Yes, it is possible. We might witness a surge of projects running on more efficient mining (or reward) system going mainstream – such as Proof of Stake (POS) and masternodes, which were mentioned in our 2019 prediction piece.
If why is the question; just look at the recent onslaught in Bitcoin and other cryptocurrency prices. It resulted in many miners having to shut down, or even declare bankruptcy globally. Generally speaking, why the need to invest in such huge infrastructures to compete, and digitally mine for tokens? What good can come from it?
Huge costs of crypto mining
Running a mining operation is not only capital intensive, it requires constant reinvesting. Mining equipment do not only have to be replaced every so often due to increased difficulty levels of mining, it also needs to be cooled as well, which means a lot of electricity is needed.
Also, unless you’re mining in countries with low electricity tariffs (i.e. Iran, Venezuela etc), you will need cryptocurrency prices to stay above certain levels, and this means that your cash flow has to be managed very carefully. It simply means, as a small player it’s going to be hard to survive. Huge capital investments do not mean that returns are assured – simply to put it into perspective.
Proof of Stake, and influx of mining appliances
IF the need to prove that work was put into creating these “rarified” tokens – then perhaps other contributions such as building a community, improving adoption and building better solutions should be rewarded?
That is why we think (although not perfect), Proof of Stake (POS) mining could be a more efficient use of capital in this space. Yes, it doesn’t solve hoarding, but it puts it on the same league as legacy Proof of Work (POW) mining, which doesn’t solve the issue of hoarding – where the rich become richer.
Also, less we forget, the mining appliances space is quickly changing. Today, more and more companies are offering mining appliances that fit the living room, and the catch is – it does not heat up, make a lot of noise and it looks really good. Could we finally make full use of cryptocurrencies’ peer-to-peer (p2p) capabilities? Does this allow us to move away from centralized mining?
However, before we get ahead of ourselves, it is important to note Bitcoin’s continued dominance in the cryptocurrency space. Future technology has no choice but to work alongside Bitcoin’s technology or be able to be a league of its own – like Ethereum. The much awaited Ethereum 2.0 could perhaps give us a possibility of how the future would look like, or perhaps it’s already here, in the form of unicorn cryptocurrency called Dash. Could there be a rivalry between POS and POW systems? Only time will tell.
For now, back to checking CoinMarketCap.
Cover photo by: Ronald Malamba/techreport