Study: Over 74% of Bitcoin Mining Is Powered By Renewable Energy (#GotBitcoin?)
Cryptocurrency investment products and research firm CoinShares estimates that 74.1% of bitcoin (BTC) mining is powered by renewable energy in its bi-annual mining report published on June 5. Study: Over 74% of Bitcoin Mining Is Powered by Renewable Energy (#GotBitcoin?)
The report also claims that “at current prices, the average miner is highly profitable, with even older gear and high-cost producers currently able to make positive ROI.” The paper also notes that bitcoin mining operations are concentrated where there is ample renewable energy supply. Still, the report also notes:
“The renewables estimate is down from 77.8% in our November 2018 report and reflects increased visibility of the industry on our part as well as movements within the industry.”
The correlation between bitcoin mining and renewable energy reportedly makes bitcoin mining “more renewables-driven than almost every other large-scale industry in the world.” The report also notes that since November last year, the total hashrate of the network increased from 40 quintillion hashes per second (EH/s) to 50 EH/s.
This means that — during this period — the growth of the computing power invested in maintaining the network was slower than its 10-year average but in line with the five-year average.
The report also points out that the temporary decrease in hashrate (of about 40%) registered at the end of last year was the first registered instance in which there has been a major and prolonged decrease in the network’s computing power.
CoinShares believes that the recent increase in bitcoin’s hashrate is caused by old mining hardware being powered on again after the higher price rendered them profitable to run, and the deployment of next-generation, more efficient, application specific integrated circuits (ASICs).
As Cointelegraph reported in May, Canadian bitcoin mining company Hut 8 made almost $50 million in revenue last year but triggered total losses of almost $140 million. The company’s chief operating officer Andrew Kiguel noted at the time that he believes margins will improve if BTC’s price continues to rise.
Also in March, cryptocurrency mining giant Bitmain was reportedly planning to set up 200,000 units of mining equipment in China to benefit from low-cost hydroelectric power in the country.
Peter Thiel Backs $200 Million Valuation For Renewable Bitcoin Mining In The US
One company is driving its business plan straight into the “bitcoin wastes too much energy” argument and has raised $30 million to do so.
That’s according to Layer1 co-founder and CEO Alexander Liegl, which plans to bring wind-powered bitcoin mining rigs to West Texas early next year. The company is raising a total of $50 million at a $200 million valuation, he said.
The idea of bitcoin crowding out other uses for clean energy reflects a misunderstanding of the market, Liegl explained in a phone call:
“Renewable energy is still primarily under-utilized so you don’t actually have a zero-sum game.”
The company has so far raised funds for its series A from Peter Thiel, Shasta Ventures and other cryptocurrency investors that it has declined to disclose. This round follows a previous $2.1 million seed round that also included Thiel, as well as the Digital Currency Group.
Further, Liegl questioned the whole premise that the use of electricity to power the bitcoin network is a waste.
“Bitcoin is the only thing we believe in and that’s what we think can lead to disrupting the financial system,” he said, adding:
“We think electricity directed to the bitcoin mining network is certainly a net positive for society.”
The company is vertically integrated, in that it plans to run its own bitcoin mining facilities in the United States, using mining rigs that the company designed and built in-house and running its own power procurement.
“We actually own electricity substations and land-property in Texas already,” Liegl explained. “We own everything up to our own power plant, but I can tell you that is certainly on the agenda.”
The company has co-founders with prior expertise in hardware and mining, such that they believe they can execute a sophisticated strategy that makes mining in the U.S. profitable again.
“The last seven years we think of as mining 1.0,” Liegl said, with firms doing little more than racing to deploy the most capital. He added:
“Going forward, the market is shifting to a game of operational expenses.”
Don’t Mess With Texas
Texas has a major advantage as a cryptocurrency mining location, with energy prices among the very lowest in the nation (particularly for industrial electricity), according to the U.S. Energy Information Agency.
“I love the place. It’s so private-market-friendly,” Liegl said. “Bitcoin mining is pretty compelling to people out there because it’s pretty analogous to how oil and gas works.”
