Opinion Bitcoin Mining is Dead

As an experienced miner, I may have to stop mining BTC.
There are two main reasons for this decision. Firstly, my machines are no longer profitable. The halving has resulted in a decrease in production, while electricity costs remain the same and the coin price has not increased. This has led to a lack of profit. Some may wonder why I don’t buy new upgraded machines. The second reason is a phenomenon that scares me. Despite the halving, the overall network has not seen a decrease in computing power. This raises the question of who hasn’t shut down their machines. Is it because they have lower electricity costs? In the US, the electricity cost is 7.5 cents (after tax), while in Southeast Asia it is 6.5 cents (after tax), in Central Asia it is 6 cents (after tax), in Russia it is 5.8 cents (after tax), and in Africa it is 5.5 cents (after protection fees). The only places that can outcompete these regions are Russia and Africa. However, I cannot trust the African mining industry due to political instability and the inability to sign contracts. Even if a mining farm owner is willing to sign and host my machines, they could be arrested by the government at any moment. For example, before the halving in February, I planned to send my machines to Angola in Africa. However, just as I was finalizing the deal with the mining farm owner, there was a policy change in the region, and he went from being a foreign entrepreneur to an illegal person.
Regarding who has higher production than me, those with better machines have higher production. I currently have the previous generation 19 series machines, which are outdated. The only machines with over 200t of production are water-cooled machines. However, these machines are extremely expensive, as not only do we need to buy the machines themselves, but also the cabinets to house them. Each cabinet costs $70,000 and can hold 210 machines. Each machine costs over $6,000, so for 210 machines, it would cost over $1 million. As a young miner, I do not have such a huge sum of money.
So, who has the power to keep their machines running? It’s the listed companies! Many North American Bitcoin mining companies have secretly gone public during the tough years of 2021 and 2022. They have raised large amounts of funds in the secondary market to build mining farms and buy machines. For example, Marathon, the current largest listed mining company, has a market value of nearly $6 billion. BlackRock and Vanguard are its top two shareholders. In addition to Marathon, there are 20 other listed companies such as Riot and BitDeer. These listed companies are bigger and stronger, and it is because of their existence that the overall network’s computing power, which should have decreased due to the halving, remains high.
As a small miner, I represent the majority of small miners who have been wiped out in this round. Only a few comrades in Africa or Russia are still persisting at great risk. The gradual elimination of small and medium-sized players in the mining industry means that BTC mining is becoming a monopolistic and unprofitable industry, which will have a huge impact on the entire blockchain industry.
Now let’s calculate the economics. Based on the initial configuration mentioned at the beginning of the article, if we use a water-cooled high-end setup to mine BTC, the cost of a machine in a mining cabinet would be $1.33 million. With a hash rate of 257T per machine, we could have a total hash rate of 53,879T. The power consumption of one mining cabinet is 1030kw. Assuming an electricity cost of 7.5 cents in the US, and considering an ideal scenario with no continuous increase in mining difficulty, we can see that it would take 4 years to break even. However, after 4 years, the machine’s production would be halved, and it would likely be eliminated. Even if we assume a lower electricity cost of 6 cents, it would still take 1159 days to break even. Therefore, even if these listed companies have pushed us small miners out, the rewards they receive are not as great as they seem. For them, breaking even in 1159 days might be a good thing, but for us in the crypto industry, it would be better to invest the $1.33 million directly into buying 22 BTC. If BTC doubles in value after three years, we would have a 100% return on investment. Even if BTC drops by 50%, although we would lose 50% of our initial investment, it would still be better than mining, as shutting down the machines would mean zero income.
Why do I say that BTC might become a ticking time bomb? Is it because it is not profitable? Some novice players might think so, as mining is essentially helping with the calculations of the BTC network and maintaining the ledger for every transaction. If miners are not profitable, there would be no one to maintain the ledger, and BTC would collapse, right? No, that’s not the case. Thanks to Satoshi Nakamoto’s brilliant design, this situation would not occur. Whenever miners are unprofitable, they would shut down their machines. However, since each miner has different electricity costs, they would shut down their machines starting from the highest-cost ones. If some miners shut down, the overall network hash rate would decrease, and the remaining miners’ income would increase, allowing them to continue operating and maintaining network security. Therefore, BTC would not die just because miners are unprofitable. The real threat to BTC is a 51% attack. A 51% attack refers to an entity or group controlling more than 50% of the network and launching an attack on the blockchain. The attacker with majority control can disrupt the recording of new blocks by preventing other miners from completing blocks. However, currently, the possibility of successfully attacking Bitcoin or Ethereum is low, but smaller networks often become targets of 51% attacks.
However, the BTC mining industry has changed, and a 51% attack is now possible. There are two reasons for this. First, let’s consider the accounting aspect. If IBIT gradually stops accumulating BTC and we assume it currently holds 400,000 coins, after 8 years, it would only need 10% of its resources to consume the entire annual output of the BTC mining market. This would make it easy for them to achieve 51% control. They would have the ability to manipulate and interrupt every transaction, jeopardizing the security of the BTC network. Secondly, there is a conspiracy at play. Since last year, I have noticed that BlackRock has been quietly making acquisitions in our industry. It is now one of the top three major shareholders of the largest mining companies globally. Of course, I would rather believe that BlackRock’s involvement in the BTC spot ETF and the acquisition of BTC mining farms is simply due to their optimism about our industry’s development, rather than having larger ambitions to control the entire BTC computing power network. After all, human nature is inherently good.