Mining is a special way of issuing digital assets that was first adopted by Bitcoin – the first cryptocurrency. The new coins that appear lately, don’t use this concept anymore for a number of reasons.
But Bitcoin is still alive and rockin’ so miners have figured that they need to find new ways of performing mining. By doing so they are going to address the issues caused by the old and still widely used mining equipment.
Even though the Bitcoin network was introduced more than 12 years ago, its popularity has led to the necessity of using this coin right now and planning to use it in the future. Since, technically, there is no single owner of Bitcoin and to boot, it is impossible to trace who was its founder, it is also impossible to introduce some daring changes to this network. Bitcoin is a thing in itself and it is so decentralised that it works just the way it works, so users, developers, and miners have to seek new ways of working with the existing “old” blockchain rather than trying to change it at its core.
That’s why seeking the new perspectives for mining in 2022 that will keep Bitcoin alive and will help everyone to find common ground in the environmental impact issues, sounds reasonable. Let’s explore what miners think about the nearest future of minting new BTCs.
What is mining?
Bitcoin mining refers to the process of writing the packs of transactions, the so-called “blocks”, into a Bitcoin blockchain. The reason for calling this process mining lies in the fact that miners are competing for the new Bitcoins that are being issued to them automatically by the network if their block manages to get into blockchain. And it’s not easy to do – the miner has to guess a certain hash value that is extremely difficult to perform because the value has certain restrictions called the level of difficulty. Each year, more and more miners are working on Bitcoin more intensively. As a result, the difficulty of mining increases exponentially.
Mining was created by Satoshi Nakamoto first and foremost, to create value for Bitcoin. If the minting of every block happens not instantaneously but approximately once in 10 minutes, this algorithm brings many advantages. It helps to avoid issues such as double-spending and malware attacks. Additionally, it creates scarcity for which Bitcoin is appreciated.
What’s wrong with the old mining?
However, mining has also been criticised for its negative impact on the environment. Miners have to perform billions of computing operations a second so they use powerful hardware and, eventually, it consumes significant amounts of electrical power. According to sources, Bitcoin mining annually consumes the same amount of electricity as a whole country the size of Argentina.
Nearly 40% of the overall Bitcoin hash rate used to belong to Chinese miners, but that was until the moment when the local government banned cryptocurrency mining altogether, following their ban on crypto transactions introduced in 2019. Chinese officials mentioned the environmental harm of mining as the main reason why they decided to take such a strict approach. It appears that most of the Chinese mining farms were powered by coal, causing severe air pollution.
Mining in 2022 – Perspectives
Despite all the drawbacks of mining, Bitcoin continues to be the most popular cryptocurrency with a market cap of nearly $1.2 trillion. Bitcoin is the first crypto that was largely considered by financial and other commercial institutions as the asset for hedging their cash investments. By the way, institutional adoption is one of the biggest reasons why this coin has experienced a rapid surge in 2020, and after a short correction in 2021, it hits the historical all-time-highs again.
So if stopping the use of Bitcoin is not a question, the miners figured that they need to find new ways of mining in order to continue moving forward without the danger of further bans of other governments. That’s why a group of miners in the US has formed a Bitcoin Mining Council that was created as an independent organisation that aims to find ways of dealing with the issue of excessive energy use as the result of mining. By the way, this organisation was promoted by one of the most prominent role models in the world of crypto – Elon Musk.
Right after its inception, the Bitcoin Mining Council presented a report in which they state that nearly 39% of the energy used by the mining farms in the US comes from renewable sources. The council also hopes that this percentage will grow in the nearest future. Perhaps, new technologies and ways of organising farms will be introduced to cover today’s mining power requirements without losing the existing hash rate and without harming the environment.
Another direction of Bitcoin’s development is to maintain a reasonable amount of mining while using multiple layer-2 solutions that will cut down the need for excessive mining. Because, together with the growth of people using Bitcoin, the number of transactions increases, so the miners experience a growing pressure to approve all the incoming transactions.
Instead of increasing the number of transactions directly on the Bitcoin chain and having to wait while each block is created, Bitcoin users could benefit from using solutions like the Lightning network, which also increases the speed of transactions to the desired speed that is demanded in the present markets. Another possibility is using custody wallets at crypto exchanges like CEX.IO. By doing so the users will get instant transactions and the necessary liquidity and help miners to not operate so intensively having to go for such significant power consumption as they do today.