TD₿: Bitcoin Mining 101 by Peter McCormack with Harry Sudock
TL;DR Bitcoin mining companies are improving communities, the efficiency of the energy grid, and even the impact of energy use itself.
Hey Bitcoiners,
A lot of people were celebrating when Bitcoin's hash rate hit an all-time high last week, and for good reason! This means that Bitcoin’s security has never been stronger than it is right now.
Today, it requires more hash than ever before for a bad actor to perform a successful 51% attack. It takes more energy than ever before, more specialized ASIC machines than ever before, and on top of that, it still takes a tremendous amount of investment, CapEx, and skilled labor to set up a facility to successfully perform a brute force attack on the network.
But there is one other dynamic to consider here, a higher hash rate also means that miners’ profit margins are being squeezed further. As Bitcoin's hash rate and difficulty eclipse all-time highs, the price of bitcoin is currently down -60% YTD. This creates a situation where the price of the commodity that miners are producing has fallen off a cliff while Bitcoin’s difficulty is rising, eating into miners’ profitability even more. This represents a “double-whammy” for these cash-strapped miners.
In fact, miner revenue, as measured by Luxor’s Hashprice, is now down -83% in the last 12 months, and currently sits at an all-time low.
As everyone else is celebrating the hash rate all-time high, miners are grimacing as their profits are currently getting squeezed from all angles. This could create a situation where more mining operations have to close their doors and sell their BTC holdings if their revenues don’t start to improve soon.
If you are new to Bitcoin mining, then I recommend listening to this great podcast with Harry Sudock titled Bitcoin Mining 101. (09/22/2021)
The one bright side to all this is that only the strongest, most efficient miners will survive. Only the very best operators, with the very best balance sheets, and the most efficient facilities, will live to tell the tale of how they made it through the great miner squeeze of 2022.
The less efficient miners will eventually capitulate, which in the past has occurred near the bottoms of Bitcoin bear markets.
Bitcoin mining is truly a game of survival of the fittest, and right now, the creme is being separated from the crop. By the end of this squeeze, Bitcoin’s security layer will be more efficient than ever before. 💪
Tick tock next block,
Cory Klippsten
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Quote of the Day
“Bitcoin is an efficient machine for converting arrogance and leverage into humility and long-term thinking.” - Stephen Cole, Angel Investor and VP at Trammell Venture Partners
Job of the Day
upnup is looking for a Social Media Manager to join their team. This position will be responsible for the success, growth, and brand consistency of the upnup media channels. The role sits at the intersection of a social media manager and a paid advert manager (no community management!)
Not your particular skillset? Check out all the Bitcoin jobs at bitcoinerjobs.com.
Featured Event
Wednesday — come to the Kansas City Bitcoin Meetup and grab some beers with Bitcoiners at Tanner’s in Shawnee from 6:00-9:00 pm. This meetup will feature a brief agenda discussing the latest happenings in Bitcoin, with plenty of time for socializing. All levels of Bitcoiners are encouraged to attend!
Not in town for this? Check out all the Bitcoin events at bitcoinerevents.com.
Meme of the Day
