Through 2018, the profitability of Bitcoin mining (and the mining of other cryptocurrencies) has taken a bit of a tumble. Prior to the start of the year, when Bitcoin entered a bull phase and almost peaked at $20,000.00, the Bitcoin mining industry saw a huge uptake in popularity, simply because all of a sudden, mining Bitcoin could have become a very profitable business. Through the year though, a bad recipe of climbing energy prices and the falling value of Bitcoin has meant that now, mining Bitcoin really doesn’t make anyone much money.
Tie this in with the sudden change in the supply of and demand for cryptocurrency mining equipment, and suddenly the price to buy the rigs needed to mine Bitcoin has shot up. Overall, it’s a lose-lose situation for the miners. Until recently, Norway did have a partial resolution to the problem of low profitability when mining Bitcoin through a programme that allowed Bitcoin mining companies to receive subsidised energy bills from the Norwegian government. Basically, thanks to a government initiative, energy bills for Bitcoin mining companies were reduced, in order to allow them to continue to make a small profit.
With the payments from the authorities in place, mining firms in Norway paid around $0.00056 per kilowatt of energy used.
By recent reports, however, this price is set to increase as a result of the authorities retracting from this payment system. Now, the estimated costs per kilowatt of energy will be rising to around $0.194.
According to Crypto Globe, this has come out as a result of a new government level budget change, which means authorities are no longer able to cover some of the energy costs experienced by Bitcoin miners. As a result of this, miners will receive far smaller profits from their mining operations, if any profits at all. A representative from Norway’s Socialist Left Party, Lars Haltbrekken seems to be pretty happy about the recent budget changes, stating:
“Norway can not continue to provide huge tax incentives for the most dirty form of cryptographic output as bitcoin. It requires a lot of energy and generates large greenhouse gas emissions globally.”
Furthermore, according to Crypto Globe:
“Per Afterposten Roger Schjerva, a chief economist of local tech interest organization ICT Norway, criticized the move and claimed it was shocking that the state budget approved it without discussion, consultation or dialogue with the industry. Per his words, the government is playing a gambling role with its credibility with the move.”
There are very mixed opinions about this move, with some seemingly happy that this is sure to reduce the carbon footprint of the mining industry in Norway, and other believing that the government are acting irresponsibly within this, as now, a number of active and working mining firms have essentially been left stranded.