The United States took a position as the new world power in digital mining.
Argentina, El Salvador and Paraguay want to capture the attention of the miners expelled by China.
The Bitcoin mining ecosystem proved in 2021 that it grows and strengthens. This after resisting and recovering from the attack by China, one of the largest and most powerful nations on earth, which banned digital mining that was generated in its territory.
Today we can be sure that the Bitcoin’s defense system is robust and it provides a reliable base layer of processing power, allowing more cryptocurrency to be issued in a decentralized system, at all costs.
When China banned digital mining, the main cryptocurrency’s network decreased your computing power by 50-60%. Now the ecosystem has the assurance that the network can maintain itself with this level of deterioration and that it can also recover in a short time.
During the year, several events related to Bitcoin mining occurred that also demonstrate the strengths that the network has to protect its integrity. Based on this, we review 2021 through six events that reaffirm that the industry closes a successful year.
1. America overshadowed China for the first time
Earlier in the year, Bitcoin’s hash rate had risen steadily, going from roughly 140 exahashes per second (Eh / s) to an all-time high of over 171.3 Eh / s. At that time, in China was meeting the largest Bitcoin mining power, responsible for almost half of the global hash rate.
However, everything changed when the government declared its first measures against digital mining in June and Bitcoin miners began to leave the country. Two months later, the situation became complicated when the Central Bank of China reported that all activities related to cryptocurrencies were considered “illegal”, including, of course, commerce and mining.
From then on, the great exodus of companies related to the ecosystem began. And that’s how, a month later, The United States concentrated more than a third of the world’s Bitcoin mining, displacing China as the territory that centralized this activity.
The United States raised its mining power to an average of 42.7 Eh / s, while the percentage produced by the Asian country fell to 0, although some miners could remain in hiding.
2. The industry did not stop, even though it was more difficult to mine
After a precipitous fall of almost 60% less in the hash rate of Bitcoin, compared to its all-time high of 171.3 Eh / s, the network’s processing power had to increase more than 114% in five months to reach, in December, a new record of 181 exahashes per second.
Meanwhile, the network mining difficulty, or the cryptographic complexity threshold for Bitcoin miners, also progressively increased over five months. It means that, for 18 weeks, from July to December 2021, Bitcoin mining difficulty rose 52.48%, making the longest upward adjustment streak in the last three years.
For more than 126 days in 2021, miners encountered increasing difficulty finding new blocks of bitcoin and earn rewards. This, taking into account that the network protocol is configured to adjust the level of difficulty every 2016 blocks, or approximately every two weeks, with the idea that the new blocks are extracted at a stable rate.
Despite the long streak of upward adjustment, the industry did not stop and the miners increased their profits above 57%. And therefore there was a net reduction in the mandatory selling pressure to cover its operating expenses.
3. Miners hold bitcoin and cover expenses with dollar loans
In 2021, bitcoin miners became even more committed to a strategy that they began to implement in March 2020. Looking to capitalize on the shortage of bitcoin, nine of the largest companies dedicated to digital mining offered their BTC as collateral to apply for a loan in US dollars through a financial institution or the public sale of shares.
These nine companies from the United States and Canada refused to liquidate their bitcoins, on the contrary, they bet that the price of the cryptocurrency will continue to rise. Therefore, they relied on the traditional financial system, based on uncontrolled monetary issuance and inflationary pressure, to invest it in mining farms that mine bitcoin focused on scarcity.
That’s the strategy that Riot, Bitfarms, Hut8, Greenidge, Argo, HIVE, Cleanspark, BIT Digital, and Marathon Digital Holdings implemented. All are among the largest digital mining companies in the United States and Canada, and in 2021 they refused to put aside their earned rewards in BTC.
As miners are the ones who must bring new coins to market, their refusal to do so further reduces an already scarce supply.
Mining pools also joined in on this strategy and together owned at least 1.2 million BTC at the close of the first half of December, just 500 BTC from hitting a new all-time high.
4. A state begins mining Bitcoin with volcanic energy
In June, El Salvador’s President Nayib Bukele said the country would use renewable energy from its volcanoes to mine Bitcoin and three months later announced that the state had used geothermal energy to issue new currencies. Thus, the Central American country became the first to use volcanic activity for digital mining.
