The December 2019 report on the Bitcoin mining network from CoinShares Research, a division of the digital asset management firm, presented an industry in good health at the end of the year, with a hash rate that had almost doubled in the previous six months, a new generation of more powerful and efficient technology on the market and the continued use of sustainable, renewable energy.
The report indicated that, at this year’s average Bitcoin price, fee ratio and block frequency, miners were on their way to making $5.4 billion in total revenue for 2019, down slightly from 2018, but significantly up from $3.4 billion accrued in 2017.
“Unlike the period leading up to our previous report, these last 6 months have been relatively calm in terms of large-scale structural changes,” per the report. “Whereas the period between November 2018 and June 2019 witnessed a large number of bankruptcies and capital transfers, the development of the last 6 months has been mainly one of expansion.”
As the Bitcoin mining sphere builds on this positive momentum from the end of 2019 and heads into 2020, factors like the increasing hash rate, new hardware, the upcoming reward halving and more will determine how the industry, and Bitcoin in general, grows.
Good News for the Bitcoin Mining Hash Rate in 2020
CoinShares reported a “huge increase” in the mining hash rate which nearly doubled in the last six months from approximately 50 exahashes per second (EH/s) to almost 90 EH/s, having peaked at more than 100 EH/s.
The report attributed this increase to a combination of the availability of a new generation of more powerful, efficient mining equipment and strong average Bitcoin prices.
And, even since the reports release on December 3, 2019, the hash rate has continued to climb.
In a recent episode of the What’s Halvening podcast, CoinShares Research Director Chris Bendiksen discussed the increase in hash rate, particularly from Chinese operations, which he said accounted for almost 70 percent of the increase. China now accounts for 65 percent of the global Bitcoin mining hash rate.
Bendiksen noted that this increase in hash rate was largely the result of improved technology and, since most new mining computers are produced in China, Chinese miners were first in line in getting next generation technology upgrades.
He expects that, as new technology filters into the Western market, the hash rate there will rise as well.
He also noted that there were signs that as Chinese miners upgraded they were shipping their old Bitmain Antminer S9 mining hardware to places like Iran and Kazakhstan.
Blockstream CSO Samson Mow, whose company has mining operations in Quebec, Canada, and Adel, Georgia, agreed with Bendiksen’s optimistic outlook for 2020.
“Bitcoin’s network hashrate will keep climbing as miners switch out older equipment with newer and more efficient models,” Mow told Bitcoin Magazine.
Will China Continue to Dominate Bitcoin Mining in 2020?
As noted above, the CoinShares report indicated that “as much as 65% of Bitcoin hash power resides within China — the highest we’ve seen since we began our network monitoring in late 2017.”
Despite the growth of Bitcoin mining around the world, in places like North America, Russia and the Middle East, China still dominates the industry. Some may view this as a concern, especially as the dominance appears poised to grow entering 2020, as it centralizes one of Bitcoin’s most critical industries.
For Mow’s part, China’s dominance is certainly something to note, but ultimately he believes it is “a non-issue.”
“I wouldn’t be concerned about China’s dominance in Bitcoin mining,” Mow said. “The main advantages of mining in China are faster setup times and lower initial CapEx which, along with closer proximity to where ASICs are assembled, have driven industry growth there … Now that we have mining infrastructure built up in North America, like with Blockstream’s mining operations and others, the CapEx advantages are less important, and we have the additional benefit of lower electricity costs.”
The CoinShares report noted that there has been a major “policy switch” on the part of China’s government, going from listing mining as an undesirable industry as recently as April 2019 to removing mining from this list completely (although Bitcoin itself is still illegal).
Still, Mow does not see China’s dominance as a priority issue for 2020.
“Mining in China is still done by individuals and corporations, just as mining in North America or any other location,” Mow said. “Also, the concept of ‘Chinese hash rate’ is misleading because there are non-Chinese individuals and companies mining in China, just as there are Chinese miners in North America.”
How the 2020 Halving Will Impact Bitcoin Mining
For this article, Bitcoin Magazine reached out to a number of Bitcoin mining industry leaders and CEOs…