The Ultimate Resource For The Bitcoin Miner And The Mining Industry (#GotBitcoin?)
How To Build A Crypto Mining Rig In 2020 To Earn Bitcoin And Ether. The Ultimate Resource For The Bitcoin Miner And The Mining Industry (#GotBitcoin?)
Mining with home rigs is back, so here’s what those interested need to know to put together their own rig at home.
In a time of global crisis, a pandemic, and a generally unstable political and social environment, cryptocurrencies have shown remarkable stability. Moreover, the pandemic-induced economic downturn played into the hands of the industry by not only attracting professional cryptocurrency traders but also reviving mining as a way of generating passive income.
It is not surprising that countries experiencing difficult political and economic situations have witnessed a boom in the purchase of GPU cards in recent months. In the region of Abkhazia, where all crypto activities have been illegal since 2018, citizens spent more than $500,000 on mining equipment over a period of six months.
Another factor that has worked to further popularize mining is strong crypto prices. Bitcoin (BTC) has risen by almost a third, while Ether (ETH), the most popular currency for mining, has added $150 to its price and the decentralized frenzy has meant that gas fees have reached unprecedented levels.
So, here’s how to design a cryptocurrency rig — and an exploration of whether it needs to be done at all, given all the associated risks.
Mining Rig Components
A cryptocurrency mining rig consists of a computer that has many graphics cards but no monitor. Computer cases are filled with GPU cards, a power-generating unit, a motherboard and a cooling system. If a monitor is connected, it can become a regular computer where a user can open a browser or play their favorite video game.
The Rig Is Connected To The Internet, And Thus, The Blockchain Network. The Network Operates By Itself To Conduct Monetary Transactions Using The Power Of The Graphics Cards. To Be More Specific, A Mining Rig Consists Of:
* An ordinary motherboard, which has the capability of linking to a number of connectors for GPU cards.
* A hard disk drive, or HDD, with 100 to 250 gigabytes of memory to house the cryptocurrency wallet, with an Ether wallet usually taking up 25 GB and a BTC wallet requiring 50 GB or more.
* Several GPU cards, which are the most important components in a rig because they are the base that defines the cryptocurrency that a user will mine, along with their future profit and its timeline.
* A power-generating unit. A rig with four GPUs often requires more than one power unit. Usually, miners have a few 750-watt units connected together.
* A power adapter for GPU cards. Video cards are connected to the motherboard using special extension cards called “risers.” There are many different types and models of risers, but the PCI-E 1x version 006 is the most popular.
* A power switch.
* A cooling system, and it’s preferable to have several coolers to provide additional airflow.
Another important detail is the frame for the rig. It is better to make a frame out of wood or aluminum. The size of the mining rig will be slightly larger than its frame due to protruding parts, adapters and a cooling system.
For example, a seven-GPU rig will be approximately 21 inches wide (53 centimeters), 12 inches deep (30 centimeters) and 12 inches high (30 centimeters).
After purchasing all the components of the rig, it’s time to design it, which is a rather easy task for a person who has experience with computer hardware. Additionally, there are plenty of guides on YouTube.
When a rig is ready, all that needs to be done is to install some software — i.e., to choose a program for mining the currency of preference. Another way is to find a mining pool, which is a popular way to mine, as it’s becoming harder to do so individually due to the rising complexity of crypto mining.
There are also some tools available such as TeamViewer, for remote control, and WatchDog, which automatically restarts the system if the program freezes.
Top GPU Cards
As a rule, one rig should include four to seven video cards — it’s a number that will not go beyond the framework of a stable operation, although there are exceptions.
Miners can connect 10 to 15 GPU cards to one motherboard, but seven is the optimal number because Microsoft’s Windows 10 operating system can detect only this number of cards. But there is a solution: specialized mining software based on the Linux kernel. In that case, the key is to choose the right motherboard, such as an ASRock Pro BTC+ series or similar.
Determining which GPU cards are best for mining is not so straightforward, as the answer depends only on the amount of money that the miner has. In general, it makes little sense to buy the most expensive, powerful GPUs for the price of two to three slightly weaker ones, as there is a greater chance the cheaper ones will bring more benefits due to their low power consumption and initial cost.
