To Mine Or Not To Mine?
It’s 2022, and the question on the mind of some is: should I start mining cryptocurrency?
Cryptocurrency mining is the process of verifying and adding new transactions to the blockchain – the decentralized public ledger of all cryptocurrency transactions. Miners use powerful computers loaded with specialized software to help solve complex cryptographic puzzles. These puzzles are a unique string of numbers and letters that represent a block of transaction data. Miners confirm and add new blocks of cryptocurrency transactions to the blockchain.
The act of mining is what sustains the blockchain. In exchange for their service, miners are rewarded with newly generated cryptocurrency, generally in the form of a transaction fee.
Mining – The Beginnings
In the early days of Bitcoin, mining could be done with a simple Central Processing Units (CPUs). However, as the network grew, miners began using Graphics Processing Units (GPUs), then Field Programmable Gate Arrays (FPGAs), and finally Application-Specific Integrated Circuit (ASICs) – devices specifically designed to mine Bitcoin and other cryptocurrencies. Moreover, the use of these powerful devices has made it increasingly difficult for individual miners to compete with large mining pools, which can afford to purchase more ASICs. Specifically, a mining pool is when a group of people combine resources in order to mine more successfully.
This has led to the increasing popularity of cloud mining – the renting of computing power from a provider and their specialized ASICs. Today, mining is a big business, with large operations spending millions of dollars on electricity every month. Nevertheless, mining has always been a contentious issue, with opponents arguing that the negative environmental impacts outweigh any benefits.
Is Mining Worth It?
Mining is a power-intensive process. Surprisingly, it is estimated that mining consumes as much electricity annually as the entire country of Ireland. This has led to concerns about the environmental impacts. In particular, critics have pointed to the high carbon footprints of Bitcoin and Ethereum.
Bitcoin is particularly energy-intensive, due to the way its algorithm works. In fact, it is estimated that Bitcoin mining alone is responsible for 0.21% of global emissions. Although Ethereum is less energy-intensive, it is still a major consumer. However, a recent report suggests that the situation may change in 2022 when the cost of renewable energy is projected to be lower. If this proves to be true, then it could mean a shift away from traditional operations. Coincidentally, it could be the miners themselves that drive renewable energy sources, like solar and wind power, in search of cheaper alternatives. Also, miners are increasingly producing more energy-efficient hardware.
Mining Cryptocurrency – Key Benefits
- It rewards miners with passive income. This provides an incentive to continue verifying and adding new blocks of transactions to the blockchain.
- It helps to secure the blockchain by confirming and validating transactions. Importantly, this prevents fraud or double-spending of coins.
- Mining helps to spread out the responsibility of confirming transactions. This makes the network more secure.
Cryptocurrency mining is an essential part of how most cryptocurrencies function. Specifically, miners play a vital role in ensuring the cryptocurrency ecosystem is secure and functioning properly. Without miners, there would be no one to validate transactions and add new blocks to the blockchain.
So, should you start mining cryptocurrency in 2022? That depends on a number of factors, including the cost of renewable energy and the type of hardware you’re using. But, given the current trends, it’s likely that mining will become less energy-intensive. More importantly, it will become more environmentally friendly as well.