In this episode of Understanding Crypto James Burtt and Paul Abercrombie discuss the effects of the crypto crash on crypto mining. Since many investors choose to exchange their riskier cryptocurrencies like Bitcoin and Ethereum for safer government bonds, the price of cryptocurrencies has fallen. Paul outlines the pros and cons of this. They both agree that despite the current market collapse, Blockchain technology, which is independent of hardware, has the capacity for innovation unmatched by any other technology.

 

Bitcoin Mining 

In light of the economic unrest, high risk claims are being liquidated in favor of more secure and low risk ones. Several governments across the world have decided to offer bonds; as a result, many riskier equities were sold off in favour of fixed-rate, safer government bonds. This liquidation is one of the factors contributing to the recent decline in cryptocurrency values, which, predictably, has had an impact on mining. 

 

Paul talks about Bitcoin mining strategies, which are controlled by multiple computers that raise the level of difficulty based on the number of computers on the network. “It's almost an algorithmic way of creating supply and demand,” James adds. Paul argues that Bitcoin mining has decreased significantly this year, but global economic unrest has preceded these declines. He believes that the ideal time for investors to become involved in mining is now.  “This is an asset that touched $65,000. It's now down but it's  $16,000, just over $20,000, again… so it is on sale,” says James. [Listen from 2:29]

 

Ethereum’s Dilemma 

Ethereum uses a consensus mechanism, specifically proof of work, or a GPU mining machine which is essentially a super computer. Coupled with low prices, Ethereum's intentions to move from its current proof-of-work system to a proof-of-stake mechanism, can be troublesome for the currency.  Paul describes the proof of stake system as “one computer with a piece of software on it which just checks that the transactions happen. It’s like a ledger, basically it reduces the amount of computing power needed to make it work.” Fewer computers result in a direct decrease in carbon emissions, Paul continues, which makes this switch more alluring to some investors. Other Ethereum-based side businesses have already made the switch and are now enjoying some level of popularity. While there are certain advantages, the expected market's glut might be disastrous for the current GPU miners causing the currency to fall further. “It's even harder to make it work when you're already set up in a different mechanism in a different way,” Paul points out. However, this still offers the Winners Club community a chance to engage in cryptocurrency farming. The installation of Ethereum evaluator nodes is part of their strategy to become Ethereum's referee evaluator. [Listen from 13:43]

 

Rapid Developments

Paul says, “There's lots of micro parts of the crypto space that's all having a little bit of an input into what's going on in this broader crypto market.” He and James talk about just how much Web3 is connected and how the crisis made this connectivity more apparent. Given the current state of the economy, Paul believes that long-term investors will continue to prosper because cryptocurrency will survive in the long run. James agrees but warns that investors must exercise caution because of the rapid changes within the cryptocurrency sector. “For people who want to invest for stability this ain't the game to be playing. But for those who want potentially big returns for sure big risks, it's a very exciting time,” he argues. Paul attributes this dynamism to blockchain technology, which is not dependent on any type of hardware, as opposed to other types of technology. Paul says, “Technology hardware has limited the progression of tech over the past 10 years…Whereas blockchain will move so much faster, so much more exponentially, because it would just simply require people to write code.” With  the development of appropriate codes on the blockchain, all of the challenges the market is experiencing can be fixed. Paul and James, who are both fascinated by this volatility, agree that it is the driving force behind much of  Web3’s development. [Listen from 21: 39]

 

Key Takeaways:

• The recent crypto crash also impacted cryptocurrency mining. 
• No other technology comes close to the transformative potential of blockchain technology.

 

Resources

James Burtt on Twitter | LinkedIn | Instagram | Clubhouse

Paul Abercrombie on Website | Twitter | LinkedIn | Instagram