The highest income in mining is currently achieved with Nvidia GeForce RTX 2080 Ti and AMD Radeon VII cards, but it is more profitable to build a mining farm with AMD Radeon RX 580 and Nvidia GeForce GTX 1660 Super cards, as they will pay off much faster.
It should also be kept in mind that AMD RX series GPU cards can be flashed by changing the working time of the RAM, downvolting the core and overclocking. Programs such as MSI Afterburner and Sapphire TriXX can assist in making these manipulations, which will help GPU cards achieve maximum performance during the mining process.
Electricity In Question
In over 10 years, the mining industry has turned from something incomprehensible and rather cheap to a professional, high-tech venture that implies high barriers of entry, not only for the equipment but also for its maintenance.
After Purchasing Mining Equipment, Paying The Cost Of Electricity During Its Operation Becomes The Main Expense That Directly Affects Profitability. The Energy Consumption Of One Mining Rig Consists Of The Following Components:
* GPU cards, depending on the power and mining algorithm, consume between 360 watts and 1500 watts for a rig of six to seven cards.
* The motherboard, power unit, HDD and RAM consume up to 100 watts.
* The cooling system uses from 20 watts to several kilowatts when using air conditioning systems.
So, how can a miner reduce the cost of electricity? The main consumers of electricity are the GPU cards, and with the right settings, electricity consumption during mining can be reduced significantly. For example, when mining Ether, the main thing is to overclock the video memory.
The most optimal operating mode for GPU cards is setting the core voltage to about 830 to 850 millivolts for AMD cards and 650 to 850 millivolts for Nvidia cards. Lowering the voltage on the core of the card, in addition to reducing power consumption, decreases the amount of heat, which has a beneficial effect on the equipment.
Power-generating units can also use less power if they have a “gold” certificate, which means they save a large amount of electricity (about 15%) compared with power units that lack them.
Another way is to change HDDs to solid-state drives, which will increase the speed of loading the operating system and reduce the power consumption of each rig by five to 15 watts. Furthermore, modern RAM (DDR4 or DDR3L instead of DDR3) and processors can reduce consumption by another 10 to 20 watts.
A miner can also reduce consumption through slightly more complicated ways too, such as finding more economical electricity tariffs — for example, installing the rigs where there are reduced tariffs for consumers with electric stoves or electric heating and lower night-time prices.
If possible, miners can even reach out to a power plant that generates electricity to find out if it has surplus capacity. Some miners can create their own solar or wind farms and use them for mining, but not everyone can afford such an investment.
Mining In The Cloud
Keeping in mind the unstable situation in the economy, some may want to join the crypto mining community but cannot due to the high initial costs associated. Here’s where “hosted mining” can come into play, whereby cryptocurrencies are mined through a remote connection to equipment that has been rented out. Philip Salter, head of operations at Genesis Mining — a hosted mining provider — told Cointelegraph:
“Since mining is becoming more competitive, margins are shrinking and it’s harder for home miners to compete. Miners need to get every drop of efficiency they can, and that means growing the operation (economies of scale) and doing it somewhere where electricity is insanely cheap. […] Mining in the cloud seems like the only viable option for many.”
Hosted mining starts with a user choosing a provider of computational capacity. Then they enter into agreements with the company to connect to its equipment. After paying for computer capacity, miners are provided with access to remote mining of cryptocurrencies through rented equipment.
So, users only need a computer and a fast internet connection to operate. Hosted mining commissions are charged in accordance with the agreements established between the parties.
This type of mining has a number of advantages, such as not requiring start-up capital, not needing to connect equipment by yourself, no costs of maintenance and electricity, the ability to disconnect from work at any time, and not needing special technical knowledge and skills.
There are also risks in cloud mining, primarily because, like any young industry, many rogue actors seek to take over the funds of ignorant users. So, when choosing a platform, users should spend time and carefully study its history and reviews.
Also, hosted mining brings in lower income compared with mining using one’s own equipment. Nevertheless, this is a possible option for those who really want to get involved in mining because, in any case, no one will give up an opportunity for passive income, even if it’s not too significant.
Build It On Your Own
In summary, it can be said that today, mining seems to be an attractive way to make some income. If for some reason hosted mining is inconvenient, then setting up a personal rig is not too difficult. This will require an initial investment and a little time to figure out how the system operates.
