- Bitcoin crash: BTC prices continue to fall and dipped for the first time in 3 years below $20,000
- The crypto market as a whole crashed by more than 7% in the past 24 hours alone
- A fundamental flaw in Bitcoin’s infrastructure might lead Bitcoin to a total collapse, mostly due to Bitcoin miners
Bitcoin is risking a total collapse. We are indeed in a strong bear market, which brought Bitcoin prices from a high of $69,700 all the way to a current price of $19,100. There is a huge sell-off in the market as most investors already lost hopes of a recovery. The crypto market consists mainly of buyers, sellers, and miners. The latter approves transactions between buyers and sellers and makes a small fee. With fewer miners on the market, the crypto infrastructure becomes risky.
What is Crypto Mining?
Crypto mining entails employing high-end, energy-intensive equipment to solve complicated mathematical problems. It verifies transactions in the crypto industry. To put it another way, mining is the process of creating new tokens that are then sold on the market. Not all tokens, however, are mined when they are created or when transactions are confirmed. Proof of stake coins, for example, are generated or manufactured in a completely different way. Miners are also responsible for the security of the blockchain using crypto mining. This is in addition to creating new tokens and validating transactions. Because of the heavy capital required to acquire the equipment needed to mine at a faster rate and the cost of electricity, crypto fees become expensive.
How Does Crypto Mining Work?
In the case of Bitcoin, miners need to solve complex mathematical questions to achieve their aim. They spend enormous amounts to purchase complex computers to achieve their aims to carry this out. These computers also consume a higher degree of electricity needed for mining purposes than other computers. Miners would be required to get the right answer to the problem to be able to mine one token.
This mining process is called the Proof of Work. Miners continue to make random guesses using a massive amount of computational power. However, the difficulty of the network increases as every new miner joins the network. If a miner successfully guesses the right answer, they complete the process and add a block to the network. This will see them get 6.25 Bitcoin as a reward. Notably, rewards have decreased every four years since Bitcoin was developed.
Bitcoin Mining Became…Expensive!
Bitcoin miners receive their fees in…Bitcoins. In order to cash in their profits, they go to the open market and sell their Bitcoins for Dollars or Euros. The recent crypto market crash brought crypto prices down from a high of $69,700 all the way to a current price of $19,100. This resulted in a decrease of 72.5% in profits generated from mining. Because of the recent market crash, miners are now receiving fewer profits.
In fact, when miners receive their fees, they need to first cover their costs:
- The initial cost paid to acquire their rigs (fixed)
- Electricity bills (variable)
For a long time now, mining has been a lucrative business as the fees earned from mining Bitcoin were higher than the electricity bill, until recently. As Bitcoin dropped lower than $20,000, miners are starting to get annoyed from barely getting any profits.
A Twitter user even spoke about this:
Will Bitcoin Crash if there are no Miners anymore?
Eliminating the miners from the crypto infrastructure would hurt the crypto economy badly. As mentioned earlier, not only do miners approve transactions, but they also make sure the network is safe. Removing miners from the equation would be a total collapse of the crypto market. Other cryptocurrencies don’t require proof-of-work, such as Ripple’s XRP as they already exist. Ripple has no mining operations or miners. Instead, to improve reliability and speed, transactions are enabled by a “centralized” blockchain.
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