Further, 16 percent of power in Texas comes from wind, according to the Department of Energy. Over 25,000 megawatts have been built with almost 8,000 currently under construction.
While Liegl acknowledges that any operation like his will need a backup power supply for times when wind is not strong enough, the company still expects to deliver a very high proportion of its hashrate via renewable electricity.
The problem for Texas, Liegl explained, is cooling the miners.
Air-cooled miners in Texas would burn up, he explained, so they had to devise a way to liquid-cool the miners. That’s what Layer1 has created with its proprietary mining equipment, each unit of which runs on two megawatts of power.
The first facility will be set up in an open area about 90 minutes west of Midland, Texas.
How Big Is Enough?
“The United States’ hash rate share is currently below 5 percent,” Liegl said. “Our goal is to bump that up to at least over 15 percent.”
As the company notes in an announcement shared with CoinDesk in advance, 60 percent of bitcoin’s hash rate and all of its hardware production is in China. The announcement describes the scale of Layer1’s ambition:
“With this funding, we are positioned to own the whole Bitcoin mining stack by designing, producing, and operating our entire mining infrastructure, including proprietary: ASIC chips, liquid-cooled mining containers and power procurement and development.”
By securing a large amount of funding early, Jacob Mullins of Shasta Ventures said that Layer1 can pursue a more ambitious vision than most startups could, pursuing unit economics that make it attractive as a long-term investment. Further, he believes that as a producer of bitcoin in the U.S., taking a pro-regulator approach, Layer1 will have an advantage when domestic institutions finally move into bitcoin.
“I think that’s another bold way of going at the market and I think over time will create a moat of quality for the business,” Mullins said.
Of course to meet institutional demand – if it ever comes – will take a lot of bitcoin.
There’s no question that Layer1 is going for scale and quickly, but Leigl declined to disclose expected wattage used in 2020, though he said he expected it to be “many hundreds of megawatts.” He added:
“Going forward to 2021, we’re talking gigwatts.”
A Plan To Decentralize Bitcoin Mining Again Is Gaining Ground
Braiins, the company behind one of the largest bitcoin mining pools, recently released a code spec that could be promising for decentralized mining.
The spec, Stratum V2, could significantly change how bitcoin mining functions and would add security and efficiency to mining pools, the entities that organize miners spread across the world.
Although it aims to improve bitcoin mining pools in a number of ways, the primary benefit comes from a component that reduces one of the most pressing problems in bitcoin: mining pool centralization.
“If this protocol does everything it promises, ‘mining centralization’ as an argument will be completely dead,” bitcoin developer and educator Jimmy Song said.
Meanwhile, Square bitcoin developer Matt Corallo, one of the designers of the protocol, wrote in a recent Reddit AMA: “This is huge for mining centralization. Instead of being focused on the centralization of pools (which is the world we’re in today), we can focus on the centralization of actual miners [and] farm owners!”
Last year, Corallo revealed BetterHash, a plan to combat the centralization problem in mining pools. Now Braiins and Corallo are pooling their work to build one protocol that fixes a number of current mining pool issues.
Mining has long been a difficult proposition for individual miners. In the early days to bitcoin, miners from around the world began connecting to so-called mining pools to earn a more consistent paycheck. All of the miners worked in tandem and when one member of the pool got lucky, the thinking went, the entire pool benefited.
In time, weighted mining pools emerged as a safer, more profitable way of mining by taking in all of the bitcoin earned by their miners and redistributing them based on mining power contributed. Unfortunately, according to recent data from Blockchain.info, only three mining pools control over 50% of bitcoin’s mining power, thereby centralizing the mining power in a few hands.
This is a problem. When one of the miners in a mining pool wins a block and rakes in the 12.5 bitcoin reward, the mining pool decides which transactions go into that block. Bitcoin experts worry that these centralized entities could use this power to censor transactions they don’t like.
To prevent this, Stratum V2 supports “job negotiation” modeled off of Corallo’s BetterHash. This changes the relationship between the miner and the mining pool. Instead of mining pools deciding what transactions go into blocks, miners decide which ones to include.
