Alejandro de la Torre, cryptocurrency mining expert, was our special guest in a virtual conversation held by the Bit2Me team. Where he tells us about his extensive career in the world of Bitcoin mining.
With more than 7 years of experience in the world of cryptocurrencies, De la Torre has participated in projects of great importance for Bitcoin mining. He is currently Vice President of Poole's, one of the largest mining pools that exist worldwide. Furthermore, he is the co-founder of BTC.com, where he also served as Vice President. Likewise, Alejandro de la Torre was Strategy and Business Development Manager at BlockTrail BV A company dedicated to providing technological services and products based on blockchain.
Also present at the conversation were the Commercial Director and CSO of Bit2Me, Javier Pastor, and the Director of Public Relations and Social Networks, Giovanny Montealegre. Those who spoke with De la Torre to make the cryptographic community aware of the potential of Bitcoin mining pools. In addition to the importance that these spaces have for the network and the system in general. As well as the variables that users must take into account when joining one of these pools.
Alejandro de la Torre tells us a little about Poolin
Poolin is one of the largest Bitcoin mining pools in the world. It was created in 2015 with the aim of redefining the mining pool industry. It has an unwavering approach towards decentralization so that any user, who wishes, can be part of Bitcoin mining.
Likewise, Poolin currently handles 20% of the hash power of the Bitcoin network.. In addition, the company is always in constant search for new implementations and projects that allow them to provide greater service to users.
In this sense, Alejandro de la Torre mentions that:
“We are one of the largest pools in the industry, we are number one in Bitcoin… We also mine other currencies such as Litecoin, Zcash, Ethereum, Dogecoin and many others.”
Referring to the fact that mining within Poolin is focused on Bitcoin and other important cryptocurrencies in the market. Likewise, De la Torre highlights that Poolin has state-of-the-art equipment designed with the most advanced technology in the industry.. Which has ensured the company remains among the top places.
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What is a mining pool and what does it mean for Bitcoin?
Mining pools are a space where miners can pool their computing power to make the job of mining blocks easier. In addition, it is the most effective way that currently exists to mine cryptocurrencies, especially Bitcoin. Because the difficulty of the network at the moment makes the job more difficult for a single miner. As well as an unprofitable activity individually.
For their part, these spaces are intended to fulfill 3 essential functions, as highlighted by our CSO Javier Pastor.
“Miners perform a function, well three main functions, which are to store, distribute and secure the Bitcoin network.”
In this sense, Pastor notes that Mining pools largely ensure the proper functioning and operability of the network. Furthermore, thanks to the union of this computing power, it can be ensured that the generation of the blocks is carried out in the estimated time. Which is approximately 10 minutes for each new block.
For his part, our guest, Alejandro de la Torre, also notes that Mining is one of the most essential and fundamental aspects within the Bitcoin system. Since without this activity the bitcoins could not be generated. Likewise, De la Torre points out that the miners are responsible for generating and maintaining the hash rate of the system. Which guarantees high security and robustness to the network. At the same time, it prevents transactions from being modified, altered or deleted.
“To change a transaction in Bitcoin, you would have to create the same type of energy from the entire Bitcoin network and all the miners. “You would have to recreate all of that to change a transaction in Bitcoin… This is basically impossible, no computer in the world can do it, not all the computers in the world.”
This in mention that Bitcoin is currently the most powerful computing system that exists in the world.. It is even estimated to be approximately 500 times more powerful than any super computer that exists today.
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But what is a miner?
To define what a miner is and how you can start mining Bitcoin or other cryptocurrencies, De la Torre mentions that:
“A miner is a person who has a mining computer in his or her possession. “It is an advanced and specialized computer that only does one thing: mine bitcoins.”
Bitcoin mining computers are complex equipment specially designed to fulfill this function. Which is to perform advanced calculations to solve computational problems that allow them to generate new blocks and receive the reward from the network for it.
For its part, currently the most recommended thing for a person who wants to get into this is group mining. For this activity to be profitable and successful, a miner must join a mining pool. Otherwise, if working individually, the miner will have a very low chance of generating a block and receiving the reward bitcoins.
Likewise, within the conversation a very important topic was touched on. Especially for those people who are considering joining this activity and increasing the hash rate of the Bitcoin network.
Variables to consider when investing in Bitcoin mining
De la Torres tells us that among the most important aspects to consider before investing in Bitcoin mining equipment are:
- Electricity cost;
- Ambient temperature;
- Policies and regulations that exist around Bitcoin or other cryptocurrencies in the country from where you want to do the mining;
- Mining equipment costs and rates;
- Transfer or shipping of this equipment to other countries.
