Bitcoin Mining: Where Crypto Meets Infrastructure
When Bitcoin burst onto the scene in 2009 it was shrouded in intrigue. An unknown programmer working under the pseudonym Satoshi Nakamoto had created a digital currency, conjuring images of a pixilated coin straight out of a Nintendo game. The reality of Bitcoin is vastly more complex than this. The process of mining a bitcoin has been described as “painstaking, costly, and only sporadically rewarding”. So, how are these “pennies from heaven” mined and what could it mean for the future of our industry?
How Do You Mine a Bitcoin?
Bitcoin mining is complicated. A miner must solve a highly complex maths problem by utilising computer power to generate a number that lands closest to a specific 64-digit hexagonal number (also known as a hash). The first miner, or group of miners, that generates the hash is rewarded with 6.25 Bitcoins (that’s currently $42,900).
An example of one of these “hashes” is:
Every hash generated adds a “block” to the Bitcoin blockchain. As of July 2021, every new block generated was worth more than $205,000. You can read more about this tricky process here.
What Does This Mean for Our Industry?
In just over a decade of existence, Bitcoin has been through numerous fluctuations in value, with some drawing the conclusion that it is far too risky to be secure investment for infrastructure companies. In early August 2021, the value of Bitcoin dropped by $11,000 in a single day. However, the infrastructure demand that goes hand in hand with Bitcoin mining is not something we should turn a blind eye to. Especially with El Salvador’s announcement earlier this month that Bitcoin will be made a national currency within its borders, it is vital that our industry is in step with cryptocurrency developments.
Bitcoin mining requires electricity. A lot of it. In order to secure the computer power necessary to generate an accurate hash, huge amounts of electricity are required. Then, to keep these computers cool, large amounts of cooling is needed, requiring even more electricity. According to Benjamin Jones, professor of economics at the University of New Mexico, mining Bitcoin requires a level of electricity that “has historically been more than [the electricity used by] entire countries, like Ireland…We’re talking about multiple terawatts a year of electricity being used just for Bitcoin.”
The infrastructure industry can and arguably must, be a part of this story. By investing in eco-friendly power alternatives to coal, the power generated to mine Bitcoin could have its carbon footprint reduced massively. Additionally, if other countries join El Salvador in making Bitcoin legal tender, there is potential for huge mining centres, cooling systems and supercomputer storage facilities to boom.
Business Writer at Foresight Works