How difficult is Bitcoin mining?

Bitcoin mining is a way to obtain Bitcoin from the "source". The so-called "mining" is to use computers as "mining machines" to solve encryption problems given by the Bitcoin system to compete for the right to record Bitcoin accounts, pack transactions into blocks, and connect blocks to form a "chain". The Bitcoin system will issue block rewards to miners who obtain the right to record.

The Bitcoin network generates one block approximately every 10 minutes. Currently, miners can get 12.5 Bitcoins as a reward for each successful block they pack on the blockchain. Mining is a way to issue Bitcoins. Mining is an investment in Bitcoins with a considerable rate of return. So is the return on mining good? What does it depend on?

The income from Bitcoin mining is mainly affected by the difficulty of mining and electricity costs. Since the mining difficulty (which determines the unit mining income) and the price of Bitcoin are the same for all miners, the mining income of miners is only related to the computing power of their mining machines. The greater the computing power, the greater the mining income. The main factors affecting the mining cost are the power consumption and electricity costs of the mining machine. In addition, the energy consumption ratio (W/T) of the mining machine is also an indicator worthy of attention. Mining machines with the same computing power have the same mining income, but mining machines with a smaller energy consumption ratio have lower electricity expenses, which means that the mining income is theoretically higher.

Bitcoin mining has formed an industrial chain. In addition to mining, there are also mining farms, mining machine manufacturers, mining pools, cloud computing platforms and other industries that deserve attention. As the producer of computing power, mining machine manufacturers have absolute voice in the industrial chain; miners purchase computing power from mining machine manufacturers, paying attention to the price of coins, mining difficulty and mining machine power consumption; miners host mining machines in mining farms, and the construction of mining farms is highly non-standard, which is inseparable from the local regulatory strength; miners and cloud computing platforms connect mining machine computing power to mining pools; cloud computing platforms "retail" mining machine computing power to investors, improving the liquidity of computing power. The development of the entire industrial chain is extremely similar to the IT development process.

As the dry season approaches, the computing power of Bitcoin mining will continue to rise. It is known that Bitmain's mining machines S17 and S17 Pro, which use the second-generation 7-nanometer chips, contain about 144 chips. A 12-inch 7-nanometer wafer can cut out about 3,000 ASIC chips. Assuming that this batch of wafers is mainly used to manufacture 7-nanometer mining machines S17 Pro (56T), Bitmain will be able to manufacture about 1.04 million mining machines by the end of the year; assuming that this batch of mining machines is officially launched, sold out and used for mining in early 2020, the computing power of the entire network will increase by 58.24EH/s.

The act of placing a high-value order reflects that the leading mining machine manufacturer Bitmain has confirmed the recovery of the mining machine market and is optimistic about the future market. In addition, due to the low electricity costs during the flood season, China's southwest mining farms have attracted 60% of the computing power of the entire Bitcoin network. After the flood season ends in October, many mining machines will be moved from the southwest to the northwest, and the vacancy rate of the northwest mining farms will decrease.

Mining is the way Bitcoin is issued. The Bitcoin system will issue block rewards to miners who have obtained the right to record accounts. The entire Bitcoin network produces one block approximately every 10 minutes. The mining difficulty is adjusted dynamically. It will be adjusted every 2016 blocks mined. The basis for the adjustment is the block time of the previous 2016 blocks. If the average block time in the previous cycle is less than 10 minutes, the difficulty will be increased. If it is greater than 10 minutes, the difficulty will be reduced. The purpose is to ensure that the system stably produces one block every 10 minutes. Therefore, the difficulty adjustment time is about 2 weeks (2016 * 10 minutes). All these rules are stipulated in the open source code.

The system rewards 50 bitcoins for each block, and this reward is halved approximately every four years. Halvings occurred in November 2012 and July 2016, respectively. The current block reward is 12.5 bitcoins, and the next halving is expected to occur in May 2020. That is, the global bitcoin miners will receive a total of about 1,800 bitcoins in block rewards every day.

Bitcoin is "issued" in this way, with a total of about 21 million. As of August 31, 2019, 1,791 bitcoins have been mined. In addition to block rewards, miners will also receive transaction fees paid by the sender. Theoretically, the smallest unit of Bitcoin will be mined in 2140, and miners will only receive transaction fees. Perhaps the increase in mining difficulty and the reduction in production will bring about a new round of price increases?