3 factors to consider before mining Bitcoin

3 factors to consider before mining Bitcoin

Key facts:
  • Capital, energy and equipment constitute the “Miner’s Trilemma”.

  • The greater the interest in mining, the less equipment will be available, Burnett defines.

Bob Burnett, CEO and founder of the Bitcoin and cryptocurrency mining company, Barefoot Mining, explains the trilemma (choice between three options) that any person or entity that wishes to carry out the activity must consider.

Burnett founded his company in 2017. At that time —he tells in a publication of Bitcoin Magazine—, «Getting investment capital for any mining company was relatively easy». There was heightened interest in the cryptocurrency industry.

Instead, during the “crypto winter” of 2018, incoming capital into cryptocurrency mining dwindled. That also translated into a reduction in energy cost as well as equipment availability.

Based on these experiences, the entrepreneur postulates the Miner’s Trilemma. According to Burnett, those are the three aspects that should be analyzed by anyone who wants to mine cryptocurrencies: investment capital, energy and mining equipment.

3 factors to consider before mining Bitcoin
Differences between the trilemmas between the bull market of 2021 and the crypto winter of 2022. Green represents the greatest opportunities, while red points towards difficulties. Source: Bob Burnett, Barefoot Mining.

According to his postulate, the greater the capital interested in investing (for example, what happened in 2017), the lower the availability of mining equipment. Therefore, there will be an increase in equipment costsalso translating into a slight increase in energy costs.

For the case of 2022, in the middle of crypto winter, the trilemma has been inverted. In this case, the availability of mining equipment has increased but, nevertheless, the capital interested in investing in this area is reduced.

Burnett comments that, given this Miner’s Trilemma, it is “paramount when investing” that a Bitcoin mining company (or home-based individual) has an advantage over one of the three options to choose from.

In your case, quote that his company started thanks to the fact that he had a large stock of computer equipment. That’s why it became easy for them, in 2017, to start a small mining company. It had an advantage in a market of scarce mining equipment.

The employer’s recommendation makes sense in a context in which, according to many specialists, Bitcoin mining is about to resurface massively. For example, as CriptoNoticias reported this morning, there are those who consider that the “blackout” of miners as a result of low profitability could end in September of this year. When that happens, it is expected that new miners will also decide to join the network.

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