CriptoNoticias visited the Berlin geothermal power plant in November to see how volcanoes provide energy to a container of 300 Bitcoin miners.
Although these miners are only the first step that the country has taken in terms of digital mining, the state hopes to create more farms in the future and power them with geothermal energy in some of the 170 volcanoes in El Salvador.
5. The rise of large publicly traded Bitcoin mining companies
Publicly traded Bitcoin miners reported extraordinary gains made during the year. Riot Blockchain, which is listed on Nasdaq, mined 466 bitcoins in November, an increase of about 298% over the same period a year earlier, the company said in a release.
The firm also quadrupled its BTC production in September, when they managed to extract 406 BTC. This figure represents a rise of 346% compared to what was registered in the same period of 2020, when only 91 BTC were mined.
As of November, the company, which is among the largest miners in the world, had produced 3,387 BTC, 262% more than in the first 11 months of 2020. Its deployed fleet of nearly 30,000 computers was producing more bitcoins and adding 4,464 BTC to its warehouse.
In addition, the firm acquired the largest Bitcoin mining facility in North America and expects to reach a hash rate of 7.7 Eh / s by the end of 2022, which is double the mining capacity it has in store. the actuality.
For its part, Canadian Bitfarms, another Nasdaq-listed bitcoin mining company, said that in 2021 its production had exceeded 3,000 BTC. The company mined 339 BTC in November, up from 343 the previous month, and increased its capacity by 16% in the same period. The Bitfarms fleet currently generates 2.1 Eh / s of computational power.
Bitfarms announced that in before the end of 2021 would start bitcoin mining in Paraguay and then continue with Argentina. It currently operates one plant in Washington, United States, and four in Québec, Canada.
After realizing a gain of more than 1,000% in 2020, Marathon Digital, listed on Nasdaq, in 2021 concentrated its efforts on deploy the largest mining operation in North America to one of the lowest energy costs thanks to its access to “cheap” energy.
Marathon Digital has located its Bitcoin mining farm next to the Hardin Generating Station, a 105 MW power facility located in the US state of Montana. There it has the capacity to deploy up to 30,000 mining equipment that will generate 3,320 PH / s.
In 2021 the “digital gold” fever revalued companies dedicated to Bitcoin mining, among these is also Stronghold, which made its debut this year on Nasdaq, increasing the value of its shares more than 50% since its IPO.
This year, the firm made enough profits to acquire more than 9,000 equipment for digital mining, which it will put into operation at its facilities in 2022.
Another Canadian miner that has made a name for itself in recent times is Hut 8 Mining, which completed a listing on Nasdaq in June 2021. It focuses on bitcoin and ethereum and in the middle of the year it mined 326 bitcoins, representing an average production of 10.5 BTC per day.
Hut 8 Mining is among the large publicly traded Bitcoin mining companies, along with Argo and Marathon, whose shares posted good momentum for much of 2021.
6. Latin America, territory with potential for Bitcoin mining
Latin America is emerging as one of the regions that offers the best conditions for Bitcoin mining to continue to grow and strengthen. In 2021 the regulation of digital mining showed progress in El Salvador, Paraguay and BrazilCountries hoping to capture the attention of miners who had to forcibly leave China.
In El Salvador, for example, there is already a “plan to offer facilities to mine Bitcoin with very cheap energy, 100% clean, 100% renewable and with zero emissions, taking advantage of volcanic activity”, as Salvadoran President Nayib Bukele pointed out to midyear.
In Paraguay the Senate approved a bill that has yet to be approved in the Chamber of Deputies, and then regulated by the Executive Power. The regulations classify digital mining as an “innovative digital industry” that is likely to receive the incentives granted by the national government for such purposes.
As detailed in CriptoNoticias publications, cheap and abundant energy from Paraguay makes cryptocurrency mining a profitable activity in the country. For this reason, many companies from abroad have approached to evaluate the potential offered by their territory. But nevertheless, Paraguayan media They highlight that the regulators have not yet given the green light to the regulations, so we will have to wait for this to happen.
Argentina too stands out as a Latin country with potential for Bitcoin mining. In fact, the Canadian company Bitfarms Ltd. is advancing its plans to build a gigantic Bitcoin mining center in this country, a project it has been working on since October last year.