Randy Ready, CEO and chief technology officer of Mining Rig Rentals — a hardware mining rental platform — believes that building your own system certainly is more interesting, adding: “I suggest going with a small rig and potentially going larger once you are familiar with mining and have a stable profit.”
Announced Friday, the Antminer S17e has a hash rate (mining power) of 64 terahertz per second and a power efficiency of 45 joules per TH.
The numbers compare favorably with the current most powerful model on sale. According to the Bitmain website, that’s an S17 with 53 TH/s and an efficiency rating of 45 J/TH in normal power mode.
The second new Antminer, the more budget-friendly T17e, provides a hash rate of 53 TH/s and power efficiency of 55 J/TH. This one appears to offer identical hashing power and lower efficiency to the 53 TH/s (45 J/TH) S17 model already on sale, but at a lower price point.
In Its Announcement, Bitmain Says:
“Both new models have been designed for more stable operations in the long-term to reduce maintenance costs for customers. This is made possible through the dual tube heat dissipation technology which improves how efficiently heat dissipates.”
They are also loaded with new software said to be “more secure” than previously in order to to prevent “malicious attacks.”
The new models will be sold in three batches from today till Sept. 11, and will be shipped through November.
The China-based miner maker is also saying it will compensate buyers with coupons if they should suffer a late delivery for the “e” models, “based on PPS rewards of the mining pool (electricity cost deducted).”
Bitmain To Launch Platform For Connecting Miners And Farms In October
Chinese crypto mining hardware giant Bitmain will launch a platform connecting global crypto miners with farm owners in October.
World’s First Resource To Connect Farms And Miners
The platform, dubbed World Digital Mining Map (WDMM), will be officially launched during the World Digital Mining Summit (WDMS) taking place in Frankfurt between Oct. 8 and Oct. 10, Bitmain announced in a blog post on Sept. 27.
According to the announcement, the WDMM will be the first global network to connect mining hardware owners with mining farms who will provide the available power resources to host them for a fee. In turn, network members will get access to a number of personalized services from Bitmain, including assistance with mining farm design, connections to foreign clients to host, and support with operations, purchasing, and construction.
Listing Applications During WDMS
In order to apply to be listed on the WDMM, mining farm owners will need to provide data on their current mining facilities and capacity to host other miners. Mining farm owners will be able to apply for listing on the WDMM during the WDMS event, the post notes.
Matthew Wang, Director of Mining Farm of Bitmain, stated that the WDMM will help make crypto mining more sustainable in the long term by providing a whole new way for connecting mining farms and hardware owners. Wang outlined the Bitmain’s commitment to leverage on-going support to miners throughout their hardware’s lifetime and to support the overall progress in the industry.
Top 10 Mining Farms
Additionally, Bitmain also plans to announce the winners of the world’s top 10 mining farms during the WDMS. According to the project’s website, winners will receive official certification and VIP tickets for the WDMS. According to the report, voting for the Top 10 Mining Farms is still open.
On Sept. 9, Bitmain launched two new Application Specific Integrated Circuit (ASIC) miners, the S17e and the T17e. According to the specifications, The S17e model has a hash rate of 64 TH/s and operates with a power efficiency of 45 J/TH, while the T17e offers a hash rate of 53 TH/s and a power efficiency of 55 J/TH.
Bitmain Launches ‘World’s Largest’ Bitcoin Mining Facility In Texas
Chinese cryptocurrency hardware manufacturer Bitmain has opened what it claims is the “world’s largest” facility for Bitcoin (BTC) mining in Rockdale, Texas.
In a news release published on Oct. 21, Bitmain revealed the project had been completed together with the Rockdale Municipal Development District and Canadian technology firm DMG Blockchain Solutions.
Pledges To Boost The Local Economy
The news release places a strong emphasis on working with the local economy of Rockdale, which is located in Milam County, east of Austin.
The facility — currently developed to a current 25MW capacity, with a 50MW facility remaining under construction — sits on a 33,000-acre site and can expand to a capacity of over 300MW in the future.
The site is reportedly owned by the Aluminum Company of America, Alcoa, and formerly served as the location for a smelter.
DMG, which is to provide hosting and management services for the Texas facility, will cooperate with Bitmain to expand the facility’s capacity and ensure the efficiency of the site’s mining operations.
