The bitcoin mining landscape was, perhaps, permanently shaped over the past year, as events both great and small made their marks on the industry.
2014 saw community uprisings against large hashrate contributors, growing amounts of capital flowing into the space, the expansion of mining into the remote corners of the planet and much, much more.
MegaBigPower’s Dave Carlson argues that the last year was a game changer that brought both risk and reward for those who decided to throw their hat in the mining ring.
Carlson operates a bitcoin mine out of Washington state and began establishing a franchisee mining initiative over the summer.
According to Carlson, 2014 saw dramatic change that has deep implications for the industry moving forward. This evolution has both benefits and costs, he says, and any enterprise that didn’t maintain a pragmatic stance and invest in infrastructure “is now suffering the consequences”.
He told CoinDesk:
“The promise of running magic money machines in your own home caught consumers’ imaginations. The chance to grab quick profits enticed entrepreneurs and investors. Huge risks were taken. They were exciting times, but they were short lived.”
Carlson also speculated that 2015 could bring big changes to mining, saying that, at the end of day, the ecosystem may evolve but will always be governed by that one key metric: the price.
Big leap for tech
On the technology side, Carlson indicated that ASICs improved in both performance and design quality throughout 2014. He cited the work by companies in the hardware space today as a vast improvement over past generations of equipment, and predicted that this trend will continue.
“The first ASIC mining rigs were really community-designed hobby kits,” he said. “The new stuff coming out is more professional and much higher quality.”
ASIC developments followed established trends of technology growth in the past year, he added, explaining:
“We are watching bitcoin transaction-processing technology progress very rapidly through the same stages that data center servers have gone through.”
However, he noted that ASIC improvements won’t be that significant as we move into 2015. While certainly an improvement over previous generations, Carlson argued that any foreseeable performance enhancements will not result in a significant boost to the overall network hash rate.
Centralization remains an issue
The rise of the ASIC and the profitability shifts for mine operators has resulted in what can only be called the death of the retail bitcoin miner, according to Carlson.
“The market for retail miners has all but disappeared,” he explained. “The amount of power required to make a relevant amount of bitcoin has pretty much just left the larger operators who can run at scale using cheap power.”
Calling large mining pools a “direct threat to bitcoin’s future”, Carlson said that the community should be as much against the existence of several large mining entities as they are about one huge one.
He said:
“Each and every investor, owner, entrepreneur or bitcoin enthusiast should be concerned that having two large pools and one ‘Unknown’ does not ensure the healthy future of the bitcoin ecosystem.”
What’s coming in 2015
Carlson sees the price as the determining factor for network growth in 2014, though he sees a steady rise playing out over the next year. At the same time, he didn’t rule out big changes if something unexpected redraws the lines in the industry.
He explained:
“As price fluctuates up and down, we will see the network size follow. If a new market dynamic causes significant reduction in BTC supply, or there’s a significant increase in demand we will see prices move higher.”
Carlson is interested in seeing how transaction volumes change over the course of 2015, he said, explaining that mining pools in the space are evolving their business practices as the nature of transactions change.
“Large mining pools are already adjusting their thresholds to accept only paid transaction,” he said. “Soon they will begin to adjust those thresholds higher, requiring more pay for more critical transactions.”
Carlson suggested that sidechains may prove to be a potential source of future growth as well.
Overall, he pointed to the environment for existing mine operators as a strong one, and Carlson noted he looks forward a more “steady” pace in 2015.
“I’m really excited to see the market settling down,” Carlson said. “This gives an opportunity to clearly identify the economic expectations around securing capital for growth.”