The consequences of the Coronavirus on the crypto world, as well as on most sectors of society, are difficult to calculate. However, there are some more obvious effects than others. As is the one that the disease would be having over Bitcoin mining, which could lead to Chinese farms losing their dominance over this activity.
The concentration of Bitcoin mining
Cryptocurrency mining is one of the fundamental activities for the maintenance of the crypto world. Well, it is thanks to this mechanism, through which Blockchain users lend their computing power for the execution of system operations, in exchange for a reward, that cryptocurrencies get the capabilities to keep working.
The ideal for this activity is that it is carried out by hundreds of thousands of individuals around the world. Since this is the only way to guarantee transparency and decentralization in the governance of cryptocurrencies. However, in the case of Bitcoin, the story is far from being so.
The ever increasing difficulty in mining the BTC blocks has led to this activity only being able to be carried out profitably with the use of expensive mining equipment.
These consume a lot of electricity and would therefore be a smart investment only when purchased and used in large quantities. Thus taking advantage of the economies of scale they generate.
In this context, mining has become an activity increasingly controlled by large mining companies, known as farms. Which have the financial capacity to acquire and put to work thousands of mining machines at the same time.
This situation has concentrated the dominance over mining and the Bitcoin Blockchain, in a handful of large business actors, with the most powerful being located, until now, in China.
China mining domain affected by COVID-19
Most of the mining farms in China work using S9s mining equipment. A type of equipment that, despite being cheap, has been becoming outdated over time. This implies that it is losing the power necessary to compete with more modern equipment.
Therefore, mining farms that work with this type of equipment need very high prices in the cryptocurrency to be profitable. Currently being the minimum price for S9s machines to be profitable at $ 5,136 per BTC. What, given the volatility in Bitcoin prices in recent days, is a rather uncertain target.
To this situation we must add the logistical difficulties imposed by the quarantine due to the Coronavirus. And it is that, most of the mining farms in China have not been able to receive the spare parts they need to keep working. Nor have they been able to perform the maintenance that their aging equipment requires.
Blow to mining
All of this has strongly hit the mining domain of Chinese farms, as commented by Wu Tong, Deputy Director of the Blockchain Commission of the Ministry of Commerce:
“Under the influence of the epidemic, the difficulty of maintaining, renewing and continuing the production of mining machines has further increased, and the drop in prices of 12.04 has put many mining machines up for sale. The tide of mining machines for sale has already occurred, and the average selling price of each mining machine is 30% -50% lower than before the Spring Festival“
Thus, the dominance over mining exercised by Chinese farms would be seriously questioned. At least, as long as the immediate effects of the Coronavirus on Chinese society are sustained and prevent mining farms from investing in their equipment. Making this our Today’s Data here at CryptoTrend.