As the capital market accelerates the move from analog to digital, crypto mining has started to play out majorly within the B2B Ecosystem. Crypto mining holds immense potential in accounts payable, wherein logistics firms can use blockchain technology for tracking and tracing functions. Also, marketers are interested in using cryptocurrency for real-time payments, foreign currency conversion, and automatic sales tax calculations.
Crypto mining holds immense potential for B2B Ecosystem and has evolved a lot since the emergence of Bitcoin as unregulated, anonymous payment technology. One of the most poignant movements in the evolution came in February 2019 when JPMorgan Chase announced the development of JPM Coin, the first bank-backed cryptocurrency in the U.S.
Crypto mining or Cryptomining is a popular topic in the digital space these days. We all have been buzzed by Bitcoin, Dash, Ethereum, and other types of cryptocurrencies.
According to an announcement by Bitcoin:
“Bitcoin and the crypto economy has steadily surpassed the $1 trillion valuation mark and on Friday, February 12, 2021, the crypto market capitalization of all the coins in existence is worth $1.41 trillion.”
So, the next question that pops up in anyone’s head: “what is Bitcoin mining or what is crypto mining?”
In brief, cryptocurrency mining is a term that refers to the process of gathering cryptocurrency as a reward for work that is complete. (This is known as Bitcoin mining when referencing mining of Bitcoins specifically.) The trend has gained immense precedence in recent times. Moreover, in the year 2021 regulated digital exchanges custodians will continue to be announced and are expected to go live.
Crypto mining has only been around since Bitcoin was first mined in 2009, and in the current year, the terminology has made quite a splash among miners, investors, and cybercriminals alike.
But why Crypto mining is so popular among people anyway?
The answer is that Crypto mining serves as an alternative source of income for some people. For others, it provides an alternative source of income and for still others, it’s about gaining greater financial freedom without government intervention in terms of traditional banking systems.
Traditional banks are centralized systems whereas cryptocurrencies use decentralized, distributed systems. Also, a prime motivation behind using Crypto mining is that in general Crypto mining is legal; however, whether it’s legal or illegal primarily depends on two key considerations:
- The geographic location, and
- Whether crypto is mined through legal means
Moreover, for some countries, Crypto mining profits are taxable while for others such activities don’t fall under the overarching umbrella of taxable income.
Mechanism of Crypto Mining
The legitimacy of crypto transactions is verified first by crypto miners before they plan to reap the rewards. Blockchain has two central concepts including public-key encryption or asymmetric encryption and math. A blockchain basically is a series of chained data blocks containing pieces of data including cryptographic issues and are employed by the traditional cryptocurrencies such as Bitcoin.
Components Within the Bitcoin Blockchain
The following components are involved in the creation of the Bitcoin Blockchain:
- Nodes – These comprise the individuals and devices that exist within a blockchain such as your computer and the computers of other cryptocurrency miners.
- Miners – They are the specific nodes that verify “solve” unconfirmed blocks in the blockchain by verifying the hashes. Once a miner verifies a block, the confirmed block is added to the blockchain. The first miner who announces to the rest of the nodes that they’ve solved the hash is rewarded with cryptocurrency.
- Transactions – A transaction implies an exchange of cryptocurrencies between two parties. Each separate transaction gets bundled with others to form a list that gets added to the unconfirmed block. Extra data blocks then need to be verified by the miner nodes.
- Hashes – These are the one-way cryptographic functions used by nodes to verify the legitimacy of cryptocurrency mining transactions. A hash is an integral component of every block within a blockchain and is generated by combining the header data from the previous blockchain block with a nonce.
- Nonces – NIST describes nonce as “a random or non-repeating value” (that’s used just once). In crypto mining, nonce gets added to the hash in each block of the blockchain and is the number that the miners are solving for.
- Consensus algorithm – This is a protocol within the blockchain that helps different nodes within a distributed network to come to an agreement to verify data. This first type of consensus algorithm is thought to be “proof of work,” or PoW.
- Blocks – These are the individual sections comprising the overall blockchain. Each block has a list of completed transactions. Blocks, once confirmed, can’t be modified. Making changes to old blocks means that the hash of the modified block and those of every block that’s been added to the blockchain since the publication of the original block would be then, have to be recognized by all of the other nodes in the peer-to-peer network. Simply, put it’s virtually not possible to modify the old blocks.
