Many commentators suggest that cryptocurrencies will be the gold, the money, and the oil of the future. In contrast, others maintain that, at the moment, the market for crypto coins is too volatile and, ultimately, has weak fundamentals. In the middle of this debate, blockchain technology moves on, and people who walk along seem to be getting richer.

One way to participate in the cryptocurrency world is to mine it. The word is a common term for providing hardware to run the blockchain behind the crypto. In short, the blockchain is a ledger where all operations with crypto coins are written down. It operates on a network of independent computers for the double purpose of security and elimination of any central authority. The latter, by extension, eliminates the risk of the agency problem that created the 2008 financial crisis, the tormented cradle of all cryptocurrencies.

What is Bitcoin mining?

The Bitcoin blockchain is the first and most respected. It is updated with a new block of transaction data every 10 minutes. Anyone can participate in this process by providing one’s computer to the network that runs the blockchain. The participants are rewarded with newly created coins and transaction fees paid by the users of Bitcoin. But here comes the problem: only one computer is rewarded the entire sum every time, and the decision is made like a lottery. Specifically, computers try to guess a number, and the first that does wins. It’s called mining.

Behind this quaint facade lie the considerations of security and fairness. It ensures that everyone has an equal chance of getting the reward. The difficulty comes from the efficiency of making the calculations required to participate in the lottery. The less energy it takes to make one guess, the better, and it pays to pull funds and expertise together to achieve the best results. Services like UAE mining minery.io provide hosting for special mining rigs to ensure optimal operating conditions, support, and maintenance. 

What is SWOT analysis?

SWOT, an acronym for internal Strengths, internal Weaknesses, external Opportunities, and external Threats, is a strategic management analysis used to look as directly as possible at the present and future of a business or industry. It shows what must be done to prevent failure and what resources can be used. Below is an analysis of the Bitcoin mining industry.

Internal Strengths

Bitcoin mining is the oldest thing in the business and has the following strengths:

• Developed a community of businesses and mining hubs
• Robust technology with cryptography at the core
• Clear operation

Being the first mover is always advantageous, and the first mover that creates an industry always enjoys the participation of a technically strong and dedicated community. The same happened with AT&T in telephony, Google with the internet search, and is currently happening with OpenAI and its ChatGPT. For Bitcoin, the community is the biggest fundamental behind it, which ensures its high market value. It also allows newcomers to participate easily by investing small in many companies that provide mining rig hosting. 

The robustness of blockchain technology and the clarity of operation are other strengths. They allow new investors to understand the process at a glance and be sure it is straightforward. The principles of transparency and fairness are the principal value provided by Bitcoin.

Internal Weaknesses

Once computers are set up, Bitcoin mining is off the hands of managers, investors, and technicians. It relies completely on machinery and the underlying technology, which dictates the following weaknesses:

• Machinery breaks and requires maintenance from professionals
• Less new coins are minted each year

Computer equipment is the key to Bitcoin mining because profitability comes down to minimizing the energy costs per unit of calculations. This requires maintenance of the best operating conditions and a dedicated professional service. Running a mining rig in the form of a home PC would mean having exuberant costs that would outweigh the statistical chance of receiving the block reward many times over.

In addition, fewer coins are minted each year due to the algorithm at the core of the blockchain. Part of the mining reward already comes from the transaction fees Bitcoin users pay. If the price of Bitcoin would not be showing a constant rise, the rewards could become progressively smaller.

External Opportunities

Bitcoin was the first mover in the cryptocurrency economy. It makes it the crypto #1 for anyone interested in the industry. With these come opportunities:

• Bitcoin is the most respectable crypto people want to buy
• Dedicated hardware is now created to increase income from mining

Bitcoin is almost synonymous with cryptocurrencies, making it the most desirable asset in this new digital economy evolution. In addition, hardware manufacturers make dedicated rigs designed specifically for Bitcoin mining. The benefits of these rigs come from the reduction in energy consumption per unit of computation. In conjunction with the developed ecosystem of mining pools and mining rig hosting services, it clearly shows the evolution of mining technology. It simply requires an investor to move along with it.

External Threats

Other blockchains, particularly Ethereum, have risen in popularity and have their strengths. This threat of competition poses the following threats:

• The evolution of the technology may create an ultimately better cryptocurrency than Bitcoin
• NFT minting is not possible on Bitcoin

Bitcoin enjoys its status as the most reliable cryptocurrency, mainly to the first mover advantage. However, if a new evolution of cryptocurrencies would make the Bitcoin blockchain outdated or even unfeasible, then Bitcoin would stop growing in value and start to depreciate, most likely slowly.

The creation of NFTs, one of the hottest things in the crypto world, is not possible on the Bitcoin Blockchain due to the simplicity of its operation. This is a bigger threat than a relatively obscure threat by future better technology. The reality is there is already a new technology in place that can do more than simply be transparent and cryptographically robust. 

Sum total

The weak points of Bitcoin mining are the complete reliance on computer technology, a possible decline in income if Bitcoin prices will not rise, and the threat from the blockchains that support the creation of NFTs. The strong points are the transparency and simplicity of the technology, the first-mover advantage that makes Bitcoin the most desirable cryptocurrency, and the existence of a wide community of dedicated professionals and businesses.

It is clear that the difficulty of operation of Bitcoin mining equipment may be tough for an individual entrepreneur who wishes to perform mining alone. However, these can be better approached with the help of the community already in place and working on the best ways to run a mining business.

The fact that the Bitcoin blockchain does not support NFTs makes it in the world of cryptocurrencies akin to gold compared to Ethereum, which appears more akin to oil that powers a yet buggy but interesting technology. On the other hand, the first-mover status of Bitcoin and its no-nonsense operation make it the simplest choice for investors who wish to simply store value. After all, gold is still gold.