“[If] there are cases of transaction censorship in the future, we have a security measure in the protocol that miners can use to circumvent the censorship,” Capek said.
This also means that miners, not mining pools, will be able to vote on protocol upgrades to bitcoin if Stratum V2 is adopted by mining pools.
“With the job negotiation protocol, miners can also choose their block header version field. This allows them freedom in any potential voting via BIP8/BIP9 style mechanism,” Capek said.
All that said, Capek stressed that the new specification is not necessarily a “silver bullet” for mining centralization. He pointed out that the mining pools that want to censor bitcoin transactions could simply opt-out of adopting the protocol.
“At the same time it’s important to mention that a pool that would ‘intentionally’ perform such censorship would not allow its users to negotiate their jobs,” he said.
Meanwhile, Luke Dashjr, veteran bitcoin coder, argued on Twitter that there are other aspects of mining centralization that still need to be addressed. For example, the fact that only a handful of companies produce mining hardware, the computers made specifically for producing bitcoin, is also a grave threat to decentralization.
Decentralization isn’t the only draw in Stratum V2. Mining pools will have an incentive to adopt the new protocol because it will save them money and prevent attacks that could cause them to lose rewards. First, it makes transferring data back and forth more efficient. It could also make stealing mining pool hash power much harder.
“Last but not least, we have addressed the security aspects by allowing fully encrypted and authenticated communication using the current state of the art technology called ‘Noise Protocol Framework,'” Capek said.
This peer-reviewed technique is the same technology used by the mobile messenger WhatsApp and bitcoin’s lightning network.
Braiins is still finalizing a few features in the specification, such as deciding which encryption algorithm to use for hiding data from snoops, Capek said. But a version is available to test and most of the Stratum V2 specification draft is now up for review.
Capek expects it to take at least 12 months for mining pools to adopt the protocol.
“Getting everybody on board is a matter of realizing the benefits on the security and efficiency side, which in turn leads to saving some operational costs,” he said.
Death Spirals And BTC — What Happens When Miners Capitulate?
The stagnation of the cryptocurrency market has put Bitcoin’s (BTC) price at risk of further decline, as it struggles to recover beyond key resistance levels. A descending price increases the probability of the so-called “miner capitulation” occuring, which is said to have triggered the major BTC drop in December 2018.
Late last year, the Bitcoin price fell to around $6,000 following three months of stability in a tight range between $6,000 and $6,500. The subsequent drop to the $3,000s happened within the span of just one month.
Why Miner Capitulation Occurs?
Miner capitulation occurs in the Bitcoin market when mining is no longer profitable. As profitability drops, miners naturally sell their Bitcoin holdings, capitulating as a response to worsening market sentiment. If miners begin to sell off, it creates significant selling pressure in the market. Such pressure creates a difficult environment for major cryptocurrencies like Bitcoin to maintain their momentum.
Large mining centers and companies are unlikely to capitulate due to a short-term price slump, as they hold long-term contracts with electricity providers. They also have more capital to deal with instability in the market for an extended time period.
Meanwhile, short-term capitulation among smaller mining companies is likely. Major mining firms closing down one after another could lead to a death spiral in which the Bitcoin network’s hash rate drops to near-zero.
However, as security and cryptocurrency researcher Andreas Antonpoulos previously said, a death spiral or an abrupt drop in the hash rate of the Bitcoin network to near-zero is not likely to happen because miners operate with long-term perspective and strategy. He explained, “Part of the reason that’s unlikely to happen is that miners have a much more long-term perspective.”
Hence, when short-term miner capitulation occurs — similar to late 2018 — the market tends to recover in six months to a year. Currently, it is still premature to predict whether miner capitulation will occur heading into the year’s end. However, if negative sentiment around the market is carried onto the first quarter of 2020, a December 2018-esque capitulation could occur in the upcoming months.