Both firms will work closely to establish the facility’s on-ground team together with the local workforce commission, the Rockdale MDD.
Bitmain says it is committed to seeking local Rockdale suppliers to support the ongoing construction work and will also purchase energy directly from Rockdale’s electric grid operator, the Electric Reliability Council of Texas.
Aside from supporting the local economy, Bitmain also plans to launch educational programs and training on blockchain technology and mining data center operations, together with the Rockdale school district.
“Significant” For Bitmain’s Global Expansion Plans
As previously reported, Bitmain’s plans for its Texas site was first announced in Aug. 2018.
At the time, Bitmain said it expected to create 400 local jobs in the first two years, quoting $500 million as its total planned investment into the economy over an initial period of seven years.
This January, local reports alleged that the project was being downscaled, with reports of staff layoffs and suspended operations. Adverse market conditions were thought to be the reason for the purported cooling-off.
Clinton Brown, Rockdale Lead Project Manager for Bitmain, has today said the facility’s launch is “significant to Bitmain’s global expansion plans” and that the state’s stable and efficient energy resources will be fundamental to supporting what he believes is set to be the inevitable scale of growth of the mining industry.
Bitmain Quietly Files for Deutsche Bank-Backed IPO in the US: Report
China-based mining titan Bitmain Technologies has discreetly filed an application for an Initial Public Offering (IPO) with the United States Securities and Exchange Commission (SEC).
According to an Oct. 30 report from Tencent News citing anonymous “informed sources,” German multinational Deutsche Bank is sponsoring the application. The amount sought to be raised by the offering has not been specified.
Deutsche Bank Reportedly Sponsoring The Application
Tencent News further reports that the IPO plans have been dominated by Bitmain co-founder Jihan Wu and Chief Financial Officer Liu Luyao.
To bolster chances of success, the firm has purportedly hired Zheng Hua, former Nasdaq representative for China, as a consultant to the firm.
The SEC’s review process will reportedly entail three rounds of inquiries and last an estimated minimum of 1-2 months.
A further unnamed industry source, reportedly familiar with the SEC’s listing procedures, told Tencent:
“The SEC has no biased position toward the blockchain business, but is rather concerned about professional and technical issues.”
The source claimed that the company’s connection to the Bitcoin (BTC) fork Bitcoin Cash (BCH) is likely to be the largest obstacle facing the application.
Industry onlookers will remember Bitmain’s earlier, ill-fated attempt to file a major $3 billion IPO on the Hong Kong Stock Exchange in September 2018, which lapsed after multiple controversies this March.
This week has been another eventful week for Bitmain with Jihan Wu revealing that fellow co-founder Micree Ketuan Zhan had left the company amid signs of internal company drama.
On Oct. 28, rival Chinese mining firm Canaan Creative filed for an IPO with the U.S. SEC to raise $400 million, eyeing a listing on Nasdaq under the ticker CAN.
Earlier this month, Bitmain opened what it claims is the “world’s largest” facility for Bitcoin mining in Rockdale, Texas.
Leaked Transcript Details Power Struggle Inside Bitcoin Mining Giant Bitmain
A partial transcript of an internal meeting at Bitmain on Tuesday details a long-running power struggle that led to the sudden ousting of co-founder Micree Zhan.
The conflict between Zhan and fellow co-founder Jihan Wu came to a head in December 2018 as the company pursued a round of layoffs.
In Tuesday’s emergency meeting called by Wu, he admitted the company has had a subpar 2019, exacerbating tensions among top executives.
The abrupt dismissal of Zhan comes just one week after Bitmain filed for another IPO attempt in the U.S., according to a report by Tencent News.
A transcript of a Bitmain staff meeting reveals an ugly power struggle inside the world’s biggest bitcoin miner maker that led to the abrupt ousting of co-founder Micree Ketuan Zhan.
CoinDesk has obtained and verified a partial transcript from the hourlong meeting on Tuesday. In it, Jihan Wu, a co-founder of Bitmain who started the company with Zhan in 2013, explained to all employees why he thought it was necessary to oust his long-time partner and former co-CEO.
After stepping down from day-to-day management in December 2018, Wu returned Tuesday as chairman of the company and executive director of the Beijing Bitmain subsidiary. He immediately made his presence felt.
