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If small Bitcoin mining firms shut shop, is mining monopolization underway?

Rakshitha Narasimhan

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BTC mining difficulty spikes to 16.55; Is mining monopolization underway?
Source: Unsplash

The days when anyone with a computer could mine crypto is long gone. As Bitcoin‘s price skyrocketed, the difficulty surged, and professional mining groups with specialized computer chips and high processing power dominated the industry – Bitmain, for instance.

The recent market bloodbath highlighted another area of concern. The Bitcoin’s price fall has hit miners the most, as they are making fewer profits.

The mining operation F2Pool also recently noted that BTC’s hashrate had “barely flinched” when prices dropped to $3,600 on March 12. The firm further stated,

“However, we saw over the weekend the estimated difficulty change is trending downward. This means some miners are now switching off their machines. As always in mining, it’s the survival of the fittest: New Machines. Cheap Electricity. Low Rent.”

Small mining firms that are not able to bear the expenses are now shutting down, which is resulting in all the big miners monopolizing the industry. The question arises – “Can smaller-scale miners continue to be profitable?”

The mining difficulty stood to 16.55 at present which is making it really hard for small miners to stay in the business. Bitcoin miner and cryptocurrency investor Kris, in a recent podcast, was of the opinion that there was no room for ‘small fish’ anymore in the mining industry. He stated,

“If you look at what mining difficulty is -16.55, it’s insane. Even with the chaos happening around the world, it’s[mining industry] is a very competitive space. There’s no room for the small fish anymore. Whales are coming in and trying to do a hostile takeover.”

This gives rise to another question. Will we see a massive monopolization of power in the hands of big miners as they have the capacity to ride out of the coronavirus storm? Kris, however, was of the opinion that things weren’t going well for big mining firms either. “COVID-19 pandemic is impacting everybody on every level,” he noted.

He further stated,

“The big mega mining farms have to get investment, right? And what most people don’t know is these guys are mining at a loss[….]Whenever you have a big 5-10 megawatt mining facility, your mine, but you don’t sell that Bitcoin right away, you take that Bitcoin and you hoard it.

A Psychology and Journalism graduate, Rakshitha focuses on UK and Indian markets. As a crypto-journalist, her interests lie in blockchain technology adoption across emerging economies.