While bitcoin is seen as a leading crypto and a digital store of value for investors, the mining side of the equation is often overlooked.
Mining is key to the blockchain’s ecosystem because the process creates new bitcoins by solving puzzles. From an investor’s perspective, it provides an additional way to gain exposure to the crypto outside of buying it directly. Individuals can either purchase hardware and mine, earning rewards in exchange, or they can invest in a publicly traded mining company, although the latter won’t earn you any bitcoin.
Edward Lu, senior vice president of Canaan, a Beijing-based publicly traded hardware manufacturer for bitcoin miners, says he welcomes investors to the sector. However, deciding which route to delegate capital to is purely an individual choice.
As for bitcoin mining, it’s becoming more competitive as new players, including Intel, enter the space. However, it’s not a major cause for concern. Lu pointed out that if the world’s largest semiconductor chip manufacturer has decided to enter the sector, it’s an indication that it believes there’s potential for long-term growth.
On the other hand, to remain profitable in this industry, research and development are key to improving mining machine efficiency. Without continual improvement, there are no guarantees of profitability within the sector, he said.
As for the real use case of bitcoin, Lu doubts the crypto can replace fiat. While he welcomes decentralization through blockchain technology, he believes each government will develop its own central bank digital currency (CBDC).
He was one of the early adopters of China’s digital yuan and says the CBDC is very convenient because it allows him to purchase things easily through a mobile phone.
He does however believe that blockchain technology in general, not just bitcoin, will create a new type of globalization where the freedom to transfer value and information will be available to more people across borders. This, in turn, would create a more equal world. It’s timely because globalization is being challenged at the governmental level. However, there are certain policies that can only be solved by politicians rather than technology or markets, he added.