Bitcoin mining farm
Keynote speeches
- The confusing world of cryptocurrency is all about computers, electricity and equations
- Hash rates and mining difficulty can indicate whether the market is weak or strong
- Despite the cryptocurrency crash and high energy prices, there are early signs that the market is bouncing back with high mining difficulty recorded earlier this month.
Have you ever wondered about the mechanics behind cryptocurrency? Meet cryptocurrency, a complex system powered by hash rates, a race to crack code and math. Yes indeed.
If you’re thinking about conventional mining, stop there. Although cryptocurrency mining is reminiscent of the gold rush of the 1800s, the comparison ends there. Crypto mining farms are more like vast areas of computing hardware in data centers.
So how does it all work? Get ready for your crash course in cryptocurrency mining. We will tell you what it is, how it works and what is happening in the market.
Remember, if you’re looking for a simple way to invest in cryptocurrency and want to use the power of AI to do it, download the Q.ai app and check out our Crypto suite.
What is crypto mining?
It is what verifies and adds new cryptocurrency to the cryptocurrency blockchain. To verify the operation, you must first solve a rather complex mathematical equation. Crypto miners are all vying for the chance to be the first to crack the puzzle.
Whichever miner solves the equation first wins the prize: a slice of the digital currency pie. After that, the process starts again. The more miners you have, the bigger the profit margin.
It’s a great system because it keeps the blockchain safe and secure, while miners are rewarded with the cryptocurrency they just mined.
How does this work?
At its core, cryptocurrency relies on good computer hardware and lots of electricity. After that, it gets more complicated.
Many ordinary people are put off by how difficult it is to understand cryptocurrency – and cryptocurrency mining is unfortunately no different. We’ve put the most common lingo into simple terms to help you become a mining enthusiast in no time.
Apparatus
Since anyone can deal with cryptocurrency, you can use an ordinary computer for work. Unfortunately, with so much competition in the market, it is unlikely that you will make a profit.
For Bitcoin, miners use ASIC computers, which are powerful, specially designed machines for mining. For other cryptocurrencies like Ethereum, miners can get away with powerful gaming computers.
Electricity
Fluctuating energy prices reduce or increase profit margins for cryptocurrency miners. Usually, the equipment runs on fossil fuels. Professional mining companies can have their own wind or solar farms to boost their production.
There are huge efforts to green the cryptocurrency industry based on the amount of energy it consumes from fossil fuels. The White House recently released a report showing that global electricity use for cryptocurrency production is 120-240 billion kilowatt-hours per year – more than all of Argentina and Australia combined.
Crypto difficulty
This refers to how difficult it is to solve the mathematical problem needed to add a transaction to the blockchain. The level of difficulty is also determined by how much power or hash rate is used in the network.
A higher difficulty level means more competition and less profit. The advantage of high mining difficulty is that the market is bullish.
Hash rates
Each time a miner tries to solve the code, a hash code is generated. The higher the miner’s hash rate, the more calculations per second it can process and receive rewards. The better hardware you have, the higher your hash rate will be.
The total hash rate between all miners is used as another measure for the overall performance of the network.
How profitable is it?
For a cryptocurrency to be worth it, the profit must exceed the electricity and hardware costs. This is due to the inflated price of gas contributing to high electricity prices around the world, pushing miners’ margins to the limit lately.
Some cryptocurrencies join forces to create mining pools where computing power and profits are shared. Owning ASIC hardware also makes life easier for professional miners.
What’s been going on lately?
Like the rest of the cryptocurrency market, cryptocurrency is all over the place and shows no clear direction for what might happen next. So we’ll take a look at what’s happened over the past few months and you can decide for yourself.
Merger of Ethereum
Last September, Ethereum completed its long-awaited merger and switched the system to a Proof-of-Stake mechanism. With the move, miners were replaced with validators. By putting up their stake as a security deposit, they are trusted to verify transactions.
The merger, though planned for some time, has sparked concerns among crypto enthusiasts that the network will become less secure when verifying new transactions.
The upside? 99% reduction in energy usage for the entire Ethereum network. Given cryptocurrency’s rocky image for environmental credentials, this was a huge move for the industry and the planet.
Crypto winter
Unless you’ve been living under a rock, then you’ll know about the fall in cryptocurrency prices. Bitcoin, the world’s most popular cryptocurrency, has risen from $68,000 in November 2021 to around $16,000 in early January this year.
This is the tip of the iceberg. The fallout from FTX’s collapse is still ongoing, with the SEC charging Genesis and Gemini with illegal unregistered securities. By December of last year, Bitcoin mining profits fell by 70%. All seemed lost.
More carnage lay ahead.
Highest mining of all time
By the way, bitcoin has been rising for the past two weeks and the price of bitcoin is currently trading around $23,000.
The price increase caused miners to flock to the networks again. This caused the mining difficulty to increase by 10.26% to an all-time high of 37.73 trillion hashes on January 15th.
Are we in a bull run? It’s hard to say, especially given the recent dips in the cryptocurrency market. With two new records already set, 2023 is sure to be an exciting year for Bitcoin miners.
Bottom line
Crypto may not be down right now, but many strongly believe that it is definitely not over. If you fit into that camp, then it’s important to learn how things work. You want to make sure you have the knowledge and understanding to make the right financial decision, especially given how volatile cryptocurrency can be.
However, all the research in the world will not allow us to analyze the level of data that AI can do.
That’s why we’ve created the perfect match with our AI-powered Crypto Kit. It invests in a number of different crypto assets through public trusts, which can include coins and tokens such as Bitcoin, Ethereum, Chainlink and Litecoin.
Each week, our AI analyzes large amounts of data and predicts how these trusts will perform in the coming week on a risk-adjusted basis. It then automatically balances the Kit for you based on these predictions.
So, if you want to invest in cryptocurrency with AI, download the Q.ai app today.
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