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Buy Bitcoin Hashing Power [2021]

The first two methods are self-explanatory, and they're the usual subjects of the debate around bitcoin: its value as an investment and as a currency. As for the third method, bitcoins are created through a process called mining, in which computer power (hashing power) is used to solve a puzzle in pursuit of a number called a nonce. In theory, these puzzles could be done with a pen and paper. They aren't mathematically challenging, they just require a lot of number-crunching and guesswork.

buy bitcoin hashing power

So why buy a bitcoin for Monday morning's price of roughly $43,000 when you can just solve one of these puzzles and get one on your own? To answer that question, it helps to think of the traits bitcoin shares not with other currencies or investments, but with something else -- commodities.

The U.S. Commodity Futures Trading Commission characterizes bitcoin as a commodity so that derivative contracts like futures and options can be traded based on its underlying value. This makes a certain amount of sense. What's considered a commodity has changed over time, but from goats to gold, commodities all have something in common: They're fungible, meaning interchangeable. There may be different types of tea and grades of motor oil. But a gallon of unleaded gasoline is more or less the same no matter where you get it.

In most commodity-dependent industries, when the price of the underlying commodity goes up, supply starts to increase, as well. When prices of gold or copper go up, miners respond by ramping up production. It's the same with oil. Higher supply eventually causes prices to go down, and the cycle repeats. But something strange is happening with bitcoin: Its price is near its all-time high, but supply is increasing at its slowest pace ever. There are several reasons for this.

In the early days, the puzzles that bitcoin miners had to solve were relatively easy and didn't require a lot of hashing power. A dusty old central processing unit (CPU) would do the trick. But the puzzles have gotten exponentially harder over time. This is because bitcoin's founders decided each block of bitcoin should take about 10 minutes to mine, in an effort to keep a lid on supply. As computing power surged, so did the difficulty. The difficulty is adjusted every 2,016 blocks -- which is roughly every two weeks if it takes 10 minutes to mine a block. In theory, you could take the average hash rate and the time per block of the prior 2,016 blocks to estimate what the next difficulty number will be. But it's not a perfect science (since sometimes a block is mined in far less than 10 minutes by pure luck).

So there's one part of our answer: the computing power required to mine one block of bitcoin is exponentially higher now than it was 12 years ago, even if the time it takes to mine one block is still around 10 minutes.

The first bitcoin block, known as the "genesis block," yielded 50 bitcoin. But after every 210,000 blocks are mined (about every four years), the reward is cut in half. The first halving occurred on Nov. 28, 2012. The second was on July 9, 2016. And the third was on May 11, 2020. Today, each block yields just 6.25 bitcoin.

The maximum bitcoin supply that can ever be mined is 21 million. This means that half of the total potential supply was generated within the first four years after bitcoin's launch. And 93.75% of the total supply will be mined before the next halving in 2024. This table shows the pattern well.

The effect of these halvings on supply may surprise you. By 2044, 99.9% of all bitcoin will be in circulation, leaving just 20,508 left to be mined. Just 40 bitcoin will be mined in the four years starting in 2080. And before the century ends, less than one bitcoin will be mined per year. Eventually, the last bitcoin will be mined in 2140.

So although bitcoin is near a record high price, and the computing power being used to mine bitcoin is also at a record high, bitcoin supply is increasing at its slowest rate in history for two reasons:

To be more successful, miners join what are called pools, where they combine their computing power and then split the prize from successfully mined blocks. The best bitcoin mining rigs can cost upwards of $3,000, while the older models can be purchased for a few hundred dollars. The Whatsminer M30S++ has a hash rate of 112 trillion per second. Assuming a conservative electricity cost of $0.07 per kWh, it can break even at a bitcoin price of $7,420. This looks like a sweet deal now, but keep in mind that bitcoin was less than $7,000 just last April.

Older models like the Antminer S9, which has a hash rate of just 13.5 trillion per second, can break even at $24,730 bitcoin. This hash rate was more than acceptable when bitcoin mining took less computing power and each block yielded 50 bitcoin. And it's been profitable recently. But it could be a money-losing endeavor if computing power floods the market and the difficulty increases at a faster pace than bitcoin's price. This has happened several times before, when bitcoin's price crashes or the difficulty level rises to the point where once profitable rigs become unprofitable.

