23/10/18 14:55 UTC-4

The effect of mining complexity on the market value of the cryptocurrency

Mining complexity and cryptocurrency cost
Mining complexity and cryptocurrency cost

The level of complexity of the mining of digital monetary units is determined on the basis of an analysis of the number of blocks released for the time allotted to perform the functions incorporated in it. Thus, with a sharp increase in the number of blocks created, there is an increase in the level of complexity of mining.

Each e-currency has a certain limit for the release of blocks for the set time, so when the maximum is reached, the speed of operations slows down and the subsequent complication of mining occurs. The process of issuing a cryptocurrency is directly determined by the number of involved miners and the capacity of the Blockchain network (hashrate).


The Efthereum Perspectives

After sharp fluctuations in the value of Bitcoin (BTC), many miners and investors have pondered the issue of switching to alternative cryptocurrencies. The second after Bitcoin in popularity and capitalization in early 2018 was Ethereum (ETH), which, thanks to new opportunities in the conclusion of transactions with various assets, was widely used and lightning increased its turnover. Given the prospects of the Ethereum as a long-term investment, it began to actively mine, thereby further heating up interest in this currency.


The main reasons for the increase in the complexity of mining

Using the example of Ethereum, the second most widely used cryptocurrency in the world, it is possible to analyze the reasons for the increase in the complexity of mining. The increase in the number of operations in the blockchain is usually associated with the activity of the miners, as a result, the process of mining the cryptocurrency is complicated.

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Mining of the Etherium requires adjustment of the system after 1000 created blocks – this leads to the need to create new software to accelerate the computing capabilities of the platform. Accordingly, with the fall in the level of electronic transactions, the complexity of mining is reduced and leads to a slowdown in computational operations.


Mining complexity dynamics

For all the time of existence of ETH, the complexity of mining has changed along with the growing interest of investors in this cryptocurrency. At the very beginning of its history, the Etherium had a mining complexity of 1.2 TH / s, which made it possible for miners to easily obtain huge amounts of this cryptocurrency. As of 01.07.2017, the complexity of mining was 992 TH/s, and 1 ETH was worth $ 290.

The possible profit from cloud mining when buying 100 MH/s was $ 12.4 per day. But after the level of complexity has grown to 250 TH/s, and the value of the currency has grown not so much, the profitability of mining has significantly decreased.

October 1, 2017 the average cost of the Etherium on the exchange did not exceed $ 310, while the complexity of the mining was already 2865 TH/s. The income from the investment of 100 MH/s was $ 4.6 per day. In early 2018, the index of mining complexity fluctuated at 2500 TH/s, followed by a rise in the value of the coin to $ 1,200. So, as of January 15, 2018, the complexity of mining reached the level of 2189 TH/s, with a market price for 1 ETH – 1300 $. The same 100 MH/s capacity brought $ 16.2 of profit per day.

Based on the above figures, investing in the mining of the Etherium will generate revenue depending on the growth dynamics of "complexity" and the market rate of the cryptocurrency.

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A detailed analysis of the growth amplitude of the complexity of mining and the rise in price of the Etherium shows a decrease in profitability for individual investors, leaving good indicators only for those who are ready to join a powerful pool. Negative impact on the capitalization of Ethereum may be caused by an increase in electricity prices and unsuccessful transformations in the work of the Blockchain.


Taking into account the situation that has developed with the release of Ethereum, it is worth considering the investment option, using cloud-mining based on powerful Data Centers. This option will allow the investor to join large pools and earn extra money in the event of an increase in the value of the digital currency.

Editor: Yuliya Soroka

#mining #complexity #value #cryptocurrency



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