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Is Bitcoin Mining A Stable Business Model?

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Bitcoin Mining Stable

Bitcoin, a peer-to-peer monetary system, incurs a mining progression to maintain its supply and demand. Register Now to become an independent bitcoin trader and learn how to trade in bitcoin with proper guidance. One can mine BTC utilizing custom computers consisting of graphic processing units or application-specific integrated circuits.

Although variations in the computing power of a mining system, the formation of dedicated mining centers, and increments in the hash have affected the profitability of bitcoin mining, still bitcoin mining is one of the most stable business models.  

In the early stages of bitcoins creation, the limited supply of bitcoins was a growth dynamo. On October 31st, 2008, when the first bitcoins were in the bitcoin network, only 21 million would ever be created. The hope was that bitcoin would become more widespread and accepted, and this limited supply could create a demand for them.

Why is bitcoin mining money-making and constant?

There are a few reasons why bitcoin mining is a stable business model. The first one is that the supply of bitcoins cannot be changed to avoid inflation. It is because all the bitcoins that will ever exist were created in the genesis block and every 10 minutes after that. So no one can change the supply at will. It has been a source of controversy for fiat systems where governments and central banks can print more money and manipulate inflation without limit.

Another reason Bitcoin mining can be considered a stable business model is that the demand for bitcoins cannot have any alteration either. At the moment, there are about 3 million bitcoins that miners can mine in about 100 years. In the early days of bitcoins, when supply was limited, and many bitcoin enthusiasts wanted to buy and hoard them, demand was even higher. It acted as a catalyst to spur the growth of bitcoin transactions, making it more valuable.

Bitcoin mining is becoming environmentally friendly!

In addition to being a stable business model, bitcoin mining is becoming an environmentally friendly business model. Using highly conservative powered facilities that consume power in huge quantities means they are likely to be good for the ecosystem than using machines with a low power consumption using energy sources like electricity.

The mining of bitcoins with the highest power consumption may seem like a bad idea as there is a lot of bitcoin mining done in China, where electricity is cheap compared to the rest of the world. But, if you consider that an average home consumes at least 10,000 KWh in one year, you can get an idea of how much energy is consumed by machines. That amount of power is not insignificant, and businesses that consume power at this scale over a long period can severely damage the environment.

However, bitcoin mining will get more sophisticated with technological advancement; people will look for ways to consume less energy while maintaining profitability.

Components of bitcoin mining

Bitcoin mining is a process that requires the use of high-powered computers to solve a complex equation and validate the transactions. The bitcoin blockchain is implemented in such a way that it takes ten minutes to solve an equation and validate transactions without failures. To validate transactions, miners are awarded Bitcoins as incentives.

Bitcoin mining can be done effectively by utilizing custom computers with graphic processing units. These computers are faster in solving the equations and consume less power than Application Specific Integrated Circuits (ASICs). At present, ASIC machines are used primarily for bitcoin mining as these machines consume less power, do not overheat, and are extremely fast at solving equations.

The future of bitcoin mining

As of now, there are about 3 million bitcoins that miners can mine. The reward for mining the first bitcoin was fixed at 50 bitcoins. After that, however, the reward is halved every four years. It will continue until all the Bitcoins have been mined.

This halving of the bitcoin rewards means that miners would not be awarded any bitcoins for their work in about 100 years when all 21 million bitcoins are mined. The only incentive left would be to collect transaction fees that people might have to pay to confirm their transactions promptly.

Currently, the bitcoin network allows at the most 21 transactions per second. It translates to about 9 million transactions per year. However, if bitcoin becomes commonly accepted and used by big corporations, it can quickly scale its transaction capabilities to millions of transactions every day or even more. As it’s a decentralized system that anyone can trade Bitcoin or use without any restriction, there is no way that anyone can control this scaling process. It’s only limited by the hardware that people use to do the transaction.

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