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Mining cryptocurrency, a money spinner of the young

"I was a DJ. I was visiting my town and a friend told me that there is a new business opportunity. Lots of money can be made. He told me that I should mine bitcoins," says Bhanu Shakya, a cryptocurrency miner. This was in the year 2013. Bhanu bought two high processing machines to mine bitcoins and since then has been mining several cryptocurrencies. He aims to build the largest cryptocurrency mining farm in India. At present, he has 700 graphic cards in his GPU (Graphic Processing Unit) farm. He plans to increase this capacity to 3000 cards. These cards are constantly mining a cryptocurrency, not necessarily bitcoins.

Why do we mine bitcoins?

The technology behind bitcoins and other crypto currencies is called blockchain. With this technology, there is no central authority responsible for the currency. All the transactions are recorded in a public ledger across multiple computers accessible to all. If any transaction (buying or selling of the currency) takes place, it needs to be verified to enter the public ledger. It is the job of the cryptocurrency miners to verify these transactions by running complex mathematical formulas/nodes on their high processing machines. In exchange of this, a miner gets some cryptocurrency.

How many bitcoins you get after mining?

As we know, the number of bitcoins to be released in the market are finite. Post that, no more bitcoins will be released. Shakya says, "At the end of 2009, when bitcoins first came into the market, for one node run of 10 minutes, a miner used to get 50 bitcoins. When a particular block gets solved, then the reward of the miners is reduced by half. This usually happens every four years. By the year 2140, last bitcoin will be mined."

He further adds, "Now there are too many bitcoin miners. The reward gets distributed amongst many. There are lot of transactions happening in the market and so the processors have to work faster and faster to verify these transactions. So, we need to install very expensive processors that are usually 14000 times faster than a normal computer but they need to be replaced every 5-6 months."

Shakya prefers mining other cryptocurrencies like ethereum where the market is still not saturated with many players and the currency can be mined just with graphic cards (cheaper and a technology with more shelf life).

High electricity consumption

According to an article published by World economic forum dated 15th Dec 2017, the electricity used in a single Bitcoin transaction could power a house for a month. And bitcoin mining (the process of generating a bitcoin) now consumes the same amount of electricity every year as Denmark - 33TWh, according to one recent report. Bitcoin mining's energy use is reportedly growing at a rate of 25% per month. At that rate of growth, it will consume as much electricity as the US in 2019. And by 2020, bitcoin mining could be consuming the same amount of electricity every year as is currently used by the entire world.

Shakya says that there are large mining farms in China as the electricity is very cheap there, which forms the major operational cost of crypto currency mining. He further adds that in India Uttrakhand and Himachal Pradesh are viable places to set up the mining farms as the electricity is highly subsidised. He further adds that tech firms in Japan like DMO are building hardware devices that would reduce electricity consumption by half.

But the number of transactions are bound to increase. More and more machines would be churned and the high electricity consumption may become a major challenge for the sustainability of cryptocurrency.

Shakya plans to launch his own exchange on 26th January with 0% commission on bitcoin transaction. With the recent crackdown by the IT department on bitcoin investors, it is to be seen if Shakya would be able to fulfil his dreams.

Vrinda Aggarwal

Vrinda Aggarwal

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