Not all miners are created equal, and some will be more at risk than others once Bitcoin undergoes its next halving event in May. With block rewards slashed in half next month, taking a 50% bite out of profitability, some participants who verify Bitcoin transactions will be forced to shut down their mining rigs. With mining operations requiring plenty of electricity and dedicated computer gear to turn a profit, Bitcoin educator and analyst Andreas Antonopoulos explains why the big event will leave certain miners on the sidelines while sparing others.
According to Antonopoulos, it’s not about the scale of the operation. Vulnerable miners have a number of factors working against them as the Bitcoin halving reduces the amount of newly created BTC that will enter the circulating supply, making it harder for miners to earn the digital asset.
In a new Bitcoin Q&A video clip, Antonopoulos says the strongest miners are optimized.
“If everybody is running the exact same ASIC and buying electricity at exactly the same price, then when the block subsidy halves, everybody’s profitability drops by half. But it doesn’t drop differently for smaller versus larger operators. The economies of scale come primarily from the ability to purchase lots of ASIC mining equipment at a reduced price and also to purchase large blocks of electricity and situate facilities near inexpensive electricity sources.
From that perspective, larger miners may be and are sometimes more profitable than smaller miners. However, with larger miners, you have other problems, such as, for example, having to make massive upgrades of operating infrastructure when a new, more efficient ASIC miner comes out. Concentrated risk, where, for example, a fire in a warehouse or a flood in a warehouse can take out an enormous amount of ASICs, etc., etc.
So profitability, especially over the long term, depends on a very large number of factors and the economies of scale are not…