Date
24 September 2018
There has been a lot of argument as to whether cryptocurrency mining actually creates any value. Photo: Reuters
There has been a lot of argument as to whether cryptocurrency mining actually creates any value. Photo: Reuters

The moral debate on crypto-mining firms

By offering products or services and creating value, companies are rewarded with profit. This logic applies to almost all businesses. But cryptocurrency mining might be an exception.

It’s reported that several leading cryptocurrency miners are planning IPOs in Hong Kong, collectively aiming to raise up to HK$100 billion.

Cryptocurrency mining originated from bitcoin in 2009. Miners verify virtual currency transactions and earn crypto-denominated rewards by solving complex math problems.

Over time, however, cryptocurrency mining has evolved to become a number crunching process just for the sake of itself instead of solving any real math problems.

The original idea of cryptocurrency mining was to utilize idle computers to solve complex math problems together.

Nowadays, more powerful, specialized machines with specific chips and design are being used for cryptocurrency mining.

Top suppliers of such machines mostly come from China. It is said that the biggest three as a whole have more than 90 percent of the market.

Bitmain Technologies, the top maker of crypto mining gear, is reportedly planning a Hong Kong initial public offering that could raise US$3 billion, valuing the company at up to US$40 billion.

There has been a lot of argument as to whether cryptocurrency mining actually creates any value. Such activities are also criticized for consuming an excessive amount of electricity.

Catherine Mulligan, co-director of the Imperial College Centre for Cryptocurrency Research and Engineering, estimates that by 2020 bitcoin will be using as much energy as the entire United States.

Nonetheless, mining is a prerequisite for the crypto ecosystem, and cyptocurrencies do carry a market value and play a role in spreading technologies like blockchain.

This article appeared in the Hong Kong Economic Journal on Aug 16

Translation by Julie Zhu

[Chinese version 中文版]

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RC

 

Hong Kong Economic Journal columnist

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