Friday , October 7 2022

The crash brings the miners in crisis



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Digital Currency Crash Bitcoin starts a downward spiral: Many Bitcoin producers give up because the business is no longer worthy. This puts the system in need, but has positive consequences for energy consumption.

Thomas Schürpf

Many Bitcoin miners are under pressure from the low prices. (Image: Alessandro Bianchi / Reuters)

Many Bitcoin miners are under pressure from the low prices. (Image: Alessandro Bianchi / Reuters)

Gold rush is over: The main digital currency Bitcoin has lost 75% of its value this year. Since the beginning of November, the losses are heavy. To pay $ 6000 for Bitcoin two weeks ago, you can get it now for less than $ 4,000. The price crash affects almost all crypto courses as much. According to the web portal Coinmarketcap.com, which lists around 2000 digital currencies, has shrunk the total market value of these currencies from the top of January from $ 831 billion to just $ 121.6 billion.

The consequences for the entire system are significant. Prices are currently so low that in many cases, the mining industry needed to produce crypto margins is no longer profitable, according to an analysis by JP Morgan on November 23.

The miners create the digital currency units in complex mathematical processes on computers or mostly with the entire computer usage. Since they are mainly offset by shares in the crypto curves they produce, their revenues have fallen dramatically. According to statistics from Blockchain.com, miners' revenue has fallen by more than 80% since the beginning of the year. On the other hand, efforts have been high, ie energy costs.

Many miners go for financial reasons. Since the Coindesk Web Portal reports, since the beginning of the turmoil in November, 600,000 and 800,000 Bitcoin miners have shut down their installations or, in any case, temporarily shut down.

Particularly clear are the consequences in China, where more than half of the crypt field is created. Here, many miners are said to have withdrawn in recent weeks, as "South China Morning Post" reports. On-line networks display images and videos of warehouses that apparently cleared the server and disposed of. Even with almost free electricity purchases, the plants are no longer profitable to power.

But capacity reduction is also evident elsewhere. For example, in the United States, the mining company Giga Watt, owned by Dave Carlson, has just applied for bankruptcy because it could not meet the debts that sometimes contain electricity bills.

The miners that currently stay all over the world are not simply replaced by others. This is shown by Blockchain.com's so-called hash rate. This estimates Bitcoin's network total computing power. The chart shows that since the beginning of November a total of 24% of data power has gone lost.

However, the loss of computer power does not necessarily mean bottlenecks in the crypto curves. Because the block chain system provides for the reduction of the required arithmetic data, if less mining capacity is available. That way, fewer computers can generate more digital money. This is to ensure that sufficient units of a crypto currency are available all the time.

Significantly less energy is consumed

A positive effect of the fading computing power is reflected in the energy balance. Because the blockchain calculation requires huge amounts of energy, the amount of power saved is high. Bitcoin Energy Consumption Index currently indicates a power consumption of 54 terawatt hours per year for Bitcoin. This is well below the estimated 73 terawatt hours (-26%) in early November.

But current consumption is still surprisingly high. This corresponds to almost all of Switzerland's electricity consumption (2017: 58 TWh per year).

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