3 trends that will shape the future of Bitcoin mining
Trends can tell a lot about where an industry has come from and where it’s going. When Bitcoin first launched in 2009, individuals were mining Bitcoin from their laptops, and I personally was mining Bitcoin from a few mining rigs set up in my dorm room. We didn’t know that we’d have to be concerned about things like energy consumption at scale, hardware suppliers, and maximizing operational efficiency in massive data centers. But as Bitcoin mining grew and scaled, trial and error provided opportunities to learn and create new innovations to help the industry grow.
While 2022 has been a challenging year for Bitcoin and the crypto industry in general, the mining industry continues to grow. The following trends show how the Bitcoin mining industry is building on past knowledge and experience, and preparing for a scaled future.
Trend 1: Renewable Power
It may be the biggest buzz item about Bitcoin mining today: energy usage. Mining rigs take electricity to power, and large-scale mining operations are running thousands of miners at a time. Much has been written about how much energy mining utilizes — up to 110 terawatt-hours per year, the equivalent energy production of a small country. But the key topic of discussion should be what kind of energy sources are mining operations using.
One of the major trends we’re seeing in Bitcoin mining today is the turn towards more renewable energy sources instead of carbon-based power. The idea that dirty sources like coal are cheaper just isn’t true, as 90% of hydropower, 75% of wind, and 40% solar are still less expensive than the cheapest fossil fuel option. It’ll be a natural development for those power sources to take over the mining market. Increasing utilization of renewable energy will be beneficial in the long term, both for the industry and for the plant, which is why in the short term, even while profitability is very high, miners should actively consider their power source.
The good news is that Bitcoin mining operations are already turning to more renewable resources. The Bitcoin Mining Council estimates that worldwide, the Bitcoin mining industry’s sustainable electricity mix is 58.4% — an increase of 59% from 2021. They say this percentage makes it “one of the most sustainable industries globally.”
There is, of course, still work to be done to ensure that Bitcoin mining has a sustainable future ahead of it, but data shows that it’s already moving in the right direction.
Trend 2: Immersion Cooling
Imagine a room full of thousands of miners all running at their max — and imagine how much heat they produce. Mining operations have always needed ways to keep their data centers cool, and an emerging trend is the use of immersion cooling to do so.
Immersion cooling involves placing miners in a bath of oil-like liquid, which is then circulated through cooling towers to expel the heat. This method ensures that valuable mining equipment doesn’t have contact with the outside air, as dust or humidity can degrade the hardware.
Considering that miner prices are very high these days, it’s more cost-efficient to overclock limited mining hardware to the maximum to squeeze out any capacity for performance. The best way to do this is to immerse the miners since the cooling capacity of immersion liquid is much higher than that of air. Immersion cooling has also been found to reduce operational expenses by up to 33%.
Of course, an immersion setup requires significantly more expertise to build and operate than the more traditional air cooling setup. Still, we are seeing more companies relying on immersion for their build-outs and the industry sector is quickly growing.
Trend 3: Chip Shortages
A chip shortage is creating a massive supply-and-demand crisis across the globe today. Demand for semiconductor chips has increased 17% from 2019 for use in cars, phones and tablets, home healthcare devices, AI, and more — and for mining rigs. However, supply has not increased to meet that demand, despite the fact that semiconductor manufacturers are producing at 90% capacity.
Once a new batch of chips is produced, they’ll be doled out to companies who need them most — or who have the biggest pull in the marketplace, which are often not mining manufacturers. Certain in-demand chips could leave companies waiting up to a year to receive a supply.
What’s the impact on mining operations? It means that making short-term decisions is not an option right now. Since miner manufacturers are in a backlog and can’t fulfill orders in a timely manner, mining companies must plan a year or so in advance for their operations through solid modeling of the mining ecosystem, put orders in early, and wait it out.
The US Department of Commerce has concluded that “the primary bottleneck across the board appears to be wafer production capacity, which requires a longer-term solution.” Until that “longer-term solution” arises, this chip shortage will likely continue into 2023, as experts predict.
Trending in the Right Direction
Overall, these trends point to a few important things happening within the Bitcoin mining industry. First, they show that Bitcoin miners are learning what works and what doesn’t, and are focusing on making innovations or adopting new practices to evolve. Above all, these trends show that Bitcoin mining has become a resilient industry and that despite the current challenges of the market, mining is trending in the right direction.
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