Cryptocurrency miners halt as market lacks cost efficiency.
Cryptocurrency miners in India are failing to make better profits as bear markets, rising electricity cost, and an increase in mining difficulty have a looming effect on mining. Also, fewer people are entering the mining field as the cost of a rig has shot up due to a shortage of Graphic Processing Unit (GPU) cards.
Harsh Bhurbure, a miner in Karnataka, said that mining profits have been reduced drastically since the cryptocurrency bear market. “I used to make $45-50 a day previously, now I manage to make only $25-$30 per day,” he said. Spending on maintenance and cleaning is expensive and inevitable. He added that Rs 15,000 per month has to be spent on electricity, deep cleaning of the system, etc.
Sadiq Mukhi, a miner in Gujrat who has been mining since 2017, said that the mining reward and return has reduced in the last year as the number of international miners has increased exponentially. “People who are sharing the hash rate have increased. While one token was distributed among 100 people before, it is now being distributed among 1000 people,” he said.
Miners with bigger setups are sustaining the bear markets as they can afford to hold the tokens and wait for prices to rise before selling. But the small-time domestic miners are finding it hard to stick it out till the next bull run, he added.
The global cryptocurrency market capitalization has come down by 22 per cent in 2022 according to Coinmarketcap. The majority of the price movement in the market has been bearish. Ethereum, the token mined by the majority of Indian miners, is down by 47 per cent from its all-time high of $4,878 in November 2021. The token is today valued at $2,579.
As the cost of mining set up has increased and the return from mining has reduced, miners say the number of new entrants into mining has also reduced.
Arun, a miner from Mumbai, stated that the cost of setting up a mine has increased significantly in the last year. This main problem in India is the shortage of GPU cards. They have become costlier due to high demand and limited supply. “Recently, the Nvidia A2000 (a professional graphics card) came out and you could not just find it even if you were willing to pay two to three times the MRP,” he said.
“Many people are not getting into mining right now because the profitability has reduced drastically.” Arun said. Good returns are guaranteed only in Ethereum mining. But Ethereum is set to shift to a proof-of-stake method of consensus this summer. Hence, it will be difficult for new miners to break even because mining other tokens like Doge, Raven, and Shiba Inu isn’t profitable, he added. However, there are still some people who are entering the mining business, he said.
Mukhi added, “Fewer people are entering now, and small domestic miners too are backing off because it has become tougher to make profits.”
In the global market, only two chip manufacturers dominate the GPU/ graphics card market- Nvidia and AMD. Almost all GPUs available for desktop computers and laptops are made by these two companies. The reason behind the lack of supply is the ongoing semiconductor shortage caused by the pandemic. Manufacturers have struggled to meet demand due to reduced chip production combined with increased demand for electronic goods fuelled by the pandemic.
Rohus Nagpal, a blockchain expert, said that globally, cryptocurrency mining has become less profitable. In India, the high cost of electricity adds to the problems of miners. “I think it will only get worse,” he said. The solution to this could be merged mining, which is auxiliary proof of work, which is the process of mining two or more blockchains at the same time. He added that essentially the same proof of work can be used on multiple chains. Addressing the lack of regulation on cryptocurrency mining in India, he said, “Laws basically tell us what we cannot do.” So as long as there is no law banning crypto mining, it can be done by anyone.