Bearish Targets For Bitcoin
Prior to last week, when the Bitcoin price was clearly in an intense downtrend following a brief spike to $10,600 on Oct. 26, many technical analysts predicted a further drop to the $5,000 to $6,000 region.
Crypto trader Eric Thies, for instance, said last week that a key bearish indicator lit up, noting that Bitcoin is due for a deep pullback in the near future. Subsequent to an awkward price action for over two weeks, during which Bitcoin demonstrated extreme volatility, Thies said that BTC could be setting up for a recovery after tweeting on Dec. 1 that the outlook was not great. The analyst emphasized that the current structure is “potentially significant for bulls,” not dismissing the scenario of BTC rebounding strongly to higher resistance levels.
DonAlt, a cryptocurrency trader, said that while it is too early to state that Bitcoin is on track for a full recovery, it would have to reclaim higher time frame levels to engage in any meaningful upside movement.
Higher time frame resistance levels for Bitcoin sit between $7,600 and $8,500, and according to DonAlt, BTC passing those levels in the short-term would indicate a bullish movement. He said, “Now that heads have cooled off, the bullishness has quickly faded. So far, this is a bearish retracement after a huge impulse down.”
Big Mining Companies Are Having A Difficult Time
The break-even price of Bitcoin mining is estimated at around $4,100 to $4,500. According to Miner Hut8, a publicly listed mining giant based in Canada, the firm has mined Bitcoin at a cost of $4,300 throughout the third quarter. The company stated:
“Revenue of $26.7 million; Mining Profit Margin of 58%, and Adjusted EBITDA of $14.7 million. Mined 1,965 Bitcoin at a Cost per Bitcoin of US$4,363 inclusive of electricity costs, mining pool fees, and all other production costs.”
However, cryptocurrency researcher Ceteris Paribus noted that the cost of mining calculated by Miner Hut8 “leaves out depreciation, expenses, and net finance expenses,” which could place the actual cost of mining at $7,100. The researcher added:
“Short-term if the price goes under $7.1k they will keep mining as this is still > operational costs & mining equipment is a sunk cost. But long-term you can’t imply that they are profitable <$5k.
They will need to replace equipment, continue paying employees, financing costs, etc.”
The decline in Bitcoin’s price and the increase in mining difficulty has had a negative effect on the mining profit margins of Hut8 as well as other major mining firms. Due to their large Bitcoin holdings and cash reserves, large mining facilities are not at imminent risk of having to reduce their operations to cope with a declining Bitcoin price.
Still, the tough ecosystem developing before miners could take a toll on smaller firms, especially if BTC falls to the $6,000s, a price range that is below the break-even point for most producers.
Halving Won’t Have An Immediate Effect
One of the most highly anticipated events of 2020 is the block reward halving of Bitcoin in May. The mechanism, which gets triggered once every four years, would effectively drop the compensation miners receive for mining blocks that contain BTC transactions by half. It also decreases the rate of new BTC production as the network approaches its fixed supply of 21 million Bitcoins.
Since 2018, the halving has been talked about as the next driving factor of an extended Bitcoin rally. As a scarce asset, any event that decreases the supply of the cryptocurrency would theoretically impact its price trend. However, high profile investors have said that the halving is not likely to have any immediate effect on the Bitcoin price.
If the halving occurs without imposing a positive impact on the price of Bitcoin, it would place additional pressure on miners to adopt better infrastructure and efficient equipment to try to further decrease the costs.
Throughout history, the halving has not led to a large rally for Bitcoin until a year or two after the event, possibly because it is priced in well before the event occurs. As such, it is possible that the capitulation of small miners lead to BTC testing lower level supports in the $5,000 to $6,000 region despite being down substantially since mid-2019, creating negative sentiment around the cryptocurrency market in early 2020.
The Current Price Trend Of Bitcoin
Based on fundamentals, Bitcoin remains strong in various key areas including user activity, transaction value denominated in dollars, and hash rate. Official on-chain data from Blockchain.com shows that the number of unique addresses used has increased from 310,000 in January 2019 to nearly 500,000 in less than 12 months. The hash rate has also increased, from 41 exahash in January to 92 exahash, more than doubling in the same period.
