3 trends that will shape the future of Bitcoin mining

Trends can tell a lot about where an industry has come from and where it is going. When Bitcoin first launched in 2009, individuals mined Bitcoin from their laptops, and I personally mined Bitcoin from a few mining rigs set up in my dorm room. We didn’t know we had to worry about things like energy consumption at scale, hardware vendors, and maximizing operational efficiency in massive data centers. But as Bitcoin mining grew and scaled, trial and error provided opportunities to learn and create new innovations to help the industry grow.

While 2022 has been a challenging year for Bitcoin and the crypto industry in general, the mining industry continues to grow. The following trends show how the Bitcoin mining industry is building on past knowledge and experience, preparing for a scaled future.

Trend 1: Renewable power

That might be the biggest buzz item about Bitcoin mining today: energy usage. Mining rigs take electricity for power, and large-scale mining operates thousands of miners at a time. Much has been written about it how a lot of energy mining uses – up to 110 terawatt-hours per year, equivalent to the energy production of a small country. But the main topic of discussion should be what kind of energy sources is mining using.

One of the most important trends we see in Bitcoin mining today is the shift towards more renewable energy sources instead of carbon-based power. The idea that dirty sources like coal are cheaper is simply not true, as 90% of hydropower, 75% of wind power and 40% of solar power are still less expensive than the cheapest fossil fuel alternative. It will be a natural development for these power sources to take over the mining market. Increased utilization of renewable energy will be beneficial in the long term, both for the industry and for the plant, and therefore in the short term, even if the profitability is very high, miners should actively consider their power source.

The good news is that Bitcoin mining is already transitioning to more renewable resources. The Bitcoin Mining Council estimates that globally the Bitcoin mining industry’s sustainable electricity mix is ​​58.4% – an increase of 59% from 2021. They say this percentage makes it “one of the most sustainable industries globally”.

Of course, there is still work to be done to ensure that Bitcoin mining has a sustainable future ahead of it, but data shows that it is already moving in the right direction.

Trend 2: Immersion cooling

Imagine a room full of thousands of miners all working at their max – and imagine how much heat they produce. Mining has always needed ways to keep their data centers cool, and a new trend is the use of immersion cooling to do so.

Immersion cooling involves placing miners in a bath of oil-like liquid, which is then circulated through cooling towers to expel the heat. This method ensures that valuable mining equipment does not come into contact with the outside air, as dust or moisture can degrade the hardware.

Considering that the prices of miners are very high these days, it is more cost effective to overclock limited mining hardware to the maximum to squeeze out any performance capacity. The best way to do this is to submerge the miners since the cooling capacity of immersion fluid is much higher than that of air. Immersion cooling has also been shown to reduce operating costs by up to 33%.

Of course, an immersion setup requires significantly more expertise to build and operate than the more traditional air cooling setup. Nevertheless, we see more companies that depend on deepening for their developments, and the industrial sector is growing rapidly.

Trend 3: Chip shortage

Chip shortages are creating a massive supply and demand crisis all over the world today. Demand for semiconductor chips has increased by 17% from 2019 for use in cars, phones and tablets, home healthcare, AI and more – and for mining rigs. However, supply has not increased to meet that demand, despite semiconductor manufacturers producing at 90% capacity.

When a new batch of chips is produced, they will be distributed to companies that need them the most – or that have the most traction in the market, which are often not mining producers. Some in-demand chips can leave companies waiting up to a year to receive a supply.

What is the impact on mining? That means making short-term decisions is not an option right now. Since mining producers have a backlog and cannot fulfill orders on time, mining companies must plan a year or so in advance for their operations through solid modeling of the mining ecosystem, place orders early and wait for it.

The US Department of Commerce has concluded that “the primary bottleneck appears to be wafer manufacturing capacity, which requires a long-term solution.” Until the “long-term solution” emerges, this chip shortage is likely to continue into 2023, experts predict.

Trends in the right direction

Overall, these trends point to a few important things happening within the Bitcoin mining industry. First, they show that Bitcoin miners learn what works and what doesn’t, and focus on creating innovations or adopting new practices to evolve. Above all, these trends show that Bitcoin mining has become a resilient industry and that despite the current challenges in the market, mining is trending in the right direction.