of electricity and time), and once it stops, we can only expect that the price rise if the demand still exists. After all, Bitcoin is a cryptocurrency that depends on the rules of supply and demand.
According to recent reports, mining volumes have significantly increased (around 15%), which is more than it was in the last two years. We will briefly discuss the cause and the essential thing – mining rules and its impacts on miners.
What can be the result when the cap is reached?
If the same rule of mining a maximum of 21 million remains, miners will have no further benefit. What can happen next is only a change in transaction fees, which can keep miners’ attention. Please consider that the security of Bitcoin and its network depends on the number of miners, so having a decrease would severe the security, which would seem unstable for investors and traders to put their money into it further, and the price would probably fall.
The difficulty of mining
Around ten years ago, you were able to mine bitcoin using personal computers. Bitcoin mining centers didn’t even exist in the day, so “old” miners had their systems they could run with ease. The price of electricity would depend on where you are, and the competition consisted only of different individual miners and their systems.
When ASIC got involved in it, everything changed. It was hard to compete after supercomputers on your own, and even if you could, you would suffer significant expenses, which wasn’t worthy of continuing mining on your own. You needed to get better equipment, more potent machines, and you would still be at a disadvantage.
Even with supercomputers, now it’s harder to mine bitcoin than it was ten years ago. To mine one bitcoin, you should be capable of solving the hash problem. The difficulty changes according to the variable that changes its pattern every two weeks. This decreases the chances of solving the problem and mining. Let’s present it like this if the difficulty of mining at the very beginning was rated 1. In 2020, it is around 16 trillion times harder.
What’s the deal, then?
Even if mining bitcoin takes more than mining gold, it seems like this has only prompted miners to dig in. We mentioned there is a sudden mining growth this year, despite the difficulty factor. We are sure that miners are aware that the reward will lessen as they mine further, despite the difficulties getting higher.
We have around three million bitcoins left to be mined. The miner reward keeps halving every couple of years, but it seems like they might be driven by investors who are eagerly awaiting what will happen once bitcoin reaches its cap.
The Suspense
Since miners from China disagreed with another Bitcoin halving, there is a lot of tension regarding what will happen in the future. We mentioned this year’s boost in mining despite the immense difficulties, but there is also a factor that is the hardest then it has ever been for miners worldwide. Will this increased mining volume benefit investors in the long run, or is it just a sudden spike that will quickly fade like the end of the year approaches? We are yet to witness that. You can follow the pattern and analyze the market to see how various investors react to it and how you can benefit from it.
Carolyn Coley is a blockchain reporter. She joined Smartereum after graduating from UC Berkeley in 2018.
