Bitcoin mining took a big hit in 2018. 

For most of the year, mining activity operated below the threshold for profitability. The biggest name in crypto mining, Bitmain, ended the year by cutting 50% of staff and shelving plans for a stock market launch.

But what will 2019 bring? Will cryptocurrency mining become profitable again? In this article, we present an overview of bitcoin mining for 2019, touching on the biggest trends you need to know if you’re looking to get started.

Is Bitcoin Mining Profitable in a Bear Market? 

The price of bitcoin fell more than 70% in 2018, putting huge pressure on bitcoin miners. Mining profits fell 50% in one month alone (November) with the equivalent of 1.3 million miners going offline.

With cryptocurrency mining currently offering slim or zero economic return, what happens next?

Crypto mining profitability chart
Source: CoinTelegraph

It is definitely more difficult to justify starting a mining operation for most people. However, with fewer miners, there are greater chances to earn mining rewards.

There are a number of tools available that allow you to estimate potential profits or losses (here and here). These can be customized according to factors like crypto prices, electric costs, hardware specs.

Even under poor crypto market conditions, miners could decide to “hodl” any funds earned in hopes of a market turnaround. Clearly, 2019 price trends will go a long way in helping people determine whether or not to mine at all.

Layoffs at Bitmain

Bitmain is the largest cryptocurrency mining company on the planet. It supplies mining hardware and operates various mining pools.

If you’re looking into cryptocurrency mining, you need to know what’s going on at Bitmain.

In December 2018, Bitmain reportedly fired more than 50% of its staff, including its entire Bitcoin Cash (BCH) development team. The combination of huge losses and the major bet on BCH presents big challenges for the company moving forward. US IT firm UnitedCorp sued Bitmain, Kraken, Bitcoin.com, and Roger Ver for allegedly manipulating the BCH network. 

According to numerous reports, Bitmain was unable to liquidate its massive BCH reserves via cryptocurrency exchanges. Moreover, BCH was one of the worst performing cryptocurrencies in 2018. This only exacerbated the struggles of Bitmain. 

The company originally planned to open up a Texas-based data center that would cost $500 million and generate 400 jobs but has decided to put these plans on the backburner. Bitmain has also halted plans for a stock market launch, at least for now. Co-founders Wu Jihan and Zhan Ketuan plan to step down from the CEO position and remain on the board of directors. The likely successor is Wang Haichao, who is currently the product engineering director of Bitmain.

The Rise of Cryptojacking

Cryptojacking is another growing issue in the mining world.

At one point in 2018, cryptojacking replaced ransomware as the most popular form of cyber attack. Essentially, cryptojacking happens whenever person A uses person B’s computing power to mine cryptocurrency without person B knowing about it. In the early days of cryptojacking, it was more difficult to get hacked. This is because doing so required the installation of malicious software on a device.

Now, however, it’s possible to become a victim of cryptojacking just by visiting a website. With options like Coinhive, cryptojacking can be made possible by inserting a snippet of JavaScript code. The rise of cryptojacking presents new challenges for individuals and businesses both involved in the cryptocurrency space and not. Most online threat detection solutions don’t cover cryptojacking protection.

For cybersecurity experts, this has become a new issue to solve moving forward. Some major examples in 2018 included the arrests of 20 individuals in China who allegedly affected over one million computers with cryptojacking software. Additionally, In Japan, 16 individuals were arrested for a Monero (XMR) cryptojacking case.

Lawsuit Against Nvidia

The crypto bear market has weighed heavily on companies that supply chips for cryptocurrency miners. Nvidia, which produces microchips for gaming, AI systems, and crypto mining, had a rocky year in 2018.

In December 2018, Schall Law Firm announced the filing of a lawsuit against Nvidia, for “false and misleading statements to the market”. More specifically, Nvidia allegedly asserted that a decline in demand for GPUs used for cryptocurrency mining would not have a negative impact on the company’s operations or performance due to high demand for GPUs from gamers. 

While the stock market, in general, experienced declines in Q4 2018, Nvidia was hit harder than most. In addition, the timing lines up with its business performance. The day after Nvidia’s Q3 earnings report was released, Nvidia’s stock fell around 19 percent. One commenter said, “Stock went down for external reasons and no stock exchange listed firm can be sued for ‘force majeure’.” Another has said, “Assuming Nvidia made this statement, it could plausibly be grounds for a lawsuit, as it’s clearly in violation of securities rules.” 

No matter whose side you are on in this argument, it’s important to recognize how it could impact the cryptocurrency industry moving forward. What will be the result of this lawsuit? Will Nvidia focus on crypto-specific products moving forward?