Earlier in the day, Wu notified staff that Zhan had been dismissed from all his roles, effective immediately. During the subsequent all-hands meeting, he described a falling-out between the two executives late last year.
“Zhan escalated what should be a disagreement on an ordinary company business decision to the level of power struggle,” Wu told the staff.
Wu said in Tuesday’s meeting that he and Zhan have butted heads since 2015.
However, things came to a head in December 2018 when Bitmain decided on a round of major layoffs. Wu pushed for the layoffs, while Zhan initially resisted.
According to Wu, he and three other founding members of Bitmain tried to persuade Zhan to reach a unanimous decision on the layoffs, which Wu and others viewed as necessary for saving the company.
Zhan remained unconvinced, however, and tried to rally other senior and mid-level management against the layoff plan, Wu said, only to find out that most supported it.
Wu Said In Tuesday’s Meeting:
“Everyone knows in 2018, the company spent unnecessary and hasty investment everywhere on research and development projects and hiring dozens and hundreds of people without a second thought. Everyone supported the layoffs.”
Still, Zhan ordered a second meeting on Dec. 17, arguing that he should be the sole CEO and threatening to void stock-option incentives for whoever wouldn’t back him up.
In the end, Zhan’s second attempt failed, Wu said, but the two came to an agreement to both step down as co-CEOs and Bitmain moved ahead with the layoffs.
“I know Zhan is an insecure person and can be bitter. I chose to take a further step back and let him take the glory role of chairman,” Wu said in the meeting.
However, the turmoil caused serious divisions within the company and spooked Bitmain’s trading partners, at a time when the crypto market was at its bottom, according to Wu’s account.
“Right on that day, we had suppliers calling us to push for clearing accounts payable. The Bank of Beijing already agreed to give us credit lines but that got cut the next day,” Wu said, adding:
“Had it not been the bounce-back of the bitcoin price in later months … the company may not have been able to weather through the winter last year.”
2019 hasn’t been great for Bitmain, Wu said in Tueday’s internal meeting.
Even with bitcoin’s price rebound, Wu said the company didn’t fully seize the moment.
“Our mining equipment’s market share is declining,” he said. “Our mining pools’ dominance is also declining.”
Indeed, Bitmain’s major rival miner makers including Canaan, WhatsMiner and InnoSilicon have all been able to increase sales following the market boom this year.
Meanwhile, BTC.com and Antpool, Bitmain’s flagship mining pools, lost their long-time dominant positions to Poolin – founded by former BTC.com creators – and F2Pool. Poolin and F2pool are currently the top two mining pools in the world, based on the real-time hash rate distribution.
Calls to Zhan’s mobile number, as well as subsequent text messages requesting comment, were not answered. However, a Tencent News report said on Wednesday that Zhan has already started approaching lawyers in an aim to bring a lawsuit against Bitmain.
A spokesperson for Bitmain would not comment.
Wu and Zhan seem to have sparred over what Wu called Zhan’s “crazy” ideas – namely doubling down on the company’s artificial intelligence (AI) business, which is unrelated to bitcoin mining.
According to Wu, some of Zhan’s ideas included getting finance and accounting employees in Shenzhen to take up sales roles for AI products.
“Who will be handling our book in Shenzhen? How are we going to present the financial data for [an] IPO?” Wu asked, adding:
“Recruiting 300 fresh graduates? How many staff do we have right now? Do we have sufficient resources to train them if we recruit this many people in one shot?”
He further alleged that Zhan recently proposed investing more in a business that was already “distressed” and had burnt out the firm’s core developers who are “sick at home.”
“AI is a venture investment for Bitmain,” Wu said. “It still needs a considerable amount of investment. We have to keep making money from our main business in order to have the venture investment in AI.”
“Some said inside the company, I’m the one who handles business and Zhan handles technology. I want to ask, between Zhan and I, who really has a love for the technology? Zhan doesn’t love technology, he loves that feeling of fulfilling his endless desire for power. He doesn’t love technology, he loves vanity. Folks, we have no options but to keep Zhan away from this company.”
According to the Tencent News report, Bitmain has already filed an application in the U.S. seeking to go public again. The confidential filing was reportedly submitted one week before what the news outlet described as Wu’s coup.
