There are a lot of Bitcoin advocates out there who continue to state that Bitcoin is free from government control and that no matter what happens, it cannot be shut down. This may very well be true when the currency first started out, because you could do all of the mining that you need on a standard laptop. Now however, there are mining farms out there and Bitcoin needs a huge range of electrical supplies in order to be mined properly. If Bitcoin does not have access to this electricity then it is ultimately dead, and it would be impossible for people to mine it. With the electrical supply and grid being controlled by the government, it isn’t hard to see that Bitcoin isn’t as immune as people first made out. Bitcoin has a desperate need for electricity and this comes from the POW protocol. POW is described as being a very complex puzzle. Those who choose to mine Bitcoin need to solve these puzzles in order to earn the right to mine Bitcoin. When you are able to solve one of the puzzles, you would then get the right to transfer and claim the reward of 12.5 new Bitcoins. You will face some transaction fees when you do this, of course. When you look at how Bitcoin is mined, you would think that hard-working miners who have really advanced computer systems will win in the end and this is true, but it’s not because the puzzles need a lot of analytical power, it’s actually because of a completely different reason.

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Bitcoin is both a worldwide payment system and a cryptocurrency. It is known for being the first decentralised currency and the system all relies on blockchain technology. There isn’t a single administrator or a bank that controls the whole thing, and that is a super important concept that you need to understand. Of course, POW does generate a series of digits and miners need to figure out how the sequence comes together. This is often called a puzzle but it really isn’t at all. There are no clues to this and it is not logic at all. All you can really do is guess, and no brain power is involved.

Of course, if you are able to guess a lot of numbers per second then you have a much higher chance of guessing the right one before someone else does. It’s very similar to a lottery, in the fact that the more tickets you are able to buy, the more chance you have of winning. You don’t need to have any problem-solving abilities and you don’t need to have any analytical abilities either. You just need to have a computer that is very fast, but very fast computers often need a lot of electricity in order to power them.

What’s even more interesting is the difficulty adjustment. This forces miners to work much harder for their rewards as the price for Bitcoin rises. This makes each sequence much longer and therefore the whole thing is much harder to guess. The idea of Bitcoin being one big complicated puzzle is a complete myth.

Each number that you need to guess is known as being a hash, and the number of guesses that you make per second is known as the hashrate. If you want to try and maintain the hashrate that is optimum for guessing that sequence in good time then you would need a computer that is able to operate at a very high level of efficiency. When Bitcoin prices shoot up, this creates an arms race among a lot of miners and it means that they either have to upgrade their equipment or they have to lose out on their hard work to other miners.

The computer hardware industry really has responded to this demand and the days where just about anyone could mine Bitcoin are long gone. These days, you need to have a rig that is specifically designed for mining. You also need to have an ASIC which is specific to Bitcoin mining.

Those who have a lot of money are able to take advantage of this, and the more people that work together, the more likely they are of being able to solve the sequence. These are known as being pools, and they share resources so that they can gain control of the market. There are three pools at the moment and they add up to over 55% of the network. On top of this, 80% of the mining is done in China but it is growing in other countries. This includes the US, Venezuela, India and Japan. Ultimately, countries that have a huge electrical industry are really at an advantage.

Bitcoin mining uses up the same amount of electricity as the Czech Republic.  As the price goes up, so will energy consumption and some governments are even starting to put an end to mining by stopping them from accessing the electrical grid. The Central Bank for China has stated that they want to curb mining by limiting the access that they have to power. They want to make sure that miners do not have access to lower energy prices, taxes or  even land for mining.

US authorities are also becoming concerned about mining, and Pittsburgh and New York have already banned mining. There is a growing concern about the environmental cost of Bitcoin and in February, the state-owned supplier for Italy refused to supply any energy to those who wanted to mine Bitcoin and this is all because of the amount of energy that it uses and the impact that this has on the environment. They have stated that they want to start decarbonising and that they also want to create a sustainable environment. Bitcoin, clearly, does not fit into this idea.

Hydro-Quebec in Canada have taken the step to start rationalising electricity. They do this by picking the miners that they want to try and support and they also try and refuse mining to others as well. They want to try and find the best players and ones who will offer the most benefits to the country, and give them the priority when it comes to energy. This helps to stop people from really taking advantage of the grid. Bitcoin miners have stated in the past that they believe the grid needs to provide them with as much energy as they need, providing that they can pay for it. This is not the case at all, and all of this is just starting to come to light now, with many countries taking action against miners.

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