If you have a Twitter account, use a blockchain explorer or tend to your own Bitcoin node, you possibly came across some discomforting information yesterday: Bitcoin’s difficulty went up 13%.
We have no hopium to sell you in this article. Mining will only get more difficult from here on out as additional hashrate comes online. Hashprice will drop further and margins will squeeze until the highest cost miner capitulates.
With these troubling thoughts in mind, other sources of revenue become top of mind. Other networks and tweaks to Bitcoin itself are also worth attention. Let’s look at three future cryptocurrency-based solutions for increasing mining revenue, in the near and far term.
The Lightning Network
Spot number one to look is the Lightning Network. Yes, the secondary layer of the Bitcoin blockchain most miners assume will suck dry future fee markets.
According to Rusty Russell, a prominent Lightning Network developer, miners will stay busy with various transaction types that need to be settled on-chain, such as large transactions.
“You're not going to be paying for your car payment on the Lightning Network. Your Lambo is definitely going to be an on-chain transaction,” Russell said in a January 2022 episode of the Compass Podcast.
The Lightning Network will also take years to on-board new users to various liquidity channels and applications built on Lightning. Miners stand to benefit from every user and application #biudling on Lightning.
Zero Knowledge Rollups (ZKRs)
While Lightning may be here today, ZKRs might be the avenue of the future.
ZKRs allow for compression and validation of off-chain data onto a network. For instance, there’s work right now on a compressed version of the Bitcoin state that allows for complete verification and minimal data storage called Utreexo. ZKRs are currently live on Ethereum, enabling entire applications to live off-chain but settle to that network.
For Bitcoin miners, ZKRs might be a gateway to unlocking Bitcoin’s application layer. Any and all apps built on top of Bitcoin would pay fees to the main chain, after processing in a ZKR.
“There are not enough fees on Bitcoin, even during a bull market. You need to have high-paying members of a network to maintain security overtime,” ecosystem lead Louis Guthmann said on an October 2022 episode of the Mining Pod. “And those high-paying members are gathering economical value from a transaction and L2s are a serious contender to provide this flourishing fee market.”
Next-Generation Miners
ASICs themselves might change, embracing a multi-coin thesis with physical hardware adoptions.
ZKRs and other networks often need physical validators, such as run on graphics cards or CPUs. Kristy-Leigh Minehan, an Ethereum miner and developer, believes that we may in fact see a world where ASIC manufacturers like Bitmain ship Bitcoin miners with ZKR validators inside. The ASIC would accrue value from multiple networks, rather than just Bitcoin.
“What it could look like is no different than mining pools today. You’d have some pool provider creating these work packages. I need a proof generation of ‘this, this and this.’ Here’s this set of transactions. I need proof of this block here. And miners can pick up these work items or just donate their compute power,” Minehan said in a January 2022 episode of the Compass Podcast.