The report added that on Oct. 28, one day before Wu’s email, Zhan was still attending a conference in Shenzhen on behalf of Bitmain to promote its AI products.
Zhan returned to Beijing after the news broke on Tuesday, but has been barred from entering the company’s offices, Tencent News said.
However, a major question remains unanswered: How did Bitmain manage to dismiss Zhan from all of his roles given that he was the chairman and major shareholder?
Prior to the December 2018 shake-up, Zhan held 36 percent of Bitmain’s holding company while Wu had just 20.25 percent, according to Bitmain’s 2018 IPO filing in Hong Kong citing data from September 2018.
Other major shareholders include founding members Yuesheng Ge (4.18 percent), Zhaofeng Zhao (6.26 percent), and Yishuo Hu (4.18 percent), as well as a trust that held 18.47 percent as the company’s employee stock-option incentive.
Other major external shareholders include Sequoia China Capital (2.7 percent), Richway Investment Limited (1.17 percent) and Sinovation (1.13 percent).
Bitmain Expands In South America As Its Market Share Drops To 66%
Bitmain, the world’s largest cryptocurrency mining firm, is expanding its distribution in South America by partnering with two crypto mining consulting firms.
The Chinese mining mogul will extend its global exposure with Fastblock, which will be the primary distributor in Brazil, and Bit5ive, a Miami-based firm that will be distributing Antminers to over 30 countries in Latin, Central America and the Caribbean, Bitmain announced Dec. 12.
Quick Take On Bitmain’s New Distributors
Bit5ive provides major crypto mining services — sells, hosts and supports crypto mining hardware — since its foundation in 2013. The company will be distributing Bitmain’s products using the official distributor license in South America, Bit5ive’s CEO and co-founder Robert Collazo noted.
Fastblock, which has been providing mining consulting services since 2014, intends to bring its blockchain expertise from managing over 20 mining plants, according to the firm’s CEO and co-founder Bernardo Schucman.
Antonio Oliveira, senior vice president and CTO at Bit5ive, declined to comment on the numbers or client purchase regions in an email to Cointelegraph.
Fastblock hasn’t responded to Cointelegraph’s attempts to reach out at the time of publication. This article will be updated pending any new information.
Bitmain’s Market Share By Hashrate Reportedly Dropped From 75% To 66%
The news comes amidst new reports revealing that Bitmain’s market share by hashrate has dropped from around 70% to 66% from June to early December 2019. The data comes from the study “The Bitcoin Mining Network” by London-based digital asset manager CoinShares shared with Cointelegraph Dec. 12.
Meanwhile, Bitmain’s own estimations claim that the company’s market share accounted for 75% of the global crypto hardware market as of 2017, the report notes.
While the Chinese giant’s dominance over crypto mining market has slipped since 2017, the overall trend of growth in China has continued. As reported by Cointelegraph, Chinese Bitcoin miners now control as much as 66% of global hash rate, which is the highest recorded by CoinShares since the firm started monitoring the measure in 2017.
Canaan’s Post-IPO Stock Plunge Reveals Sales Slump, Price War With Bitmain
Cryptocurrency mining computer-maker Canaan Inc. may have picked the worst time for its initial public stock offering, which valued the company at $1.3 billion.
The stock price has declined in all but four of the first 17 trading sessions since the Hangzhou-based company’s Nov. 21 sale of $90 million of U.S. shares. It’s down 35 percent since the start of last week.
Canaan’s performance is being closely monitored in the cryptocurrency industry. It was the first big maker of data-mining computers to sell shares publicly and its valuation serves many investors as a sector bellwether. The shares have tumbled even as the price of bitcoin, the largest cryptocurrency, has been mostly stable over the past month, currently around $6,500.
Its stock price drop is taking place “as bitcoin miners face a challenging environment,” wrote research firm TradeBlock in a report last week. CoinDesk reached out to Canaan’s management but no response was received as of press time.
Industry executives say the big makers of bitcoin-mining computers, colloquially known as “rigs,” are in a sales slump. That’s a surprising development since many observers predicted a frenzy of upgrades ahead of bitcoin’s once-every-four-years mining-reward halving, expected in May. When that happens, the reward for successfully mining a new block of data will get cut in half. It’s widely expected that prior-generation mining rigs will become unprofitable for operators who don’t have access to unusually cheap electricity.
