For crypto miners, the cost of electricity is one of the main outside factors they always have to be aware of. Electricity is the main expense of any mining operation and it therefore determines if the business generates value or not. All of this means that if you have an interest in crypto mining, you will have to keep an eye on the price of electricity wherever you live.
What is Cryptocurrency Mining?
Bitcoin, Litecoin, Dogecoin and other cryptocurrencies are created by mining. In order to mine cryptocurrencies, miners’ computers compete to solve complex mathematical calculations. The miner who finds the solution to these problems first gets crypto assets as a reward. The whole network benefits from miners because these calculations validate the peer-to-peer transactions happening at that moment in time.
The miner (or their crypto mining software) selects a certain number of pending payment transactions in a block. The primary criterion for including or not including a deal in a block is the fee that users offered when entering the trade. The transaction fees are the ones that the miners selected beforehand.
The mathematical task is usually to find a value that depends on hashing functions. This validates grouped payment transactions, and there is a current time limit. Due to the hash function, the possibility of finding the right solution is random. This means that who finds it first depends on the performance of the hardware seeking the solution, not on the mathematical abilities of the miner. The current limit changes every few minutes. This limit comes from the average time that blocks in the network have taken to solve during this period. This means that the chance of finding a solution is inversely proportional to the current network performance.
Some big cryptocurrency miners and companies place their mining machines in countries with low electricity costs. Any crypto mining operation needs electricity for powering its hardware, but there are also other things to consider. Some of these things are not very significant, such as the cost of running light fixtures at the site, but others might be even greater than the cost of running the crypto mining hardware. For example, if the premises do not have enough natural ventilation (which is almost always the case)–it will be necessary to air-condition the hardware so that it does not overheat.
Keeping mining hardware at low temperatures is important for two main reasons. First, running computer circuits at high temperatures decreases the lifespan of this hardware. Second, many of the processors used for mining have security features in order to protect themselves from overheating, so they will slow down whenever they are hot. Thanks to this, Iceland is one of the countries where big mining centres are located. This country is ideal for crypto mining businesses for two main reasons. The first is the colder-than-average weather that helps lower air-conditioning needs. The second is that clean electricity from geo-thermal plants is widely available at low prices.
Is crypto mining profitable?
If you wonder if you should buy hardware to start mining some cryptocurrency, you can use the following calculator to estimate the feasibility of your project: https://whattomine.com/
To learn more about crypto mining, check out this link: https://en.wikipedia.org/wiki/Cryptocurrency#Mining