The economics of block production.
WHAT MINING REQUIRES
Specialised hardware Electricity, continuously Cooling Reliable connectivity Space
WHAT DETERMINES PROFITABILITY
Hardware efficiency Electricity cost Network difficulty The asset's price
WHICH DOMINATES
Electricity cost, by a wide margin.
WHY THAT MATTERS HERE
Grid electricity is expensive and unreliable, and generator power is far more expensive still.
WHAT THAT MEANS
Mining major networks is not economically viable in most of this region.
WHAT PEOPLE ARE SOLD INSTEAD
Cloud mining contracts.
WHAT THOSE USUALLY ARE
Fraud, or arrangements whose terms guarantee loss.
WHY
If the arrangement were profitable, the operator would keep the hardware.
WHAT TO ASSUME ABOUT ANY MINING INVESTMENT OFFER
That it is a scheme, unless you can inspect the hardware and its economics.
WHAT DIFFICULTY ADJUSTMENT MEANS FOR RETURNS
As more capacity joins, each participant earns less.
WHAT HARDWARE OBSOLESCENCE MEANS
Equipment becomes unprofitable within a few years.
WHAT MINING POOLS PROVIDE
Smoothed income, in exchange for a fee.
WHAT TO UNDERSTAND
That the industry operates on thin margins at industrial scale.