Crypto Mining and Gaming: Asus and Quantumcloud 

One emerging trend in the mining community is harnessing the idle power of gaming rigs.

In November 2018, Asus announced a partnership with Quantumcloud. The solution is simple. Currently, there is a major surplus of gamers who use graphics cards only when gaming. For long periods of time, the capabilities of graphics cards are not being utilized. With this partnership, ASUS will allow gamers to be able to make use of idle graphics cards to mine cryptocurrency. There will also be options to cash out earnings through PayPal or WeChat. It’s still unknown which coins will be available as options for cloud mining with Quantumcloud software. We also don’t know if, or how much of the cut from earnings, will go to Asus or Quantumcloud.

Nonetheless, it is cool to see that major tech companies are still working on partnerships that involve the expansion of cryptocurrency mining even in the bear market. Additionally, this could create greater decentralization and egalitarianism to mining operations, and crypto supplies in general, by opening a new potential user base of miners.

The Ongoing ASIC Resistance Battle

ASICs (application specific integrated circuits) are designed specifically for mining cryptocurrencies. The rise of powerful ASICs has made it almost impossible to mine cryptocurrency on a PC or laptop; some crypto projects are fighting back and blocking ASIC mining. 

bitcoin miner

Instead of allowing miners to use ASICS, several projects are developing algorithms to block this possibility. Monero was probably the most well-known case of this in 2018.

Throughout the year, ASIC rigs designed for Ethereum mining started to emerge. In September 2018, it appeared that Ethereum was willing to let this go on without the implementation of a new algorithm in its upcoming release of Ethereum v3.5 (known as Constantinople). This is likely due to the fact that Ethereum is planning to switch from Proof of Work to Proof of Stake, which would eventually make all mining operations, (ASIC, GPU, CPU) obsolete. However, in recent weeks ahead of the January 2019 update, Ethereum developers have begun to implement an ASIC resistant algorithm anyway for Constantinople. 

So where does that leave the cryptocurrency mining community in 2019? There are still a few blockchains which allow ASIC mining to take place. Bitcoin (BTC) is a good example. Additionally, Bitcoin Cash (BCH) mining pools have adopted a protocol known as Asicboost which “can speed up the mining process by a factor of approximately 20 percent by reducing the gate count on mining chips.” 

Essentially, the protocol can be applied to all types of ASIC chips. For now, it appears that the ASIC debate will continue to be relevant throughout 2019 as technologies on both sides become more advanced.

Proof of Stake (PoS) Winning over Proof of Work (PoW)?

If the battle between pro and anti-ASIC sides wasn’t enough to change the landscape of crypto, the decision between PoS and PoW as the go-to consensus algorithm definitely is. As mentioned in our recent Ethereum roadmap article, the world’s second largest cryptocurrency by market cap is moving from PoW to PoS. Along the way, the reduced mining reward from 3 ETH to 2 ETH puts pressure on the miners until the switch to Casper (Ethereum’s PoS). 

The good news is that these changes are planned out pretty far in advance. However, it also presents new big picture questions for crypto projects, miners, and entire communities. If Ethereum’s change is successful in reaching greater scalability and making the network more decentralized, it will be interesting to see which projects follow suit. Ethereum isn’t necessarily a definitive trial test for the capabilities of PoS. 

Other projects (i.e. PIVX, NIX, etc.) have already made this switch in the past. However, none have been completed at this scale or with this degree of attention from the industry. It could ultimately lead to less reliance on PoW and mining. However, at the beginning of 2019, that is still yet to be determined. 

Top Mining Tech Trends to Watch in 2019

FPGA (Field-programmable gate array): In 2018, we saw the clear advantages of new types of mining equipment. As detailed above, ASICs demonstrated the capabilities of faster hash rates. However, they lack versatility and can’t be programmed to keep up with algorithm changes. Meanwhile, GPUs are much slower but a bit more versatile for mining various coins.

Now, FPGAs could emerge and offer a solution that is the best of both worlds. For instance, some FPGAs are 10x the speed of GPUs and can quickly change to different algorithms. Additionally, they are designed to use less electricity to run. 

As of the beginning of 2019, FPGAs have yet to gain user adoption despite being around since the early 2010s. This is mostly due to factors like high price points ($4,000 per card, or $25,000 – $30,000 per rig) and highly technical configuration requirements. Still, it would be interesting to see if new tech will emerge to make FPGAs more accessible to the average miner.

Mobile Mining: There are a few different mobile mining solutions available in 2019. DroidMiner BTC/LTC/DOGE Miner and Electroneum are two such examples for Android devices. Free Bitcoin is an option available for both Android and iOS. However, there is a clear lack of options for iOS and viable apps overall. 

