How to increase Bitcoin Miner margins without relying entirely on price growth for Bitcoin

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It may seem harsh, but mining bitcoins is no longer as profitable as it once was.

The price of BTC and the cost of energy and other equipment are often the two factors that impact the profitability of bitcoin miners (mining rigs, etc.).

From its previous all-time high, the value of BTC has decreased by around 67 percent. In addition, the difficulty of mining bitcoin has skyrocketed over the past several years. By resolving incredibly challenging computational problems, recent transactions in the blocks are completed as part of the mining process for Bitcoin.

As they compete with one another to solve more challenging riddles, miners must constantly update their equipment to obtain maximum processing capability. These high-end devices consume a lot of energy, which raises the amount of power used and the amount of carbon dioxide emitted.

The time and energy required for the entire process are vast, and the difficulty of mining Bitcoin is currently at an all-time high. Because the production cost has exceeded the profit margins, many miners are now having a very tough time maintaining their businesses.

In addition, declining market circumstances are hurting mining profitability and prompting many miners to sell their Bitcoin holdings to avoid losses. In the first four months of 2022, publicly traded BTC mining companies sold about 30% of their mining earnings, according to research by Arcane. May saw a more than a threefold surge in this sell-off, with some mining companies selling all of their BTC awards, up from an earlier average of 20% to 40%.

The number of BTC supplied by miners to cryptocurrency exchanges reached a 7-month high earlier this month, when BTC values fell to lows of $17,000, according to CoinTelegraph.

To put this into perspective, the Canadian cryptocurrency mining business Bitfarms recently sold approximately $62 million worth of bitcoin or around 47% of its entire bitcoin holdings.

It is no secret that block rewards play a significant role in the revenue generated by BTC miners. In actuality, block subsidies account for more than 90% of mining earnings (BTC rewards miners receive for solving computational problems and validating blocks). But there will soon be another Bitcoin halving. The number of bitcoins created by mining and the associated mining incentives is reduced by half every four years during halvings. The current payout will be cut in half over the following two years, significantly decreasing miners’ profitability, with the subsequent halving set for 2024.

Since miners are crucial to the Bitcoin ecosystem and in charge of maintaining network security, this poses a serious obstacle for the Bitcoin blockchain. The security of Bitcoin will surely suffer if most miners quit and abandon the blockchain. BTC miners need to be appropriately motivated to stop this from happening.

But is there a method to improve the profitability of mining?

The Block’s most recent study indicates that utilizing the several protocols established on top of Bitcoin’s mainnet layer is the best strategy to preserve Bitcoin’s security while boosting miners’ income. The paper emphasized that these protocols might diversify the use cases for Bitcoin, increase its scalability and utility, increase its user base, and build a larger ecosystem that would provide more aggregate transaction fees.

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