The Future of Bitcoin Mining & Security with Sam Wouters - WBD618

Sam Wouters is a Research Analyst at River Financial. In this
interview, we discuss Bitcoin’s hash rate: what it is, the
factors affecting its growth, what this means for Bitcoin’s
security budget, and what this means for Bitcoin’s energy needs.
In short, there is a symbiotic relationship between expanding
Bitcoin’s real-world utility and securing the blockchain.


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Proof of Work is Bitcoin’s central innovation: the development of
a process that through game theory keep the network honest, and
provides security from outside attack. It enabled a global store
of value that does not need centralised armoured physical vaults
for security. However, the process of hashing that enables PoW
requires large amounts of power, and, with the halving mechanism,
requires an increase in Bitcoin’s price, transaction fees, or
both, to maintain equivalent network security spending.


Bitcoin’s energy debate in 2022 was completely realigned: rather
than being an attack vector for opponents, Bitcoin mining’s
energy use has developed into a marketable attribute. Mega miners
have sought new revenue streams and cheaper energy which has
resulted in huge innovation in the industry. There is a growing
realisation that Bitcoin’s utility is a powerful tool in
supporting the energy transition and mitigating climate change.


This means that we are potentially entering a paradigm, where
knowledgeable decision-makers desire an increase in hash rate to
satisfy other needs. But, there is a long list of variables
affecting this: Bitcoin’s price, base layer transaction demand,
ASIC supply chains, ASIC efficiency, and domestic and
international political pressures. This means there is a range of
possible forecasts.


Irrespective of the potential future drivers that can influence
Bitcoin’s hash rate, fundamentally the issue is that the hash
rate must continue to grow. It is Bitcoin’s security budget that
is of primary importance. All other demands fall away in this
respect. Bitcoin’s adoption, use and price are all critical in
relation to this. As are the efficiency gains in mining rigs. If
people want to use Bitcoin mining for other purposes they need to
be cognizant of these issues.