The power of mobile devices simply hasn’t been enough to compete with dedicated mining rigs. Moreover, this type of mining would likely cause you to need to constantly replace mobile phone batteries. As a result, any profits are likely to turn to losses in a short amount of time. Still, it will be interesting to see if or how mobile mining can become more innovative moving forward. 

Conclusion

In summary, cryptocurrency mining operations continue to change along with the overall market. The struggle of everyone from small miners to large-scale enterprises in the past year is evident. However, the fact remains that crypto mining plays an important role in the validation of transactions for the vast majority of blockchains. Along with numerous challenges for miners, it’s also possible to find opportunities that could lead to more innovation.

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crypto layoffs erik voorhees shapeshift

Edit: This list of crypto layoffs was updated on January 14th to include the latest restructures.

Crypto Winter has hit hard. The sharp downturn in cryptocurrency prices has forced blockchain companies to take drastic measures to ensure their sustainability. Late in 2018, crypto startups began to announce layoffs and restructures, including some of the biggest names in blockchain. Here’s what we know so far:

ShapeShift (third of staff)

Crypto exchange ShapeShift is the latest to announce layoffs which will hit 37 employees – a third of its staff.

In a passionate and honest Medium post, CEO Erik Voorhees said: “It’s a deep and painful reduction, mirrored across many crypto companies in this latest bear market cycle.”

Like many blockchain companies, ShapeShift’s balance sheet is comprised of cryptocurrencies, leaving them significantly exposed during the downturn. After rapid growth of 3,000% in 2017, ShapeShift expanded to include market tracker coincap.io and hardware wallet KeepKey. Voorhees cites a lack of focus on the recent decision to downsize: “they were pulling our attention in too many directions.”

Voorhees ended his statement with an apology to his former employees: “I am sorry this happened. Your confusion, your sadness, your anger… all of it is understandable, and I am sorry to put you through it. Your contributions — of effort, of personality, of experience — remain part of our fabric.”

ConsenSys (up to 60% of staff)

ConsenSys is a startup incubator for Ethereum projects. CEO Joseph Lubin was a co-founder of Ethereum and since moved on to foster Ethereum startups.

However, ConsenSys is now re-evaluating its future. Initial reports emerged in December that ConsenSys would lay off 13% of staff. However, further rumors point to a much larger restructure involving the layoffs of 50-60% of its workforce.

In a statement, Lubin said: “Our first step in this direction has been a difficult one: we are streamlining several parts of the business including ConsenSys Solutions, spokes, and hub services, leading to a 13% reduction of mesh members.”

In its bid to fund the next generation of Ethereum projects, ConsenSys reported burn rate was $100 million.

Bitmain (up to half of all staff)

Bitmain is the biggest name in cryptocurrency mining. The company has even filed an initial public offering (IPO) to list itself on the Hong Kong stock exchange.

However, crypto winter has hit Bitmain hard. It closed its research and development arm in Israel late last year. Rumors then began to circulate that half of all staff were at risk.

The rumors spread to social media network MaiMai (China’s version of LinkedIn) to which a verified Bitmain employee wrote: “It’s affirmative. The layoff will start next week and involves more than 50 percent of the entire Bitmain’s headcount.”

The layoffs are reportedly in Bitmain’s non-core departments such as artificial intelligence.

Steemit (70% of staff)

Steemit is a blockchain-based social media and blogging platform. Similar to Medium, but contributors are paid in cryptocurrency for their writing.

The platform laid off 70% of staff in 2018. Founder and CEO Ned Scott cited “the weakness of the cryptocurrency market, the fiat returns on our automated selling of STEEM diminishing, and the growing costs of running full Steem nodes” for the decision.

He also explained the need for sharp focus on the core product before expanding: “In order to ensure that we can continue to improve Steem, we need to first get costs under control to remain economically sustainable.”

Kraken (57 staff members)

Kraken is one of the oldest and largest cryptocurrency exchanges. It’s also considered one of the most secure. However, the exchange is not immune to falling prices and lower volume on its platform.

The company cut 57 staff members from its Halifax office in Canada in 2018. However, the company maintains it is still “aggressively hiring” in many areas of the business.

Huobi (exact figures not disclosed)

Another of the world’s largest cryptocurrency exchanges, Huobi, released a vague statement about “optimizing” its staff. Although exact figures have not been disclosed, this is widely assumed to mean broad layoffs and restructure at the company.

Coinfloor (most of its 40 employees)

London-based Coinfloor is the oldest crypto exchange in the UK. It reportedly cut most of its 40 staff members in October 2018 in response to low volume. 