- Blockchain – The blockchain is a series of blocks listed in chronological order. As the previously published blocks can’t be modified or altered after being added to the blockchain, this provides a level of transparency. After all, everyone can see the transactions.
The crypto mining process involves the following steps:
- Nodes verify whether the transactions are legitimate
- Separate transactions are added to a list of other transactions to form a block
- A hash along with other data types are added to the unconfirmed block
- Miners verify the blocks and have to ensure that they block is legitimate
- Once the block is confirmed, it gets published in the blockchain
How Crypto Mining Will Impact B2B Ecosystem?
Crypto mining is a big deal for businesses and people alike. Both of them love being able to use money digitally. Crypto mining can address so many diverse needs, interests, and goals of businesses that they don’t want to deal with the hassle of paper cash and coin currencies.
Let’s explore a few of them here:
- Businesses Will Be Able to Embrace Digital Revolution
As regulated digital exchanges and custodians will continue to be launched and additional ones will keep on emerging in 2021, the traditional exchanges will seek to digitally transform themselves and embrace knowledge-enhancing partnerships to keep pace with digital asset trading from both retail and institutional investors.
Recent initiatives which have been announced and are expected to go live during 2021 include DBS Digital Exchange launched by DBS Bank in Singapore and Zodia, a collaboration between Northern Trust and Standard Chartered to launch an institutional-grade custody situation for cryptocurrencies in the UK.
- Businesses Will Be Able to Bridge the Gap Between Client Demand & Market Opportunities
Businesses will look forward to digitally transform the traditional exchanges being used by them reacting to their competitors launching digital services and seeking to bridge the gap between client demand and market opportunities. There’s an emphasis on the development of the digital custody service offerings which will reflect on the traditional types of custodial products that the market is habituated to. B2B businesses are keen on avoiding replicating old, silo-based models to truly embrace the digital revolution.
- Additional ROI Will be Generated From the Digital Prime Brokerage Offerings
Digital Prime brokerage offerings will become more tangible with both existing prime brokers as well as the new players in the cryptocurrency space. Of course, one can expect regulations of such activities to be the prime focus as well which will apply to both key individual jurisdictions as well as the standard development across jurisdictions.
- Tokenised Assets Will Fuel Product Innovation
Product innovation in terms of tokenized assets is hyped, though it’s a nascent concept. As the tokenized assets will evolve in 2021 and will positively impact the development of better products within regulated environments.
There are some challenges though such as matching companies with a wider pool of funding be it an investment into them in crypto or fiat currencies and ensuring the products placed be it through primary placement. Also, the public offer has potential demand in the secondary market.
Amidst such challenges lie the opportunities to create well-designed products that are debt-based. Structured or portfolio-based products further provide diversity for investors. Provided that traditional investors such as family offices and investment managers are still finding their feet in the digital space, digital products that can be packaged with a traditional wrapper to create a hybrid product will be more useful.
- RESTs & Digital Equities Created on Underlying Portfolio of Assets Will be Beneficial
Real Estate Security Tokens (RESTs) and areas such as asset-based securities and digital Islamic Finance will be the areas that the B2B marketers need to watch out for in 2021. Additionally, digital equities created on an underlying portfolio of assets, such as multiple FinTech investments held in funds might be a win-win situation for the B2B marketers.
- Key Developments Will be Observed in ESG/ Green Initiatives
Areas such as ESC/ Green Initiatives among other areas will witness key developments where the assets have been immobile till now; however, have underlying cash flows to warrant securitization such as diverse trade finance plays.
- Increased Demand for Smart & Digital Hub Solutions
With the 4IR, aka the fourth industrial revolution, exchanges are beginning their new phases. The 4IR is the prime driving force behind the Internet of Things (IoT) wherein AI, automation, and web technologies converge to create a “smart” version of things from cars to refrigerators.
As data-driven smart contracts, tokenization and DLT make it possible to facilitate true asset portability while linking far-flung liquidity centers, these help form more powerful ecosystems.
