This question is often asked at most cryptocurrency events in Nigeria. The curiosity is undoubtedly driven by the popularity bitcoin has gained in recent years. Price of bitcoin has repeatedly surpassed market expectations and also dashed some hopes along the way. But recent resurgence and increased institutional patronage has investors full of optimism for the future of the market.
Mining is one of the major ways of earning bitcoin. The others include buying from someone who owns bitcoin and getting it as payment for service rendered.
Bitcoin mining essentially is the backbone of the bitcoin network. Mining with regards to bitcoin is the process that helps the cryptocurrency function as intended. Bitcoin miners are network participants that perform extra tasks. Specifically, they chronologically order transactions by including them in bitcoin blocks they find ensuring that users do not spend the same bitcoin twice.
Bitcoinmagzine.com describes the process as a network lottery. For each attempt to try and find a new block, which is basically a random guess for a lucky number, a miner has to spend a tiny amount of energy. If most of the attempts fail a miner would have wasted that energy. Only once every ten minutes will a miner somewhere succeed and thus add a new block to the blockchain.
Unlocking a bitcoin requires an intense amount of computational power, says Katrina Kelly-Pitou a researcher who studies clean energy.
“Think of bitcoin as sort of hidden currency code where its value is derived by solving a programmable puzzle,” she wrote in the qz.com. “Getting through this puzzle requires computer brainpower.”
90 per cent of the cost of mining bitcoin comes from electricity. As such, bitcoin mining uses an exorbitant amount of power, somewhere between an estimated 30 terrawatt hours alone in 2017 alone. To be sure, a terawatt is equal to one trillion watts and for proper context, global energy use of all types (including fuels) is about 18 terrawatts today. 1 terrawatt could power about 10 billion 100-watt lightbulbs at the same time.
As things stand with energy consumption, it is impossible for bitcoin mining activities to be carried out in Nigeria. The average per hour data on electricity consumption in Nigeria was reported at 3,270.000MWh in March 2019 which is nowhere near the amount of power requirements from mining bitcoin.
This is why bitcoin miners have traditionally preferred China where coal supplies 60 per cent of the country’s electricity. There are also growing interest in the Pacific Northwest where power is mainly cheap due to abundant access to hydropower. Iceland is also becoming a popular place for bitcoin mining given the country’s nearly 100 per cent reliance on renewable sources for its electricity production.
Apart from electricity, bitcoin mining is naturally resource intensive and difficult in order to maintain stability of the number of blocks found each day by miners. Hence, bitcoin mining is done by specialized computers. As a rule, the individual blocks must contain a proof of work to be considered valid. This proof of work is verified by other bitcoin nodes each time they receive a block. Proof of work prevents miners from creating bitcoins out of thin air as they must have burned real energy to earn them. Secondly, proof of work also solidified bitcoin’s history, in that an attacker would need to redo all of the work that has been done if he or she plans to change a transaction that happened in the past.
Over the years, bitcoin mining has become so specialised that it is mostly done by dedicated professionals with specialised hardware, cheap electricity and often big data centres.
But while Nigerian generally ignore mining, they are pulling their weight on trading as searches on Google Trends have shown in recent times. A research conducted by Luno has also found that majority of Nigerians see bitcoin as an investment asset instead of a mining prospect.
