Since the introduction of Bitcoin in 2009, crypto mining has gone through a significant evolution, transforming into a profitable and competitive industry. Its passive, 24/7, income-generating nature has attracted many people into the world of mining and continues to do so.
So, plugging in a computer and printing money is definitely an interesting tagline, but this is just the tip of the iceberg. At its core, mining involves verifying transactions and adding them to a proof-of-work blockchain. This dynamic process of solving cryptographic problems using high-powered, specialized computing hardware can trigger the generation of cryptocurrencies.
History has shown that mining has gone through periods of being an absolutely brutal business, as well as years of euphoric margins and seemingly endless lucrative passive income streams. And just like any worthwhile business, there is nuance to how to most effectively survive and thrive as a cryptocurrency miner.
Because of its nature and evolution, crypto mining still remains an industry as volatile and misunderstood as Bitcoin or “Crypto” itself–the cryptocurrencies that it produces. Lately, there has been an increasing interest in the future of mining, and after different speculations and debates, many are left wondering if this is the end of an era.
So, is crypto mining actually dead? In short, no.
But let’s explore why.
Factors such as costs, profitability, energy consumption concerns, and ongoing technological changes generate different claims and misconceptions, leading to the perception that crypto mining faces many challenges or is a dead industry.
Below, we’ll discuss some prevalent misconceptions and provide facts and our insight to clarify any misunderstandings.
This is simply untrue, and to justify ourselves, we’ll just share a few numbers with you.
Every day, at today’s prices (end of 2023), the Bitcoin network alone generates revenues of $33.3 million per day for miners. PER DAY.
So if a programmatic potential paycheck of $33 million per day is a dead industry, then happy “Dia de Los Muertos”!
That perception that crypto mining is no longer profitable is a common myth. Of course, if you want to be profitable, that is a much more intricate question, and the answer is “it depends.”
Many people proclaim crypto mining to be dead because their individual strategy is dead. However, that does not mean that nobody is making money; it just means that THEY are not.
Maybe this also means that they don’t know anybody else who is successful, or they are not familiar with more lucrative options, or perhaps don’t know how to take advantage of the lucrative options that could be available to them.
Any of these only underscores the importance of working with the right people with the right strategy. For the intelligent investor, picking the right operator is usually the difference between healthy profits or fruitless hassle.
Many have proclaimed crypto mining “dead,” as there is no opportunity left unless you own your own personal large-scale data center. These claims are also misleading and not entirely true, and let us explain why.
While there are competitive advantages to achieving scale, many of those benefits can be acquired through a reputable hosting and development company. Such companies charge a fee for the service of aggregating thousands of miners together and providing management services in order to secure an attractive rate for their clients.
Through colocation with other miners, you achieve the power of the group without the need for organizational resources required to build and operate a data center on your own.
Abundant Mines is proudly a company that operates on this model, offering our clients the kinds of power rates and managed services that are not available when mining at home or setting up on a smaller scale.
To be successful over the long term in crypto mining and not fall into the trap of calling it “dead” requires work, and yes, it can be challenging.
However, despite the complexities, history has proven that many individuals and operations were able to adapt to the industry’s demands and succeed.
So, while other smarter and more attentive players are raking in profits, happy that you are no longer competing with them, are you willing to reverse that?
Successful and long-term mining can be achieved if you understand and optimize some essential aspects. Continue reading to discover the most important ones.
Even with free power, running older miners with low efficiency or a short lifespan barely makes sense. The maintenance requirements and low overall production of Bitcoin from these machines mean that running them past their relevant life cycle is a losing game in most cases.
Many proclaimers of the “deadness” of crypto mining are themselves running unprofitable miners and unwilling to look at the market reality of their aging equipment.
Miners depend on electricity as their main input cost. If you are mining on residential power rates or in most standard commercial settings, mining is primarily unprofitable, especially outside of bull markets.
In a bull market, the rising price can paper over many operational mistakes. However, when the tide goes out, and the cyclical markets do what they always do–which is cycle, the businesses without strong fundamentals will always eventually be revealed for their mistakes.
One of the most overlooked aspects of crypto mining is the environment in which these computers live and thrive in.
At our Columbia Gorge data center, for example, we regularly clean and maintain machines, as well as operate in a perfect climate for crypto mining.
Because we minimize dust, heat, and mismanagement, machines typically last much longer than advertised or commonly touted.
By locating your machine in a balanced climate, you typically add years to the useful life of your machine. This offers you a competitive advantage over the miners who regularly expose their equipment to high heat and other subtle but damaging environmental factors.
If you send your machines blindly to a host, you may never know why your machine didn’t last as long as it should have. We can tell you with near certainty that it almost always relates to the operating environment and standard of care those miners receive.
Also, don’t ship your miners many times throughout their life. Find them a good home, and let them “retire” there if possible. The idea of moving machines between facilities on a regular basis to travel for better energy costs for the short term is fraught with risk.
Here are some quick numbers:
In profit terms, the last bull market saw crypto miners making 95% profit margins on electricity (meaning that for every dollar spent on energy, they yielded $20 in crypto). This is bound to happen again to some degree, as cryptocurrency prices can rise much faster than physical infrastructure can be built in the real world, especially in inflationary environments with poor supply chains.
Even in the bear market, competent operators maintained 30-50% margins. While less lucrative than multiplying your money by 20, a 50% margin is more than enough for most businesses to survive and take advantage of the next upward price cycle.
Crypto mining and bitcoin mining, specifically, are not dead; they are simply evolving. We would say it has never been more alive, and it continues to grow.
We believe that these industries have a lot of runway and, in fact, are going to play a much bigger role in the energy transition and other major global technological revolutions than is currently appreciated.
Much like the internet in 1990, crypto mining is poorly understood and widely distributed but not commonly used.
The early adopters and students of this segment of technology are setting themselves up for a prosperous future. One where they understand the world on a deeper level because of their exposure to this technology and the computing power that supports it.
Are you ready to find what lies ahead? Join our community to discover the future of mining together!
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