CEO Obi Nwosu said “We are currently working on a business restructure to ensure that we focus on our competitive advantages in the marketplace… As part of this restructure, we are making some staff changes and redundancies.”

Spankchain (more than 50% staff)

Spankchain ran a successful ICO, launching a coin to fund an adult entertainment platform. But when the coin’s market cap dropped from $190 million to just $6 million, the company was forced to rethink. It cut its employee and freelancer base from 20 to 8. 

Blockfolio

Blockfolio, a crypto portfolio tracker, has cut staff from 41 to 37 in an effort to restructure the company. Despite a recent $11.5 million injection of funding, Blockfolio has refocused its operations, putting an affiliated venture called Datablock on the backburner.

340 UK Blockchain Companies Shut Their Doors

Sky News in the UK scoured the Companies House and Open Corporates database and discovered that 340 blockchain or cryptocurrency companies in the UK closed down in 2018.

The harsh market conditions are forcing companies in the space to rethink their strategies, refocus, and concentrate on their core business. Let’s hope we see fewer headlines like this in 2019.

bitcoin mining energy consumption

It’s a tough time to launch bitcoin mining hardware. As Block Explorer recently reported, bitcoin mining profits turned negative earlier this year. Not only that, but pressure is building over the energy consumption and environmental impact of bitcoin mining.

But that hasn’t stopped Bitmain, the world’s largest bitcoin mining company, from building the next-generation mining equipment.

Bitmain’s new ASIC miners are set to launch Thursday 8th November, but will they reduce energy consumption?

ASIC explained: ASIC miners, or Application Specific Integrated Circuits, are super-powerful processing chips that focus on just one task, in this case, cryptocurrency mining. They are different to normal graphics cards or computer chips which are multi-purpose.

Everything we know about the new Bitmain ASIC Miners

Bitmain is launching two new devices on Thursday: the S15 and T15

Specific details, however, are sparse. We don’t yet know the price, features, or specs of the two devices.

Bitmain has only eluded to the launch via a tweet and empty product pages

Will the new Bitmain Miner Reduce Energy Consumption?

Bitmain’s co-founder and CEO Jihan Wu revealed some information about the forthcoming technology in a speech in September.

He suggested the new miners would “achieve a ratio of energy consumption to mining capacity that is as low as 42J/TH.”

To put that in perspective, Bitmain’s current top-of-the-range miner (Antminer-S9) runs at 96J/TH. In other words, the new miners are significantly more energy efficient than its predecessors.

The current Bitmain Antminer S9

Environmental Impact of Bitcoin Mining

The news comes in the same week as a new research paper which claims bitcoin mining is three-times as expensive as mining the same value of gold.

A further study suggests bitcoin mining consumes the equivalent amount of energy as the entire country of Austria.

The new Bitmain miners may go a small way to lowering the very real impact of bitcoin mining on the world around us. 

7nm Chip Technology

The extra efficiency comes from Bitmain’s new 7nm chip technology. As explained by Jihan Wu, the 7nm Finfet technology is more powerful and more efficient than before. With “more than a billion transistors,” it ushers in a “new era of high-efficiency.”

Of course, nothing is confirmed until Bitmain reveals the full specifications of the new models. Expect more details when the miners are made available for purchase tomorrow.

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bitcoin mining profitability

Bitcoin mining has become drastically less profitable this year, despite soaring revenues. What’s behind this dip in profitability? Block Explorer editor Ben Brown explores.

New research from Diar reveals that Bitcoin mining has generated record revenues of almost $5 billion so far this year. That’s already higher than 2017 with three months to go.

However, that revenue hasn’t translated into profit.

High energy costs and increased competition in the space means the average bitcoin miner is struggling to make a profit.

In fact, September marked the first month when bitcoin mining became unprofitable for anyone paying retail prices for electricity.

Worryingly, this means bitcoin mining will increasingly be dominated by the “deep pockets” of mining corporations like Bitmain.

bitcoin mining profits infographic
Credit: Genesis Mining

Mining a Bitcoin Costs More Than Buying One

According to further data by Fundstrat, it currently costs $7,300 to mine one bitcoin.

Yet, we can go to Coinbase and buy one bitcoin for less than that – $6,600 at the time of writing.

To come up with its $7,300 figure, Fundstrat takes into account a $4,000 energy fee (at $0.06 kW/h) and $3,300 for equipment, wear-and-tear and other overheads.

So what makes bitcoin mining currently so unprofitable?