Due to the fundamentals, Bitcoin investor Timothy Petersen said that the “2019 bubble” of Bitcoin is likely to burst in about two weeks, marking a potential local bottom by year-end. Hence, if BTC begins to demonstrate an intense sell-off in the weeks to come, the most probable cause of the drop would be capitulation by smaller mining firms. Mining capitulation is also seen as a positive point for medium to long-term recovery by many investors, as it often marks the end of a bear market and the start of an accumulation phase.
Lawsuit Shows How A Public Firm’s $80M Bet On Bitcoin Miners Went Terribly Wrong
In March 2018, shortly after bitcoin’s bull run to $20,000, a publicly-traded Chinese company invested 500 million yuan, worth $80 million at the time, to buy 100,000 bitcoin mining units.
As the bear market kicked in during the months that followed, so, too, did a contract dispute, offering a rare window into Chinese public firms tapping into bitcoin mining as a new business stream and reflecting the prolonged magnitude of last year’s market sell-off.
The $80 million mining investment made by Beijing Cailiang, an app developer fully-owned by Shenzhen-listed Wholeasy, brought home almost negligible profit return in 2018. Yet it dragged the company into a lawsuit involving $15 million in debt and a potential criminal case with accusation of fraudulent public disclosure.
Though the amount at dispute may seem insignificant, the case sheds light on the increasing investments by institutions in China into an area where even public entities typically shy away from public discussions.
The Missing Bitcoin Miners
Gaming app and marketplace provider Wholeasy, with now a $500 million market cap, disclosed last Thursday that Chinese law enforcement has opened a criminal case against bitcoin miner supplier Ebang. Wholeasy’s Cailiang subsidiary filed the complaint, accusing Ebang of committing sales fraud.
That evening in China, Ebang, one of the three Chinese bitcoin miners that attempted to go public in Hong Kong in 2018, said in an urgent response that Cailiang filed the police report in a malicious attempt to play the victim.
The miner maker released a dozen pages of sales contracts and delivery receipts as supporting documents to debunk Cailiang’s story. Ebang said it had already filed a separate report to financial regulators in China accusing Cailiang of fraudulent disclosure on its liability as a public company.
The escalation followed a civil contract dispute case over an unpaid amount of 100 million yuan, worth $15 million, as part of the two parties’ $80 million bitcoin miner sales agreement in March of last year.
Ebang sued Cailiang in April 2019, demanding the defendant to pay the remaining overdue balance for the shipment of all 100,000 units of bitcoin miners. However, Cailiang claimed that it had only received 65,000 units and thus shouldn’t be liable for the remaining payments. The case was tried on Nov. 26 and is pending the judge’s ruling.
“Their malicious report to the police is nothing but an attempt to escalate it to a criminal case to interfere with a civil lawsuit,” Ebang said of its miner buyer’s motivation.
Following the news on Friday, Wholeasy’s share price dropped by eight percent on the Shenzhen Stock Exchange. It has further declined by 10 percent as of press time during China’s Monday trading hours.
As of June 30, Wholeasy’s cash in its current asset on the balance sheet was $7 million, down from $10 million on Dec. 31 2018.
$80 million investment
Started out as a gaming app developer and in-game ad distributor, Cailiang was fully acquired by Wholeasy in July 2017 under the condition that it should bring the parent company a net profit of $7 million, $8 million and $10 million for 2017, 2018, and 2019, respectively.
Soon after the acquisition, Cailiang kicked off a business unit during Q4 2017, amid bitcoin’s price surge, that it called a “high capacity cloud computing server business and hosting service”, according to Wholeasy’s 2017 financial report.
There was no mention of bitcoin, mining, miner or even blockchain in the report. That year, Cailiang made $5 million in net profit on a revenue of $21 million.
But Cailiang’s 2018 financial report indicated that the only new business area that it had expanded into in the year was “a new cloud computing server (miner) brokerage and rental service” available for individual and institutional customers.
