The crypto community has been expressing its worries over the continuous drop in the value of cryptocurrencies. However, their anxiety is perhaps nothing compared to what crypto miners are going through right now. For the first time, these miners are seeing huge losses from the once very lucrative activity. Mining, which is the primary basis for proof-of-work (PoW) cryptos, ensures decentralization and preserves consensus. In the long run, the lack of profitability can mean disaster to many platforms.
This year’s bear market has dulled crypto miners’ operations as crypto values continue its downward trend. To make matters even worse, hash difficulties have risen, while mining tools have become more costly. The latest nosedive, which has propelled Bitcoin to the below $6,000 mark, has even put more industrial miners to a more difficult situation. These events may result in a serious shakeup in the whole cryptocurrency space.
This is now leading to a significant drop in the number of crypto miners and an increase in the number of huge mining operations. The situation may likely destabilize decentralization, while more platforms become susceptible to 51 percent of attacks. Already, Bitcoin mining is now centered to very few large mining pools like Bitmain’s Antpool, which concerns many crypto advocates. This only makes the situation even worse.
Problems in crypto mining may lead to wider use of proof-of-state (PoS) cryptos or other platforms that utilize alternative consensus mechanisms. With the long-term sustainability of proof-of-work already in question, no noteworthy PoW crypto has been produced in close to three years. While crypto miners are the cryptocurrency space’s most aggressive members, they also hold extensive influence on development and publicity. These miners also have the power to change public opinion regarding the best coin design.
Notably, mining difficulty has gone down alongside profitability. This helps miners recover the drop in value because their rigs are expected to produce more coins. Still, as a first for the world’s number one cryptocurrency, Bitcoin difficulty has seen a drop for nearly six weeks. Majority of this drop may be attributed to “inefficient, unprofitable miners” who have turned off their mining machines. Another contributing factor is that there are 900 fewer nodes running today compared to the same period last year.
On the other hand, the mining profitability decline can potentially cause the crypto prices to recover. Former crypto miners will most probably resort to purchasing crypto on exchanges, which may result in increased demand. Moreover, miners who have remained in operation will have to sell less to recover their fiat expenses, just like electricity, which can lessen supply.
Blockchain tech has been developed to independently adjust to shifting demands while internally mending issues in a decentralized fashion. As soon as problems decrease, Bitcoin and other PoW platforms will undoubtedly go back to being profitable. Still, securing public trust and demand is a must, which poses a major challenge in times of volatility. The present situation only demonstrates that the cryptocurrency space is still in its development stage and that there is still more to come for Blockchain platforms before it can reach the final phase for its mainstream use.