Firstly, the price of electricity plays the most important role in this investment. In countries where the energy cost is really cheap, Bitcoin mining can be very lucrative. Quite the opposite happens in countries like Spain, where the cost of electricity is so high that it makes mining bitcoins unfeasible.
Likewise, mining equipment needs to have a cooling system that minimizes all the heat they generate with their hard work. Another aspect that increases energy consumption to a greater extent. Thus, in countries with low temperatures, such as Iceland, Holland, Russia, among others, Bitcoin mining can be very profitable. Since the energy costs for cooling the equipment can be considerably reduced.
Likewise, it is also necessary to know the measures and regulations that exist in the countries from where you want to do this activity. There are countries where Bitcoin mining is illegal, while in other countries the electricity charges are usually higher, as was the case in Uzbekistan.
Network hash rate
For its part, another important point to consider is the power of the equipment. There is a wide variety of Bitcoin mining equipment on the market. The price of which can vary from $50 to $2.300 or even more. But it must be taken into account that the equipment that is “cheap” is usually second-hand and, in addition, is usually outdated.
It is important to remember that with each miner that enters the Bitcoin network, the hash rate increases. This is due to an automatic adjustment made by the Bitcoin system as a measure to guarantee its protocol. In reference to this, De la Torre mentions:
“When there are new devices, the Bitcoin network calculates that new hash rate that has been added to the network. So, every time there are new, much stronger teams, the hash rate goes up and then the difficulty goes up.”
At this point, outdated mining machines do not have computing capacity similar to the newly developed equipment. Therefore, they do not generate competition, and therefore, they become inefficient in mining work.
Source: Blockchain.com
Due to the integration of new mining nodes into the Bitcoin network, we have been able to see an incredible increase in the network's hash rate. From 2009 to July 2010, the Bitcoin network had a value close to 0 TH/s. Subsequently, from July 2010 to December 2015, the network had a considerable increase, going from 0,2 TH/s to approximately 800 TH/s. But it was not until 2016 when Bitcoin began to see a really considerable, constant and rapid increase in its hash rate. Going from 800 TH/s to 110.000 TH/s currently.
This aspect has caused CPU mining, which was previously possible, to be replaced by GPU mining. Which in turn was also replaced by the ASIC equipment with which mining is done today.
Alejandro de la Torre: Importance of Bitcoin halving within mining pools
The Bitcoin halving is a reward reduction event that occurs within the Bitcoin network every 4 years. More specifically every time 210.000 blocks are mined. So when the reward miners receive is halved, it is very likely that the network's hash rate will also decrease for some time.
This decrease in network power is due to miners using part of the reward they receive in Bitcoin to cover their operating expenses. Therefore, when the halving occurs, for many, mining activity ceases to be profitable.
Source: Blockchain.com
In the graph you can see that, just a few days after the third Bitcoin halving occurred, the network's hash rate decreased considerably. However, as of this publication, the network's hash rate is once again on the rise. Which indicates that the miners have reconnected their equipment, or that new miners have joined the network.
Bitcoin Mining Sustainability
The limited supply of bitcoins and the reduction in the creation of these coins at each halving will lead miners to the point where mining will no longer be profitable, if they only depended on the reward provided by the system.
However, in reference to this topic, Alejandro de la Torre comments that after reaching the maximum limit of 21 million bitcoin coins, the system will no longer give any more rewards to miners. However, these will be supported by the rates (fees) generated by each transaction processed. So the network will be able to continue with a high hash rate that guarantees security and trust.
Profitability of mining through Poolin
Finally, Alejandro de la Torre tells us the benefits of mining Bitcoin through the Poolin pool. First of all, he highlights that in Poolin both the block reward and the transaction fees are delivered in full to the miners. And then, from the sum of all the profits in bitcoins, the pool fee is calculated.
“We pay the transaction fees for each block, we also give them to the miners who mine with us.”
For his part, De la Torre also highlights that the proof of work (PoW) system has demonstrated efficiency, sustainability and profitability for everyone. Furthermore, he believes that proof of stake (PoS) can favor centralization and concentration of power.
“Proof of Stake is basically like today's financial system… For example, if you have 10.000 coins you earn more money just by staking.” There is no way a new entrant can reach the level of the one who has a lot of coins.”
While with PoW anyone can develop a more powerful mining rig and start mining bitcoins. For this reason, De la Torre considers that this mining method is much more profitable and fair with respect to all participants.
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