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One of the largest Bitcoin mining facilities, Riot Platforms, has warned shareholders that the upcoming Bitcoin halving cannot be guaranteed to positively impact its profitability.
Bitcoin is programmed to undergo a "halving" approximately every four years, reducing the rewards for mining new blocks to control inflation. The next halving is set to occur sometime in April, with speculators anticipating a rise in Bitcoin's price. However, Riot Platforms cautioned investors against excessive optimism.
In its 2023 annual report, Riot stated: "While Bitcoin prices have historically surged around these halving events, there is no guarantee that price changes will be beneficial, nor is there assurance they will compensate for the reduction in mining rewards." Riot added, "The revenue we derive from Bitcoin mining operations will decrease, which could have a materially adverse effect on our operating results and financial condition."
Miners must solve complex cryptographic puzzles requiring substantial electricity to earn block rewards, a persistent criticism of the Proof of Work consensus mechanism. It's believed that halving will increase the demand for electricity, thus raising expenses.
Aki Balogh, co-founder and CEO of Bitcoin smart contract provider DLC, stated, "Many miners now find it unfeasible to remain profitable at current electricity prices." He told Decrypt, "Halving doubles the electricity required to produce the same amount of Bitcoin. Fees remain the same, but miners' profitability is halved." Consequently, miners are concerned about their profit margins, particularly those with less efficient machines.
Matthew Niemerg, co-founder of the first-layer blockchain network Aleph Zero, told Decrypt, "Efficiently operated miners, namely those with low energy costs and the latest generation ASICs, will continue to operate, while older generations of ASICs are likely to become unprofitable and shut down for economic reasons. 'Prepare to shut down unprofitable machines,'" he added.
Since the last halving in May 2020, an increasing number of miners have entered the field, leading to a rise in the hash rate, a measure of the computing power dedicated to mining at any given time.
Greg Beard, CEO and Chairman of Stronghold Digital Mining, told Decrypt, "With intensifying competition in the mining sector, we've seen the hash rate grow over five times since the last halving." He added, "So, while everyone is excited about the halving, we've already witnessed a quarter of the mining economy as miners increase machine capacity without Bitcoin prices keeping up."
This underscores the importance of mining efficiency now more than ever.
Beard explained, "Halving will benefit miners with lower electricity costs the most." "With the rise in Bitcoin prices, miners capable of maintaining low costs will win in the halving."
While experts predict that the least efficient miners may have to cease operations, Riot Platforms forecasts that the global hash rate will continue to rise.
Riot's report stated, "We expect that as more mining companies are attracted by this increased demand, the demand for new Bitcoin will also increase." "As a result, with both new and existing miners deploying additional hash rates, the global network hash rate will continue to rise, meaning miners' share of the global network hash rate (and therefore their chances of receiving Bitcoin rewards) will decline.
As miners seek more efficient options, the industry could accelerate its transition to renewable energy to lower energy costs or foster innovation in new low-cost mining machines. |
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Post time 6-3-2024 20:53:02