Cryprocurrency mining and trading have become a hype in 2017 when the price of Bitcoin exceeded beyond expectation. Until September 2018, Bitcoin miners have managed to gain more than $4.7 billion in revenue, a number that is indeed huge and increasing.
However, mining involves algorithms solving complex equations, requiring computers dedicated for the job to be effective. And with the rise of electricity prices, this have rendered cryptocurrency mining to almost completely unprofitable, even for the world’s biggest pools.
According to a blockchain research Diar that published data mapping profitability of mining Bitcoin, for the first time, it appears that small-time cryptocurrency mining operations, who pay retail rates, are no longer profitable.
Besides electricity costs, other factors include: increased competition and computing power.
According to Diar, revenue by Bitcoin miners for the first half of 2018 exceeded the total revenue earned for all the whole of 2017. Adding the figures from Q3 2018, Bitcoin mining revenue exceeds 2017's numbers by more than $1.4 billion.
Despite these revenue earnings, mining profitability has taken an enormous hit since the start of 2018. Miners started earning lesser and lesser, up to a point where they culminated in zero profit for September 2018.
One major contributing factor to the declining Bitcoin mining profitability is the skyrocketing network hashrate. In mid-September, the Ethereum World News reported that the Bitcoin network hashrate had doubled since May 2018, up from 28 quadrillion hashes per second to more than 57 quadrillion hashes per second.
This is a huge burden for small miners.
Despite miners still earn fees from their activities on top of the base block reward. If anything, with smaller miners leaving the scene, larger mining operations with larger resources are occupying the empty space left by those small miners.
All of this adds up to a market situation that favors the survival of large mining pools such as those owned by Bitmain over smaller mining operators.
According to Diar, Bitmain’s mining facilities could control a significant portion of the Bitcoin blockchain’s hashrate, with the ultimate goal of ensuring that mining operations remains profitable for all miners. This can be possible with Bitmain "swinging" its Bitcoin hashrate between countries, averaging out electricity costs and maintaining a sense of profitability across all of its facilities.
According to the research, China is one of the few countries which offers retail energy price packages that make commercial sense for Bitcoin mining, with a midpoint cost of about $0.08/kWH.
That notwithstanding, rents, salaries, equipment, and other overheads that could quickly render small mining enterprise insolvent.