Bitmain, the dominant industry player, recently announced a series of sales incentives to move backlogged or stale inventory, including promising limited price guarantees to buyers willing to commit to bulk purchases and in some cases renting out second-tier mining rigs under profit-sharing agreements.
Hashing Out Information On Their Own
It doesn’t help that investors are flying blind: According to the data provider FactSet, the stock has attracted no analyst coverage from Wall Street brokerage firms, forcing traders to generate their own models of the company’s profitability based on publicly available crypto-industry metrics like hashrate – a gauge of the amount of computer-processing power working to confirm new data blocks on the bitcoin network.
Over the past week, the bitcoin network’s hashrate has averaged about 90 quintillion operations, or exahashes, per second. Just a couple months ago, it hit an all-time-high around 100 exahashes per second, after averaging about 40 exahashes per second at the start of the year.
Matt D’Souza, co-founder and CEO of Blockware Solutions, which brokers mining-rig purchases, says that the surge in bitcoin’s hashrate during the first eight months of the year was a sign that operators were upgrading to faster, more efficient machines – leading to an increase in the network’s collective computing power.
The upgrades continued for several months even after bitcoin’s price peaked around $13,000 in late June.
But now, D’Souza says, miners are becoming somewhat more reluctant to invest in new machines until they see signs that bitcoin prices might start rising. That’s evident from the recent stall-out in the hashrate’s growth.
“They need to be assured that they’re in an environment for long-term profitability,” D’Souza said. “That’s why some of these guys have stopped buying.”
Bitmain managed to build a dominant market share in the crypto industry, partly thanks to the runaway popularity of its S9 Antminers. But those are now at risk of becoming obsolete, and in recent months Bitmain has cut prices steeply on some of its top-selling models, D’Souza said.
Mike Maloney, chief financial officer at Coinmint LLC, a private cryptocurrency mining firm, says that the ultimate prize for these manufacturers is winning the loyalty of a growing cadre of large-scale miners who can shop for rigs in bulk and negotiate contracts for cheap electricity.
“This is a trend that we’re going to be seeing in bitcoin mining,” Maloney said in a phone interview. “Bitmain is taking the lead.”
Canaan has scheduled the release of its next-generation rig, the AvalonMiner 11 series, for early next year. But that machine is expected to be less power-efficient than the Bitmain S17+ model, which is already out, said D’Souza.
According to Bitmain’s website, its top-priced S17+ model, which ships in seven days for $1,930, can produce 73 terahashes (trillion operations) per second, at a power efficiency of 40 joules per terahash.
Canaan’s top-priced model, according to its website, is the “February batch” of the AvalonMiner A1166-68T machine for $1,978, providing 68 terahashes per second at an efficiency of 47 joules per terahash. In this case, a higher efficiency rating is worse, because it indicates more power usage and thus a higher operating cost.
“They’re in a tough position,” D’Souza said of Canaan. “They need cash and that’s because they need to upgrade their hardware and stay competitive with Bitmain.”
The Risks Were Disclosed
Canaan is led and controlled by its CEO and chairman, Nangeng Zhang, who was 36 at the time of the IPO, according to an offering prospectus filed with the U.S. Securities and Exchange Commission. Nicknamed “Pumpkin,” he received a master’s degree in software engineering from Beihang University in 2010, and from September 2010 through October 2013 he was pursuing a Ph.D. degree at the Chinese university.
As early as 2013, Zhang and his team were pioneers in the use of an advanced type of microchip known as application-specific integrated circuits, or ASICS, to mine for cryptocurrencies, according to the prospectus.
The offering was structured so that Zhang would own 15 percent of the total shares outstanding but retains about 73 percent of voting rights through his sole ownership of 356.6 million of the company’s class B shares, according to the filing. The IPO valued his stake on paper at more than $213 million, but the share-price slump has already cut that figure by about $96 million.
Even as Canaan prepared for the November IPO, its revenue this year was declining, and its costs were expanding: The company’s revenue during the first nine months of 2019 was just $134.2 million, down from $378.5 million during all of 2018; operating costs rose to $57.5 million during the first nine months of this year, from $52.5 million for all of last year.
