Does Miner Consolidation Harm the Crypto Industry?
Main page Analytics, Mining, Bitcoin

The fall of the bitcoin hash rate and the cost of the first cryptocurrency leads to the fact that more and more individual miners are out of the game.

The mining industry is definitely experiencing a decline along with falling cryptocurrency prices. The cost of equipment combined with the amount of electricity needed for mining has led to the fact that this process becomes unprofitable for individual crypto enthusiasts. Indeed, some experts believe that the miners only temporarily leave BTC and look for more profitable coins in the interim period until the prices for the first cryptocurrency become more attractive.

But the fact remains, at the beginning of the year the mining experienced a boom, whereas by the end of 2018 this process was rapidly losing popularity. According to Autonomous Research LLP, at least 100,000 individual miners have closed. An estimated 1.4 million servers have been shut down since the beginning of September, according to Fundstrat Global Advisors. "We note that the BTC price would need to re-accelerate substantially for mining to once again become self-funding, as it has been for most of Bitcoin’s history," said Fundstrat.

Mining Operators in China Sell Mining Machines by Weight

Chinese media have noted that old ASIC machines, such as the Antminer S7 and T9, have reached the so-called loss point. The profits they bring can no longer cover the costs of local miners for electricity. Older ASICs sell, measuring their cost by weight. And the search query “buy miners by kilograms” is gaining popularity in local search engines.

Almost all blockchains demonstrate the hash rate. And even for a long time, bitcoin hash rate began to decline with falling quotes. It is worth noting that part of the first cryptocurrency hash rate was initially redeployed to the "war" between the bitcoin cash forks. But when ABC won, the bitcoin hash rate continued to fall anyway.

Who Will Win the BCH Hash War?

The main risk of the falling hash rate is the centralization of mining. Consolidation takes place between individual players, notes Bloomberg. As many small miners leave the market, the main power is concentrated in the hands of a small group of industrial miners. This, as the bitcoin cash example shows, can have extremely negative consequences, ranging from destructive forks, to the risk of a “51% attack”. Large miners are unlikely to deliberately destroy the source of their income, but for crypto enthusiasts, this trend can be a reason to leave the digital asset.

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