More Mining Competition Than Ever

Despite the bitcoin bear market, mining activity is stronger than ever. Bitcoin’s hash power has doubled since May, which means more and more miners are competing to generate Bitcoin blocks.

Hash rate explained: In order to generate a bitcoin block, miners compete to solve mathematical puzzles. The first to solve the puzzle with computational power generates the block and receives the bitcoin reward. The total number of attempts to solve the puzzle per second is called hash rate. The more miners working to solve the puzzle, the higher the hash rate.

The hash rate hit a record high in August. In other words, there are more miners working to generate bitcoin blocks than ever before.

bitcoin hash rate chart
Chart from: Blockchain.com

More competition means each miner requires more energy and computer power to generate a bitcoin block.

Energy Rates are Choking Mining Profits

Because miners need more and more energy to compete, electricity prices are choking their profits.

Diar estimates that anyone paying a retail energy price of $0.10 kW/h can no longer make a profit on bitcoin mining.

Add that to overhead costs such as equipment, rent, and salaries, and you begin to see why profits are declining.

It’s no surprise that 81% of bitcoin’s hashing power originates in China. That’s because energy rates are relatively lower – an average of $0.08 kW/h at retail price.

Bitcoin Mining: Dominated by “Deep Pockets”

Energy prices are even lower when bought at wholesale prices, which only large mining pools can afford to do.

In other words, the dominance in bitcoin mining will shift more and more towards big companies like Bitmain. Bitmain owns two of the largest bitcoin mining pools and commands up to 75% of the world market for mining equipment.

As you can see in the chart, bitcoin mining is already dominated by a small number of pools (Bitmain owns BTC.com and Antpool. At one point in June, Bitmain edged close to 51% of bitcoin hashrate).

bitcoin mining pools chart
Chart from: Coin.dance

With bitcoin prices in a bear market, hash rates at a record high, and fierce competition, miners are increasingly incentivized to join larger mining pools.

And here’s where it interesting. The vast majority of Bitmain’s revenue comes from selling mining equipment (95%). So it’s in Bitmain’s interest to keep bitcoin mining profitable for its miners, wherever they are in the world.

Since Bitmain can purchase cheap energy wholesale in China, where it owns 11 giant mining facilities, it can offset the more expensive mining costs in, say, the US. Bitmain can therefore lure miners to a larger pool by offering more security.

Big Companies Can Afford to Take a Short-Term Hit

The profitability issue is also linked to the fact that bitcoin is at a significantly lower price today than it was in January, offering a lower return. Companies like Bitmain can afford to play the long game, betting on higher profitability when the crypto market turns around.

By that point, Bitmain will have swallowed up more miners and increased its market share.

This all means that power, dominance, and control over bitcoin mining will shift yet further to just small group of mining pools.

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coin renders

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New Head Of South Korean Financial Regulator Considers Relaxing Cryptocurrency Regulations

The Korea Times is reporting new Financial Supervisory Service Governor Yoon Suk-heun said the country will consider relaxing cryptocurrency regulations. An official from one of South Korea’s four major cryptocurrency exchange operators, Upbit, said, “We don’t oppose regulations. But you can’t entirely kill the markets by simply imposing regulations. What the new FSS chief should think about is how the regulators should provide remedies to help crypto trading and blockchain technology get better.”

Monero Cryptojacker Using NSA exploit EternalBlue

BlockExplorer’s Armin Davis reports that following the use of the NSA developed EternalBlue exploit in the now infamous ransomware WannaCry, a new malware known as WannaMine has surfaced.

Iceland’s 600 Missing Bitcoin Mining Machines Reported To Be in China

Earlier this year 600 Bitcoin mining machines were stolen from Iceland, a case generally chalked up to unsolvable until a few days ago when Icelandic media outlet RUV reported the machines are likely in Tianjin, China. Cointelegraph reports, “In Tianjin, it was precisely a pattern of highly irregular electricity usage that is reported to have attracted the attention of a local grid operator, leading to the authorities’ confiscation of the suspect mining hardware.”

Bitmain to Begin Shipping Equihash ASIC Miners in June

Chinese mining rig manufacturer Bitmain has unveiled the first Equihash ASIC miners, BlockExplorer’s David Murray reports, “making it likely that it will soon be unprofitable to mine Zcash using GPU-powered devices.”

BlockShow Europe 2018 Coming Up May 27-28

BlockExplorer’s Isaac Rocket reports, “After an eventful two months of hosting blockchain meetups across Europe, Blockshow is bringing their journey to a close with the featured conference, BlockShow Europe 2018.” This will be a big event with over 80 blockchain experts presenting, on the most pressing issues of today’s blockchain community.