The scalability race is producing unintended consequences that can uplift the crypto market. The negativity used to put down cryptocurrencies is part of the reason for the market crash. And the prevailing criticism is that Bitcoin is useless because it cannot scale. This means that it fails under the weight of the number of transactions. And as such, crypto currencies will never replace the current financial legacy system which is faster than Bitcoin. Of course this is a challenge that many developers are tackling head on. And an observation is that in the struggle to achieve scalability, mining can benefit greatly from it.
The last two months have been marked by a decline in price, investor confidence, and mining profitability. One factor fueling this sentiment is the taunting that Bitcoin reached the “Death Spiral”; a point where mining costs surpass the value of a coin. This argument arises from the fact that as the price of Bitcoin drops, the volume of transactions drop with it, and the demand for mining disappears. This is verified by the numbers of miners exiting the space or shutting down their rigs. And by the decline in mining hardware and high computing chips sales.
However, the predominant scability solutions on the market include sidechains. These are mini-blockchains that conduct the bulk of mundane transactions off-chain. Their use free up space, bandwith, electricity, and hashrate from the main chain. But here’s the kicker: each sub-blockchain require its own network comprised of miners, nodes, and all the infrastructure required to process transactions. This means that as scaling gains adoption, the number of miners needed will also go up.
This will present an opportunity for mining to be redirected from On to Off-chain transactions. And with the arrival of institutional investment, large transactions between exchanges, custodians, and OTC markets will vastly increase. And even before that happens, if sidechains use take hold, miners will be back in business to supply the demand for mining in this new market.