- Bitcoin hashrate saw a 30% variation in 2020 Q1
- ASICs dominate the cryptocurrency mining industry
- Bitmain continues to dominate the ASIC market
According to a new report by blockchain data firm, TokenInsight, the mining landscape has changed significantly in Q1 2020. While Bitmain still holds the largest ASIC marketshare, cryptocurrency mining hashrates have been very volatile amid COVID-19. During the same period of time, crypto derivatives interest surged.
The Bitcoin blockchain is the largest POW of blockchain by far. While the Bitcoin network hash rate is relatively stable due to its massive size, Q1 2020 saw almost 30% volatility. This is attributable to a number of factors.
The fluctuation in BTC hash rate is attributable to many different factors. Bitcoin miners earn a fraction of the Bitcoin block reward they helped mine. As a result, Bitcoin’s price directly affects miner earnings.
Following the market-wide crash in March (coincidently after the WHO declared COVID-19 a pandemic), BTC hashrate plummeted. This was a result of simple economics: the cost of creation surpassed revenue. With Bitcoin’s price a fraction of what it originally was, many miners were spending more (eg. electricity, cooling, maintenance) to mine a Bitcoin than they could sell it for. While some large scale mining operations employ risk-management tactics to continue operation, many mining farms have shut down.
Furthermore, COVID-19 lockdown procedures have forced many operations to temporarily close. Without the ability to manage the Bitcoin miners on-site, many operations have temporarily shut down.
ASIC (Application-Specific Integrated Circuit) miners still hold a mining monopoly. Bitcoin’s mining algorithm SHA-256 is one of the most popular ASIC mining algorithms. According to the report, over 50% of ASIC mining occurs on SHA-256 ASIC miners.
Furthermore, the number of new ASIC miners coming to market accelerated in 2018, following Bitcoin’s $20,000 rally. While the growth of new miners slowed in 2019, Q1 2020 looks promising thus far.
The Bitcoin ASIC industry has been dominated by a few big companies. Bitmain still holds the largest miner market share and is the most well-known ASIC manufacture internationally.
Bitmain has been the subject of crypto controversy due to controlling the majority of the ASIC market share. However, as cryptocurrencies and blockchain technology gain adoption, Bitmain’s slice of the pie has decreased to a reasonable size. Furthermore, with cryptocurrency mining changing from a mere hobby to a profession, many companies have attempted to file IPOs.
As Ebang files an IPO, post-IPO competitors like Canaan Creative have seen diminishing returns, losing over 50% in value in less than a year.
Cloud mining has also been a controversial topic. Cloud mining allows individuals to rent mining hashpower at a fixed cost. The renter does not have to set up, maintain, or purchase mining equipment. However, cloud mining often comes at a significant premium.
The cloud mining sector has limited transparency and the risk of fraud still exists, the revenue for cloud mining contracts could change significantly based on market fluctuationTokenInsight
Cloud mining contracts are generally long-term (> 6 Months) and do not offer cancellations. As a result, price fluctuation can affect profitability and result in users losing money on the contract.
In addition to the lack of profitability, the cloud mining industry has been littered with scams. Many users fall victim to scams offering cloud mining contracts at an unusually low price.
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