Bitcoin rush: Miners on the rise with Vietnam set to regulate virtual currencies
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The cryptocurrency reached an all time high of $4,700 this week, so if you’ve got a head for numbers…The demand for hardware to mine Bitcoins in Vietnam is on the rise following a government decision to develop a legal framework to manage digital currencies.
Assigned ministries will have until the end of next year to complete the legislation, while tax policies for cryptocurrencies must be finalized by June 2019.
As for now, Bitcoins remain illegal in Vietnam, according to the central bank. But that does not make the virtual currency any less attractive, and Vietnamese people have already started mining.
The process of mining Bitcoins involves miners solving complex mathematical problems, and the reward is more Bitcoins generated and awarded to them.
The participant who solves the puzzle first gets to place the next block on the block chain, a public ledger that records all Bitcoin transactions, eliminating the need for a third party to process payments, and claim the rewards.
Miners verify transactions and prevent fraud, so more miners equals faster, more reliable and more secure transactions. According to current Bitcoin protocol, 21 million is the cap and no more will be mined after that number has been reached.
Bitcoin has quadrupled in value since early this year, hitting a record high of more than $4,700 on Tuesday.
Hardware for mining Bitcoins is now on sale on different sites in Vietnam for VND30-60 million ($1,300-2,600) per system. Each system usually has six to eight graphics cards.
Two months ago, computer component providers in Vietnam started running out of graphics cards due to the increasing demand for Bitcoin hardware.
“According to current Bitcoin protocol, 21 million is the cap and no more will be mined after that number has been reached.”
Hai, the owner of a computer store in Hanoi’s Hai Ba Trung District, said he has earned up to VND200 million in revenue this month from selling hardware to Bitcoin miners.
However, not many miners have been successful because Bitcoin mining is still a new concept in Vietnam, not to mention that the currency is not yet popular or legal.
“Many of my customers do not understand how to mine for Bitcoins, so they have called it a day and sold the hardware back to me. Several others are leasing their kit out to new prospectors.”
Miners are also facing fiercer competition and higher input costs. The average miner has to spend more than VND2 million each month on electricity, and the equipment can easily break because it has to run around the clock.
Financial expert Nguyen Tri Hieu said investing in Bitcoins at this time is a bold move because miners may face legal action or risk going broke as it is possible that the latest price rise in Bitcoins is a speculative bubble.
He said it would be better if miners had got involved when Bitcoin first appeared in 2009 to guarantee profits.
In late May, nearly $4 billion was wiped off of the value of Bitcoin in just four days after a correction that saw the cryptocurrency’s price fall almost 19 percent to $2,260.
The central bank has warned organizations and individuals in Vietnam not to invest in Bitcoin or conduct transactions in the currency, saying they would be taking a huge risk with no legal protection.
Questions & Answers
Q.What is the current legal status of Bitcoin in Vietnam?
What is the current legal status of Bitcoin in Vietnam?
Bitcoins remain illegal in Vietnam according to the central bank. However, the government plans to develop a legal framework to manage digital currencies, with ministries assigned to complete legislation by the end of next year.
Q.What are the main financial risks for people mining Bitcoin in Vietnam?
What are the main financial risks for people mining Bitcoin in Vietnam?
Miners may face legal action and risk going broke if the price rise is a speculative bubble. They also incur high input costs, including over VND2 million monthly for electricity, and equipment that can break down running constantly.
Q.When will new tax policies for cryptocurrencies be decided?
When will new tax policies for cryptocurrencies be decided?
New tax policies for cryptocurrencies must be finalised by June 2019. This is part of the government's plan to develop a legal framework to manage digital currencies in Vietnam.
Q.How much does a Bitcoin mining system typically cost in Vietnam?
How much does a Bitcoin mining system typically cost in Vietnam?
Hardware for mining Bitcoins is on sale in Vietnam for VND30-60 million, which is equivalent to $1,300-2,600 per system. Each system usually includes six to eight graphics cards.
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