In fact, Cailiang incorporated a mining farm in July 2018 called Mobcolor, headquartered in California with offices in Colorado and North Dakota.
And Cailiang’s 2018 revenue indeed saw significant growth with $52 million, more than double compared to 2017, while the net profit grew to $8.2 million.
But assuming Cailiang’s gaming business made the same revenue and profit in 2018 as it did in 2017, its mining-related business may only have brought home $3 million in net profit on a $31 million revenue.
And that’s after the $80 million investment, which bought 100,000 units of Ebang’s older E9+ model that have a much shorter utility life compared to more advanced products that hit the market recently.
Further, Cailiang doubled down in 2018 on its research and development cost on crypto-related services including a mining pool and, notably, a crypto exchange service despite China’s tough stance on crypto trading activities.
Based on the 2018 financial report, as of October last year, Cailiang completed the main development work for “a digital asset exchange that offers crypto-to-crypto as well as over-the-counter trading for mainstream digital assets such as BTC and ETH.”
The firm said the main goal of the exchange is to facilitate assets trading for overseas mining customers via its mining pool in order to “improve its profitability.”
Based on Ebang’s sales agreement with Cailiang released in its Thursday response, the bitcoin miners sold to the buyer in 2018 was the E9+ series, at a price of 5,000 yuan each, or $720.
At bitcoin’s current price, mining rewards and difficulty, these machines can only make a slightly positive daily return if electricity costs falls below $0.04 per kilo-watt hour, according to f2pool’s mining profitability index.
As such, the valuation of these units in the second-hand market likely won’t be anywhere near the original price. The ask and bid prices for more widely-used Bitmain’s AntMiner S9 can now be seen around $100 to $150.
Cailiang’s financial report for the first half of 2019 indicates that mining-related service is no longer among its top three businesses, although it had acquired another $3 million worth of mining equipment with ongoing mining site construction.
For the first six months of 2019, Cailiang made $3.5 million in net profit on an $18 million revenue, not yet half way through the promised target of $10 million in net profit. The company has not responded to email request for comment.
The crypto market’s downturn, especially in the second half of 2018, had caused more than 600,000 miners to shut down amid a broader industry reshuffle.
But bitcoin’s price rebound since March 2019 rejuvenated interests in mining, pushing bitcoin network’s mining difficulty to an all-time-high near 100 exahashes per second (EH/s) around October.
As bitcoin’s price has largely remained unchanged over the past month, the network’s total computing power kept steady at the 90 EH/s level.
However, faster and more efficient mining machines than the allegedly unpaid-for E9+ models are already in place elsewhere, so it may be too late for Cailiang.
Chinese Bitcoin Miners Pressured To Scale Down Due To Electricity Shortages
Bitcoin (BTC) miners in the Chinese province of Sichuan are reportedly under pressurelocal authorities to scale down their operations due to electricity shortages.
On Dec. 29, the Asia Times reported that during the dry season, which extends from October through April, the electricity supply drops drastically in Southwest China, which is why local authorities are tightening the screws on mining companies to scale down their operations.
Bitcoin Farms Tolerated During Wet Seasons Only
Bitcoin mining companies are officially prohibited but are tolerated in the Sichuan province during the wet seasons when hydropower stations generate more electricity than is required, utilizing the excess energy thanks to East Asia’s plum rain.
However, during the dry season, the local authorities attempt to assure sufficient power supply for residents and local businesses and therefore redirect their focus on the regional Bitcoin farms, who use excessive amounts of electricity to run their mining rigs.
Crackdown On Bitcoin Mining
The Chinese authorities have not only been cracking down on BTC mining farms. They have also been going after power plants. Two power plants have received fines of around $140,000 in December for providing electricity to Bitcoin farms without obtaining a power supply license.
China, whose BTC miners are currently responsible for as much as 66% of global hash rate, is continuing an ongoing fight against illicit use of energy by crypto miners. In mid-November, regulators in China’s Autonomous Region of Inner Mongolia tightened their grip on crypto mining companies, dispatchinginspection units to assure the clean-up and rectification of crypto token mining companies in the region.
