In about 40 days, Bitcoin will undergo a once-every-4 years event known as Bitcoin mining. Bitcoin mining is a 50% reduction on the bitcoin network in block subsidy rewards.
This upcoming halving however is proving to be different from those preceding it and is set apart from other halvings for a number of reasons:
- It is the most widely followed Bitcoin halving ever due to the increase in players from the last halving back in 2016
- Mining industry dynamics – more and diverse players in the space compared to 2016
- 2019 saw increased mining interest especially from institutions as individual miners started to fall off
Back in 2016 the scenario was largely retailers in the bitcoin mining space. Things however are now very different. Institutionalized miners and companies are now the major players in the mining space as barrier-to-entry is now remarkably high – you need more money and more robust systems due to the high mining risks, which basically leaves only those with enough resources to undertake mining activities.
As an example, unbeknownst to many, mining equipment is largely calculated as a cost per terrahash over the equipment cost. Currently, it costs about $20 – $30 per terrahash. When you add in the electricity cost, the ROI becomes unmanageable for retail players.
As a result of this, the geographical distribution of mining has also changed. While China still maintains a 65% bitcoin hashing power, we are increasing seeing other regions, most notably Venezuela, Kazakhastan, and Iran, coming up with increased hashing power, though still not so significant.
A lot of the hashrate is moving to these jurisdictions due to friendly regulations and cheap electricity.
However there is yet another reason why mainland China remains dominant – proximity to Asic manufacturers. Almost all global manufacturers producing these machines are Chinese companies. As a result, its more…