As digital hub-based models connect many participants from upstream to downstream as well as other services, these will bridge the gap between traditional infrastructure and fragmented multiple blockchain-enabled digital infrastructures.
Technology fragments will be able to be knitted together and the convergence of data, analytics, and blockchain will drive smarter solutions in 2021. The existing silos between Centralised Finance and Decentralised Finance will be sealed and this will create greater opportunity for the marketers.
Furthermore, the precedence of governance tokens, ability to pledge (stake), borrow, and lend digital assets more easily will be beneficial for the B2B marketers in 2021.
- Digital Exchanges Will Allow the Convergence of B2B & B2C Payments
Innovative payments using stable coins reduces friction in fiat transfers and attract large-scale users. This form of digital payment interfaces with digital exchanges enabling efficient dynamic asset exchanges to converge B2B & B2C payments more subtly and opens up wider degrees of financial access for businesses and users.
Digital payments are beneficial for retailers, merchants, payments operators, exchanges, and institutions and will be the key drivers of market growth in the year 2021.
- B2B Payment Space Will be Revolutionized
Another way Crypto mining will impact B2B Ecosystem is by the proliferation of CBDC & payment use cases that go live in 2021. The digital payment space was showered with investment activities during 2020 and there have been a plethora of announcements about account-based Central Bank Digital Currency (CBDC).
As some emerging markets will start to embrace a proper CBDC and payments enabled ecosystem this will lay grounds for the resurgence of the construct hyped in the previous year and will boost digital loyalty with tangible commerce initiatives to justify its use and growth.
- Crypto Mining Is a Step for Businesses to Control Their Finances & Strengthen Their Privacy Policies
The traditional centralized banking system isn’t trustworthy for everyone. But there’s another way that allows people to keep their money out of the traditional centralized banking system and that is the mining & the use of cryptocurrencies.
Crypto mining processes involve the use of the public key encryption & hashtag functions that makes the use of cryptocurrencies such as Bitcoin, Dash, Ethereum, and Monero more secure for the users as compared to the traditional systems.
- Crypto Mining Provides a Wise Investment Option
According to the data from Coherent Market Insights, the global cryptocurrency mining market will surpass $38 billion by the year 2025.
This means that crypto mining holds immense potential to be a highly profitable affair for B2B companies and is thought to be a good investment. However, this may not be true for all businesses as a lot of resources go into mining the cryptocurrencies and there’s not often a high return.
Some cryptocurrencies such as Bitcoin are worth a lot of money when you cash them in. This is in part because they are limited in supply and max out at a total of 21,000,000 of which 18,512,200 BTC have already been mined.
People have the option of buying and selling fractions of Bitcoins known as Satoshi. There are 100,000,000 Santoshi per BTC.
Crypto is the next big thing and businesses would want to ride the newest technology waves to be a part of the experience.
There were over 1,000,000 unique Bitcoin miners as of June 23, 2020, reported the editorial team of NetworkNewsWire of PR Newswire.
However, crypto mining isn’t for everyone.
It is a resource-intensive process and requires immense computing power for generating new guesses continually. Needless to say, along with intensive computing follows an enhanced consumption of electric power. Also, Crypto mining is expensive and to be successful one has to use more devices and ideally should have access to less expensive power. Not all businesses can improve their ROI by crypto mining. As more and more players get involved, the ROI that crypto miners can expect to receive is diminishing. Also, crypto mining is not essentially permissible across all geographical locations.
Crypto mining, despite all the cons, is on a rise and remains an interesting alternative to the traditional centralized systems that B2B marketers can look forward to tapping into in 2021. Whether the adoption is being driven by the centralized system of big banks that operate across the globe or not, it’s clear that cryptocurrency is certainly not in the land of uncertain waters and ambiguity and holds immense potential for the B2B marketers to tap into and explore.
What are your thoughts on crypto mining and its future?
Let us know in the comments section at the end of the blog.
Whether you trust cryptocurrencies as an alternative to the traditional payment systems or not to trade with, you can always trust Valasys Media to provide you with hyper-personalized and contextual B2B marketing and advertising services to suffice your specific business requirements and to help you accomplish your business objectives.
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