Due to the current collapse of the market of cryptocurrencies thousands of miners leave the Bitcoin network. Thus, according to mining-pool F2Pool, from mid-November in the order of 600,000 miners turned off their machines and stopped production of the first cryptocurrencies. However, as noted by the head of the third largest pool Mao Shenyang WorldStar, miners in China «selling equipment in kilograms». At the same time, November 22, the Norwegian government decided to abandon the program of subsidizing companies involved in mining cryptocurrency. What is the cause of the crisis and what are the consequences for the miners of cryptocurrency — read the material DeCenter.
Miners who support the work of networks with the algorithm of consensus PoW (proof-of-work) are responsible for confirmation of transactions and adding new blocks to the blockchain, for which he received remuneration in the internal cryptocurrency network. For miners the key role played by the computing power of their machines, since the likelihood of receiving rewards equal to the ratio of the computing power of the nodes to the miner’s computing power throughout the network. In connection with solo-mining the popular cryptocurrency networks in recent years has become a disadvantage: the growth in popularity of cryptocurrency, the profitability is reduced, and the process of mining is complex, and allows the PoW-block chain to control the speed of issuing new coins.
However, in this lies one of the key vulnerabilities PoW-networks: the growing complexity of mining requires more and more powerful and modern equipment, this increases the energy cost of mining. According to Mao Sisina, it is for this reason miners in China to massively sell their mining farm: «the Miners sell the equipment in kilograms, because they used outdated models that no longer fit. People are selling them for recycling instead of mine on these models.» Mao also noted that miners are disconnected from the pool F2Pool mainly used for the production of Antminer T9+ S7 production Antminer Bitmain and AvalonMiner 741 company Canaan.
This trend was also observed in other markets of mining, including the Russian. According to the statistics service of free announcements «Yula», due to the sharp fall of the bitcoin exchange rate on 19 and 20 November there was an increase in the number of proposals about sale mining equipment in 25%. Moreover, last week it became known about the suspension of mining activities by the Russian holding Russian Mining Coin (RMC) in light of the «uneconomical in the current environment». As explained by one of the founders of RMC Dmitry Marinichev, of the sharp collapse of the stock market the cost of electricity exceeded income from cryptocurrency mining.
Increased the energy cost of mining has also resulted in the completion of the program of subsidizing of electricity to bitcoin miners in Norway. According to the biggest local newspaper Aftenposten, 21 November the tax regulator in the country has decided to raise taxes for companies engaged in mining cryptocurrency — now if they pay a 0.48 era ($0.056) per kilowatt, starting from January next year, the miners will have to pay 16.58 era ($1.93). In a study of mining company Northern Bitcoin it is noted that on extraction of a single bitcoin in Norway takes about $7700.
The representative of the Parliament Lars, Haltbrekken stressed that «Norway cannot continue to provide such high tax benefits of such «polluting» the production of cryptocurrencies, mining bitcoin. This requires huge amounts of energy, which in turn produces large greenhouse gas emissions.» In response to the abolition of subsidies, the chief economist of the organization ICT Norway Roger Sierva told Aftenposten that this was shocking news for the mining industry in the country, such budget changes in the terms were adopted without any discussion, consultation or dialogue with representatives of the industry. The result of the abolition of subsidies crypto currency miners will be forced to work in Sweden or Denmark.
Moreover, the study of American scientists from the Institute of science oak ridge have shown that for mining cryptocurrency using PoW algorithm on average required more energy than is spent on mining. The researchers compared the parameters obtained in the production of these coins, like bitcoin, ether, litecoin and monero, and the amount of energy consumed during the extraction of aluminium, copper, gold, platinum and rare earth metals. So, for the mining of cryptocurrencies in the amount of $1 required: 19 MJ per bitcoin, 15 MJ per litecoin, 11 MJ for the production, monero and 9 MJ in the air. At the same time for mining of the same amount required: 122 MJ for the production of aluminium, 9 MJ for rare earth metals, 6 MJ for platinum, 5 for gold MJ and 4 MJ for the extraction of copper. Thus, the production of all minerals with the exception of aluminium takes less energy than mining cryptocurrency.
Significant losses also misleading as manufacturers of specialized equipment for mining. AMD and Nvidia are the leading manufacturers of graphics cards for mining, warned investors that as a result of the collapse of the cryptocurrency market demand for their products plummeted and revenues for this quarter will be lower than expected.
In the financial report for the third quarter head of Nvidia Juan Gensun explained that the company had overestimated the stock market, causing the value of excess inventory has increased five times and exceeded $70 million. The reason was the fact that the prices of video, who grew up during the «crypto-boom», did not have time to slow down in light of lower demand. As a result, on the day following the publication of the report, Nvidia shares fell by almost 17%.
Nvidia in August of this year noted the low yield from the sale of specialized equipment for mining. In connection with the company’s management made the decision to cease market-oriented mining of cryptocurrencies. A similar situation exists with the main competitors Nvidia — chip manufacturer AMD. According to the financial report of the company, the demand for equipment for mining cryptocurrency in the third quarter of 2018 continues to fall, and total revenue decreased by 14%.
As said the analyst, RBC Capital Markets Mitch Stevens in the last quarter of high-performance graphics card for mining brought users substantial profit, but market is now a totally different situation. According to the estimates of the threshold payback, for example, ether is the most profitable cryptocurrency for mining — is $175. However, at the current rate of $115 miners networks operate at a loss. According to experts, the negative consequences of the collapse of the cryptocurrency will also be observed not only in this but also the next quarter.
In such circumstances, the private mining becomes unprofitable, because it brings profit only to those market participants who are willing to mine cryptocurrency on an industrial scale. The head of Enigma and co-founder of cryptocurrency Fund ICG Igor Nurtdinov, noting that the mining market is gradually replacing the «home miners», who are not able to compete with the capacities of large companies. According to the businessman, the current state of the industry is the intermediate solution.