Tuesday, February 27

Noti Hash: Best of 2021 in Bitcoin Mining

Noti Hash is CryptoNoticias’ Bitcoin mining newsletter. It is published on our website every two weeks, being today, Thursday, December 30, 2021, the eleventh edition to be published, the last one in 2021, at the height of block 716,500.

The year is over! A 2021 full of ups and downs for Bitcoin mining, but that ultimately ends with the best of conditions for this sector.

Mining businesses and companies prospered like never before, creating mutual funds and going public, seeking new business opportunities and forming alliances between companies and industry leaders.

Environmental criticism was overcome by demonstrating the efficiency of energy consumption in many mining farms, often with alliances with the oil and electricity sector.

Processing power was geographically decentralized, due to the great mining exodus from China to other territories. During that period, the network had its biggest lag in 10 years, but the Bitcoin network was resilient and managed to overcome.

More Bitcoin mining equipment was produced and purchased despite the microprocessor and supply chain crisis. Many people even started mining from home, something that had not been seen since bitcoins (BTC) could be mined with a CPU or a laptop, in the early years of cryptocurrency.

All-time highs were reached in processing power and network difficulty, at various times throughout the year, with few periods of congestion and high commissions.

Last but not least, the miners participated in important voting and consensus processes to implement updates in the network, as was Taproot. Incredible!

How does 2021 close for Bitcoin mining?

Before reviewing the most relevant news of 2021, let’s talk about the present.

Processing power and network difficulty have set a new all-time high in the last week. However, the network has become congested in the last days of the year and transaction fees have increased slightly.

Number of transactions on the Bitcoin mempool from December 20 to 29, 2021. Source: Glassnode.

At this time, according to Mempool.Space, the commissions range between 11 and 14 satoshis per byte of information, which is equivalent to between 70 and 80 US cents. It is important to remember that depending on how heavy a transaction is, the total cost per commission will be deducted.

The most recent difficulty adjustment occurred on December 25, leaving the mining difficulty at 24 T, one of the highest rates in the history of Bitcoin, according to data from Glassnode.

This setting, according to data from BTC.com, occurred when the processing power or hash rate (hash rate) of Bitcoin miners was located at 173 exahashes per second (EH / s), the highest in the history of Bitcoin.

Hash rate or processing power of Bitcoin miners in 2021. Source: Glassnode.

However, currently the hash rate stands at 171 EH / s, a slight setback that does not detract from the levels that Bitcoin has reached in 2021.

Bitcoin mining difficulty throughout the year 2021. Source: Glassnode.

Although we are momentarily going through a period of mild transaction congestion, the total commissions collected by miners have been reduced during this year.

This may be due to the impact of the Lightning network, which has increased its user base and allows small and large amounts of BTC to be transferred between peers for negligible commission costs.

Total commissions per transaction (in BTC) on the Bitcoin network during the year 2021. Source: Glassnode.

Perhaps, because users are using more Lightning than mainnet transactions, miners have been accumulating significant amounts of Bitcoin. This week CryptoNews reported how miners would have at least 1.2 million BTC in their savings, approaching the all-time high of 1.77 million BTC reached in 2020.

Now, according to the firm Braiins, miners have more than 800,000 BTC in their reserves, while mining pools have more than 1.8 million BTC in their coffers, equivalent to 84 billion dollars according to the CryptoNews price calculator.

Volume of savings in BTC from miners and mining pools. Source: Braiins.

This is how the year 2021 closes with respect to the distribution of the processing power of the Bitcoin mining groups or pools, where Foundry is positioned as the most powerful:

Hash rate distribution among Bitcoin mining pools. Source: BTC.com.

What was the highlight of the year 2021?

Without a doubt, China’s ban on Bitcoin mining, along with the migration of miners and companies in the sector to other territories, was the highlight of the year.

Miners have migrated to countries like Kazakhstan, the United States, Iran, and even countries like Argentina and Paraguay. In fact, CriptoNoticias recently reported on how Latin America could become one of the friendliest places for this activity, with the aforementioned countries and others such as Venezuela and El Salvador offering opportunities.

In Venezuela, the existing legal regulation has stabilized the mining activities of Bitcoin and other cryptocurrencies, which was previously persecuted and was full of irregular events.

Now, officials who commit irregularities could go to jail, and the mining union is much calmer, receiving the support of the National Cryptocurrency Superintendency (Sunacrip).

Venezuela may open up much more in 2022 to foreign investment in Bitcoin mining. Specialists such as Aníbal Garrido and Alexis Lugo confirmed it to CriptoNoticias.

Meanwhile, in El Salvador, with the approval of Bitcoin as legal tender, it was known that they are mining bitcoin with volcanic energy and CriptoNoticias was able to verify it.

All this movement in Latin America has led companies to open new positions and offer jobs in the field of cryptocurrency mining, an opportunity that surely many Hispanics will know how to take advantage of.

Despite China’s prohibitions on mining, and the departure of major companies such as Bitmain, the authorities of that country they might be regretting, as we also recently reported, that many miners were operating in that territory from underground.

What were the technological and operational advancements in Bitcoin mining in 2021?

The Bitcoin mining hardware industry was not severely affected by the microprocessor production crisis and supply chain delays.

On the contrary, interesting technological and operational initiatives emerged for this sector, related to both the efficiency of mining hardware and environmental sustainability, as well as data visualization tools for the general public.

Bitcoin mining grew but… is it a threat to the environment?

One of the main arguments against Bitcoin mining is its high energy consumption and its environmental impact. However, part of the challenges that mining managed to overcome during 2021 was this debate, although there will always be whoever continues to hold this criticism.

In the context of the search for new destinations to mine, Bitcoin miners managed to adapt to local circumstances and make your energy consumption more efficient in terms of environmental impact.

This is especially palpable in the state of Texas, where the oil and gas industry opened its doors to Bitcoin mining so that, with surplus production, miners could carry out their operations.

This dynamic was doubly beneficial. It allowed Bitcoin miners to access cheap energy, which makes their activity more profitable; while it allows the oil industry to get rid of surplus natural gas, which they could not find a way to get rid of in an affordable way.

The benefits have been recognized even by Senators like Ted Cruz, although others like Elizabeth Warren still criticize Bitcoin mining for its positive carbon footprint.

Even so, the consensus among specialists such as Nic Carter y Lyn Alden point to what Bitcoin does not have the environmental impact that its critics claim.

Carter asserted this year that critics of Bitcoin are confused into thinking that your energy consumption depends on the number of transactions, which he later argued with a study refuting Bitcoin’s alleged environmental threat. Meanwhile, Lyn Alden claimed earlier this year that Bitcoin mining uses less than 0.1% of the energy generated globally.

All Noti Hash deliveries in 2021

Photograph of the year

The most prominent photograph of the year was taken by Ding Gang for the Caixin newspaper, in a report on the dismantling of mining farms in Sichuan province, China, in June this year.

A woman carries power supplies from a mining farm in Sichuan, China. Source: Ding Gang / Caixin Global.