In December, Chinese authorities seized nearly 7,000 crypto mining machines, illegally consuming electric power. The confiscation came as part of an inspection of more than 70,000 households, 3,061 merchants, 1,470 communities, as well as factories, mines, courtyards and villages in the Kaiping District of Tangshan city.
Montana Crypto Mine Back in Action Despite Owner’s Uncertain Legal Fate
A cryptocurrency mine in Butte Montana fired up its servers today, resuming business without its former owner, an alleged fraudster.
After a legal appearance on the matter, part-owner Kevin Washington and operator Rick Tabish started up crypto mining business CryptoWatt once again, pulling the operation out of retirement, according to a Jan. 27 press release.
Authorities closed down CryptoWatt after jailing its owner, Matthew Goettsche, on a separate fraud account totaling $722 million, the Montana Standard reported in December 2019.
Although Goettsche owned more than 50% of CryptoWatt, he was not taken into custody for dealings related to that business. Goettsche, along with four individuals, ran a “cryptocurrency investment club” named BitClub Network, through which the group allegedly swindled millions.
Rick Tabish ran CryptoWatt under Goettsche’s ownership of the site, unaware of the owner’s fraudulent endeavors with the unconnected BitClub Network. Goettsche also carried significant debt owed to Tabish.
Regarding re-opening, Tabish told the Montana Standard:
“If the facility shuts down we all lose, […] I want to protect the integrity of the facility, and the interests of our employees, the vendors, everybody who works there.
Tabish also noted his willingness to bring the matter to court if need be, pointing out that the operation would die if left shut down for too long, Montana Standard reporting included.
CryptoWatt started up again on Jan. 26, a separate article from the Montana Standard read, securing a lower power cost in the process.
Cointelegraph also recently reported on a surge of Bitcoin mining licenses in Iran.
Peter Thiel-Backed Startup Says Texas Is The Best Place To Mine Bitcoin
Alex Liegl, CEO of Layer1 Technologies, a US-based Bitcoin (BTC) mining company that recently announced its intention to repatriate 30% of Bitcoin’s hash power by 2022, has described Texas as offering miners the “cheapest power in the world, at scale.”
Less than two weeks ago, Layer1 commenced mining operations at its facility in western Texas, bringing multiple 2.5-megawatt container rigs online.
Texas is the largest producer of wind power in the United States, outproducing the second, third, and fourth-largest producers combined. If Texas were an independent nation, it would be the world’s fifth-largest generator of wind power worldwide.
Despite the cheap electricity, many miners have avoided the Lone Star state due to its heat — with temperatures regularly exceeding 90 degrees for half of each year. To combat the heat, Layer1’s mining apparatus comprises 20-by-8 shipping containers filled with miners that are suspended in a non-conductive liquid.
“If they were air-cooled, the processors would burn up,” Liegl told Forbes.
Layer1 Plans To Pause Mining During Summer
During October 2019, Layer1 raised $50 million for its venture capital investors, led by Peter Thiel alongside Digital Currency Group and Shasta Ventures.
The cash infusion funded Layer1’s acquisition of an electric substation capable of generating 100 megawatts situated on 30 acres in western Texas and rose the company’s value to $200 million.
Layer1 also plans to take advantage of skyrocketing summer electricity prices and selling its power to the grid, with Liegl stating: “We can stabilize the grid by selling capacity for curtailment at the push of a button.”
Northern Bitcoin AG To Construct “Largest Bitcoin Mining Facility In The World” In Texas
During January, Whinstone, a subsidiary of Frankfurt-based mining company Northern Bitcoin, announced that it had inked partnerships with Japanese internet provider GMO and financial services company SBI to process transactions at its forthcoming facility in Rockdale, Texas.
Whinstone’s facility is slated to launch with a capacity of 300 megawatts, with the company to expand to 1 gigawatt before 2021.
When constructed, Whinstone’s facility will have three times the capacity as Bitmain’s mining site in Rockdale — which is held to currently comprise the largest mining operation in the world.
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