When Will Mining Centralization Take Its Toll On Bitcoin?

The Bitcoin mining industry is the backbone of the cryptocurrency ecosystem. It is a decentralized network of miners competing for rewards by solving complex mathematical problems and hashing blocks.

The mining process is called proof of work because it confirms transactions on the blockchain by showing that the miner has used resources (electricity) to create new blocks. Miners are rewarded with newly minted bitcoins for their efforts which is why people have been drawn to this industry since 2009.

But there are problems with proof of work that may not be obvious at first glance. The more people join the network, the harder it is to clear congestion, which means more hardware power is needed to stay profitable over time. Mining difficulty increases with its profitability due to increasing competition between miners and mining pool; in fact, it is estimated that each transaction consumes about 5 million times more energy than a credit card transaction today!