Bitcoin is similar. New rigs won't be bought and miners won't mine if the breakeven is too close to the current price. Even the best rigs out there earn just $17.50 or so per day at $30,000 bitcoin (assuming $0.07/kWh electricity costs). At a sticker price of $3,000 per rig, it would take 170 days to break even. If bitcoin crashes to $15,000, it would take a year. And if the network is flooded with computing power and the difficulty goes up, you could be out of luck entirely.

The common theme behind all commodities is that they have tangible use in everyday life. Therefore, prices spike if production goes down. Electricity prices go up during a power outage. Water prices go up if a water main bursts.

Unlike oil, bitcoin isn't tangible and doesn't have practical use in the physical world. It has a limited supply. And the bitcoin protocol ensures that new bitcoins are produced at a consistent (though dwindling) rate independent of computing power. In this way, bitcoin's relationship with supply, production, and price is completely different from traditional commodities. That makes sense, because it was, after all, originally intended to be something else -- currency.

The power of halving is truly incredible, considering that by 2060 the annual bitcoin supply will be increasing by hundreds, not millions, per year. Once that additional supply becomes negligible, we could see bitcoin's price volatility go way down. And only then, perhaps, will bitcoin stop reminding us of commodities and investments and truly become what it was intended to be.

Hashrate is a measure of the computational power per second used when mining. More simply, it is the speed of mining. It is measured in units of hash/second, meaning how many calculations per second can be performed. Machines with a high hash power are highly efficient and can process a lot of data in a single second. In the case of Bitcoin, the hashrate indicates the number of times hash values are calculated for PoW every second.

Bitcoin is based on blockchain technology, a decentralized platform which takes power away from a central authority and gives it to the average person. Sensitive information is stored on the blockchain rather than large data centers, and is cryptographically secured. A vast amount of people, known as miners, all work together to validate the network, instead of just one person or government.

ASICs (Application Specific Integrated Circuits) however are far more powerful. They were developed from top to bottom to be used solely for mining. Their hashrates are significantly higher than anything GPUs are capable of.

A Pennsylvania-based holding company called Stronghold Digital Mining is currently running a Bitcoin mining operation using the Scrubgrass power plant(Opens in a new tab) in Venango County, Pennsylvania, which it purchased over the summer, in 2021.

Stronghold raised(Opens in a new tab) $105 million to open the power plant for its Bitcoin mining endeavors. The plant currently burns coal waste to produce enough energy to power 1,800 mining computers.

Bitcoin mining requires high-powered computer processors in order to solve advanced mathematical equations. This process helps maintain the cryptocurrency's digital ledger, known as the blockchain. When these math problems are solved, Bitcoin miners receive the cryptocurrency in exchange.

The more computing power one has, the more equations that can be solved and the more Bitcoin they earn. The process is so intense that individuals really can't earn Bitcoin based on the computer power already accessible to them. Many miners purchase thousands upon thousands of dollars worth of equipment to mine Bitcoin and even then, only these multi-million dollar operations can really mine enough Bitcoin to make the process profitable at this point.

And squarely between these two competing narratives are the communities of the Mid-Columbia Basin, which find themselves anxiously trying to answer a question that for most of the rest of us is merely an amusing abstraction: Is bitcoin for real?

More important, Nakamoto built the system to make the blocks themselves more difficult to mine as more computer power flows into the network. That is, as more miners join, or as existing miners buy more servers, or as the servers themselves get faster, the bitcoin network automatically adjusts the solution criteria so that finding those passwords requires proportionately more random guesses, and thus more computing power. These adjustments occur every 10 to 14 days, and are programmed to ensure that bitcoin blocks are mined no faster than one roughly every 10 minutes. The presumed rationale is that by forcing miners to commit more computing power, Nakamoto was making miners more invested in the long-term survival of the network.

Carved out at the end of the last Ice Age, the Columbia River is the beating heart of Wenatchee Valley. With an average flow of 265,000 cubic feet per second, it produces 44 percent of the nation's hydroelectric power. Patrick Cavan Brown for Politico Magazine 041b061a72


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