Critical point is approaching: The problem of Bitcoin

Bitcoin can be collected by mining the digital currency. Powerful computers are used to perform complicated mathematical calculations. The more Bitcoin comes on the market, the longer it will take until the next one is mined.

The mining problem of Bitcoin

Can that continue forever? No, the last Bitcoin will ever be mined. Here you can read when that is and how that comes. What we want to talk about today is the other side of this system. No, not the electricity consumption, but the big risk.

Then we are talking about the delicate balance of the costs. Bitcoin miners want to make money. It is therefore essential that the costs are lower than the value of the currency that you use.

Otherwise, you turn a loss and you could have just bought the Bitcoin directly. This point comes remarkably close with the collapsed exchange rate of the past few weeks.

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A Bitcoin is worth about $8,500 at the time of writing. The costs of mining a Bitcoin are on average $8,838. Thus recent research. The costs will vary per country and situation, but one thing is clear: the margin is shrinking rapidly.

And that is problematic. If Bitcoin decreases even further in value, this can lead to a decrease in miners and thus a decrease in computer power for transactions. In other words, everyone suffers from it.

"In some cases, the miners may simply turn off their machines until the price goes up again," said Shone Anstey, co-founder of the Blockchain Intelligence Group. "The point that some are going to lead to losses is approaching."

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That opportunistic yet logical behavior would only contribute to the instability of the cryptocurrency. But yes, what do you do against it? The mine principle is the basis of Bitcoin. Thanks to miners, the system can continue to exist in a decentralized way. Through their hardware, transactions can be carried out and the network can remain online without the need for a single centralized server.
The idea is that miners pay for their hardware and (electricity) costs with the coins they collect during the mines. An elegant system, but what happens when the exchange rate can no longer carry the system?

Time for panic?

The idea is that miners pay for their hardware and (electricity) costs with the coins they collect during the mines. An elegant system, but what happens when the exchange rate can no longer carry the system? When it simply is not worth it anymore to mines? Nobody wants to lose.

Is it time for panic? No, far from it. Firstly, the price value seems to improve. Secondly, this is not the first time that we are approaching this crucial price point. The same thing happened in January 2015. Then Bitcoin was worth $200 (so fast it went) and the costs were exactly that amount. Miners therefore turned breakeven.

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Yet they continued, even when they turned (short) loss. Do not forget that they can keep the acquired Bitcoin until the price value has increased. Most miners firmly believe in the future of cryptocurrency and are in the long term, or have other sources of income.

Does it cost minus $200, but is Bitcoin itself worth $180? Then they wait a few months until they can still make a profit. In the long term, stopping mines will only result in more losses. At least, provided you assume that Bitcoin will be worth more in the future than it is now. That is another very different matter...

One person believes in gigantic amounts, the other is very pessimistic. Anyway, interesting months are coming.

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