During the time when Bitcoin was at near $20K, many suddenly became interested in mining Bitcoin. Mining is quite an energy intensive activity that is often times criticized by environmentalists and economists. There was a study pointing out that consumption in Bitcoin mining worldwide could power an entire country. And if this trend is going to continue, it is likely that it can permanently damage the environment.
As for miners, many of them choose countries that have cheap electricity and cold weather. One of the reasons why Bitcoin mining has grown in Venezuela is because of the price cap that the Maduro administration announced on basic commodities including electricity.
In Norway, one of the reasons why many are interested in setting up their mining operations in the country is basically because of the taxation on electricity consumption. In the past, miners don’t have to pay the regular tax for electricity. However, it has been reported that things are changing. The government mentioned that cryptocurrency miners are going to pay normal electricity tax by 2019.
Currently, crypto mining companies are receiving the same electricity tax discount that is offered to other power-intensive industries that operate in Norway. For those that are running with a capacity of more than 0.5 megawatts, they are only charged $0.00056 per kilowatt hour. Normally, consumers will have to pay $0.019 per kilowatt hour.
Just 2.8 Percent of the Standard Tax Rate
This can affect a lot of miners in the country considering that they are just paying 2.8 percent of the standard tax rate. According to Lars Haltbrekken who is a Norwegian parliamentary representative, “Norway can not continue to provide huge tax incentives for the most dirty form of cryptographic output like bitcoin. It requires a lot of energy and generates large greenhouse gas emissions globally”.
This is yet another blow to miners. In fact, for the last months, it has been reported that Bitcoin miners were already losing money.
Evolution of Bitcoin Mining Operations
Bitcoin mining operations have evolved over the years. From being able to mine Bitcoin in your living room and get some profits in return, things aren’t the same anymore. In fact, 70% of Bitcoin’s hashrate is located in China. These large mining operations are the ones that were making some profits. However, after Bitcoin slipped below $6,000 and now trading at around $3,500, miners have been severely affected.
In fact, in China, there are small and medium-sized miners that are already forced to sell their mining rigs for a very cheap price. It has been reported that Antminer S7, T9, and Avalon A741 can’t generate profits from mining operations. There are now reports wherein these mining rigs are being sold as scrap and are sold based on their weight.
2018 is quite tricky, especially for miners. Running a Bitcoin mining operation isn’t cheap considering the electricity and the mining rigs that you will need to invest on. Considering these challenges, will there be a lot of miners that will choose to shut down their machines for now? This could be the case in Norway as well. Also, it is also possible that some are going to transfer to another country.