4 things to know about crypto mining in 2022
The popular perception of crypto mining, to the extent that people have even heard of it, is one of big, capital-intensive, and burdensome (not to mention environmentally harmful) endeavors. Right now, however, there’s a reason for this perception to shift. While vast mining operations with warehouses stacked full of ASICs haven’t gone away, the range of alternatives in the software and hardware stacks has expanded. As crypto has evolved in tandem with world events, the environment has changed in terms of overall capital expenditure options, risk management, and legal requirements.
Here are four crucial trends to be aware of regarding crypto mining in 2022.
#1. Restrictions are in the air
Recent history has shown that the European Union is not afraid to flex its muscles in tech markets, and it looks like the PoW (proof-of-work) consensus mining used by Bitcoin and other older generation coins will not be an exception. Earlier this year we covered how one EU regulator had called for a ban on PoW. The proposed framework for this ban has more recently been voted down in the parliament. However, crackdowns in some territories –– notably China –– have already (temporarily) poured cold water on Bitcoin’s value in the past. Tighter regulation is always a possibility, particularly in places where mining is consuming a lot of energy.
#2. Greener options are now mainstream
Not all cryptos rely on PoW, of course, and if technological efficiency were the primary factor affecting their trade volume and price, others would have soared past Bitcoin some time ago. While Ethereum has been slow to make its switch to the much less intensive PoS (proof-of-stake) consensus, people are already mining substantial volumes of cryptos already using this method –– like Solana and Tezos –– as well as tokens based on a host of other models, like proof-of-authority, proof-of-space, or proof-of-network. Add to these the non-blockchain technologies like directed acyclic graphs, which are also much lower on power consumption than PoW. Questions around the perceived security of these alternatives haven’t gone away, but the fact that we’re seeing so many “green” (or green-er) alternatives certainly represents a shift.
#3. People are now mining using Apps
Since alternative consensus models are legion and often light on resources, it makes sense that a number of developers have now come up with ways to enable mining through smartphone apps. The Pi Network arguably represents the leading example of how this works. A guide to the Pi Network by FXCM explains that it uses a simple consensus method whereby smartphone users can refer others and earn more coins in the process. The referral emphasis has led to accusations of Pi being a multi-level marketing scheme, but since it doesn’t involve additional costs beyond running a phone, it can’t reasonably be considered a scam. Meanwhile, other lightweight mining options using Algorand or Polkadot are eminently possible on a smartphone as well.
#4. The chip shortage may still cause issues
This year there have been tentative signs that the global shortage of chips could be abating in some areas. That said, predictions published by CNBC back in 2021 that the shortage would last until 2023 have so far proven to be accurate. While crypto mining has sometimes been unfairly blamed as the main culprit –– other reasons include the pandemic, the U.S.-China trade tension, and weather events –– the shortage can mean higher overhead for miners wanting to get their hands on equipment. Solutions are forthcoming, but there are no immediate fixes. New fabrication plants take time to build up and get operational, and supply chain issues around raw materials have only worsened due to the conflict in Europe. Long term, investment in more fab plants should help broaden the distribution of supply chains, as should a move toward standardized chipset interfaces. But for now, the chip shortage remains a serious issue.
The crypto sector is still developing, and we happen to live in turbulent and thoroughly interconnected times. These factors lead to regular change and upheaval, which is why it’s important for those with an interest in the subject to pay attention to trends and developments like these.
- Bitcoin’s Proof-Of-Work (PoW) Will No Longer Be Limited In The European Union
- Kazakhstan Energy Authority Disconnected 13 Unauthorized Crypto Mining Farms In The Country