The history of cryptocurrency mining dates back to 2009 when Satoshi Nakamoto founded Bitcoin. Initially developed so that anyone could participate in verifying Bitcoin transactions with their CPUs, the process of mining Bitcoins took an unexpected turn.
Less than three years after Bitcoin was launched, it became apparent that it was no longer possible to mine Bitcoins with CPUs and make profits. GPU mining was introduced and later replaced by ASIC mining.
With the golden age of Bitcoin mining fading away, experts are now concentrating on its implications and what becomes the future of mining cryptocurrencies in general.
Mining Farms Relocate in Search for Cheap Electricity
Between 2016 and early 2017, most crypto mining farms were based in China. There was cheap, subsidized electricity in most places across rural China. However, China started cracking down on crypto mining farms in late 2017.
The cost of mining cryptocurrencies in the country was raised as mining farms faced higher electricity costs and taxation. By early January 2018, a lot of Bitcoin mining companies had relocated some or all of their resources to other countries with cheap electricity.
Canada, Iceland, and Eastern Europe countries are the new destination for large-scale crypto mining companies. In the near future, crypto mining farms will continue to relocate as different governments hike electricity costs for miners.
While rising electricity cost is a reason for fleeing China, many crypto mining companies were forced to close down their factories due to the unfavorable political environment. China banned ICOs in September 2017 and before the end of the year, they decided to shut down operations of cryptocurrency exchanges.
As for crypto mining farms, the country is yet to place an official ban on crypto mining activities. However, the government has been raising electricity costs and taxes to force out mining farms out of the country. China is not the only country with an unfavorable environment for miners. Countries like India and Egypt already banned mining activities.
As more countries continue to tax or make it difficult for mining farms to thrive, the companies will continue to relocate for safe spots.
Shift to Proof of Stake Mining Algorithm
Cryptocurrencies like Bitcoin use a Proof of Work mining algorithm that asks for capital-intensive, energy consuming hardware. Initially, Bitcoin mining was cheap and a lot less energy consuming. However, the burden of mining cryptocurrencies has become unbearable.
Environment-friendly cryptocurrency networks have been ditching the PoW algorithm for an energy efficient Proof of Stake Algorithm. Ethereum is already set out to ditch PoW for the PoS mining system.
As the energy-costly mining algorithm continues to be criticized, new networks won’t be using it. This will likely change the path of mining Bitcoins. Cryptocurrency miners will no longer be required to purchase expensive hardware. The Proof of Stake algorithm uses a system where miners are picked randomly or based on a special system. There is also no block reward with the PoS system, but selected miners may be eligible to earning network fees.
The growth of Browser Mining Scripts
One of the biggest trends in 2017 in the crypto world was the use of scripts embedded on browsers to mine coins like Monero. Coinhive was the dominant mining script last year, and it continues to attract wide adoption in 2018.
Statistics show that crypto mining scripts have surged by more than 700% in the last six months. There are more than 10 cryptocurrencies that can be mined using these scripts. With cryptocurrencies continuing to rise in value, attackers continue to inject Coinhive as malware on unsuspecting users’ browsers to mine cryptos secretly.
Crypto mining software is also used by legitimate website owners as an alternative way to monetize a site rather than use ads. Learn what to mine for highest profitability with these scripts and general mining hardware. Some game developers are now also opting for mining scripts as opposed to spamming gamers with ads.
Death of Cloud Mining
Cloud mining companies are slowly exiting the crypto mining scene. Companies once revered as legitimate and profitable mining businesses have become unable to provide profitable mining rewards to investors.
Popular cloud mining companies like Genesis mining and HashFlare are tainted with poor ratings. And unlike most companies whose poor ratings come from bad services, cloud mining companies are facing the wrath of investors who are yet to come to terms with the fact that they may never break even. Some of the best mining hardware in 2017 can no longer be used to mine Bitcoin profitably in 2018.
Some popular cloud mining companies like ViaBTC have already shut down. ViatBTC shut down following China’s decision to root out crypto businesses in the country. However, existing cloud mining companies may soon start closing down as investors stop investing their money in the companies.
With so many cloud mining companies attracting low reviews for unprofitable contracts, very few people will continue investing in them. Low investments and unprofitable mining hardware will eventually lead to the death of cloud mining companies.
The rise of Premined Cryptocurrencies
Mining cryptocurrencies are not likely to end anytime soon. However, it may reduce dramatically as new cryptocurrency networks adopt new coin distribution methods. The latest trend with crypto networks is the distribution of pre-mined coins, especially when dealing with ICO tokens.
There are more than 1500 ICO tokens developed from the Ethereum network alone, and most of them are pre-mined. A lot more cryptocurrencies are also pre-mined. ICO startups pre-mine coins to have enough to distribute during their crowd sales. If these coins continue to grow in popularity, traditional crypto mining will decrease.
The cryptocurrency mining spectrum continues to change in 2018. There are lots of new developments, and some of the old trends like cloud mining are becoming unpopular. For Bitcoin miners, there are fewer ASIC miners that can produce profits, which makes the field less popular.
However, crypto miners have also started to capitalize on altcoin mining. Mining Monero, ZenCash, and other altcoins are fast taking shape. Most of the altcoin require affordable mining hardware and some, like Monero, can be mined with a simple browser extension.