The investment bank Credit Suisse, initially hired by Canaan to lead the U.S. IPO, dropped off of the underwriting team just weeks before the share sale, regulatory filings show. According to a Nov. 20 prospectus, Citigroup led the remaining team of seven underwriting firms, which also included the cryptocurrency-focused financial firm Galaxy Digital.
According to the filings, the deal was also downsized in the final weeks before the sale from an initial maximum target of $400 million.
Canaan disclosed in the prospectus that it planned to use the proceeds from the stock offering for research and development related to new computer chips and to expand its artificial-intelligence and blockchain business globally, “making strategic investments and establishing overseas offices.”
To its credit, the company also disclosed the risks when the market turns anemic. “Excess inventories, inventory markdowns, brand-image deterioration and margin squeeze caused by declining economic returns for miners or pricing competition for our bitcoin-mining machines could all have a material and adverse impact on our business, financial condition and results of operations,” according to the prospectus.
Analyzing bitcoin-mining computer stocks remains a murky practice. Just like manufacturers of oil rigs and mining bulldozers, they face the ups and downs of commodity cycles. Or rather, cryptocurrency cycles.
Canaan’s New 5-Nanometer Chips To Escalate ASIC Arms Race With Bitmain
Chinese mining application-specific integrated circuit (ASIC) manufacturer Canaan will launch new, improved mining machines with 5-nanometer chips in Q1 2020.
Chinese industry news outlet 8BTC reported on Dec. 24 that the new ASICs will have significant advantages compared to the previous generation. The new firm’s 5nm manufacturing process is expected to improve performance, power and area scaling.
A significant development
The company expects to scale the production of this new product series faster than it did with its 7nm chips. The number of nanometers refers to the size of the features of the silicon chip, 5nm approaches what is possible with conventional electronics. For scale, 1nm is approximately equivalent to the width of two silicon atoms.
As the features in chips become smaller, it becomes possible to fit more transistors in a silicon die of the same size. At the same time, the electric current has to travel less distance in the circuit to perform a calculation, which means that efficiency is improved and the amount of heat is decreased when the features are smaller.
Canaan is one of the few cryptocurrency-related companies that managed to go public with a $90 million Initial Public Offering (IPO) held in November. As Cointelegraph recently reported, the firm’s shares have seen a 40 percent drop in value since the IPO.
Ousted Co-Founder of Crypto Mining Firm Bitmain Opposes Layoffs
Micree Ketuan Zhan, the co-founder of Bitmain who was recently dismissed by Bitmain’s current CEO Jihan Wu, has publicly opposed layoffs at the firm.
As Bitmain — the world’s largest cryptocurrency mining firm — is reportedly planning to cut its workforce by 50% before the next Bitcoin (BTC) halving, Zhan claimed that he is “firmly opposed to layoffs” in a Jan. 6 Weibo post addressed to Bitmain employees.
Zhan Argues That Bitmain Cannot Lose Its Leadership In A Highly Competitive Market
Apart from claiming that Bitmain does not need to lay off its team, Zhan argued that such a move would basically be suicide for the company. He wrote:
“To all employees of Bitmain: I am firmly opposed to layoffs! We don’t need to lay off people! We cannot play suicide!”
Zhan argued that Bitmain’s cash flow is healthy, and “there is a substantial amount of virtual cryptocurrency.” Zhan, who is Bitmain’s biggest shareholder with a reported 60% stake, outlined the company’s leading position in the highly competitive cryptocurrency mining market. He stressed that cutting Bitmain’s staff in half would just allow other mining firms to grab up Bitmain’s market share.
Bitmain Reportedly Started Cutting Staff This Morning
Meanwhile, Bitmain “staff optimization” allegedly started this morning, according to local reports on Jan. 6. Bitmain has reportedly provided its employees with a compensation plan, while some employees have signed a termination agreement. Additionally, a number of headhunters have purportedly started communicating with resigned Bitmain employees.
When reached for comment, a Bitmain spokesperson stated, “Depending on market conditions and business developments, we continue to make adjustments to our staff. As a result, we also are continuously on the lookout for new talent and welcome applicants from all walks of life.”
The news brings a fresh twist in a series of events referred to as “Bitmain Drama” by the crypto community. After Zhan was dismissed by Bitmain CEO Jihan Wu in November 2019, the executive subsequently initiated court proceedings against the company in a bid to restore his voting control of the firm.
Meanwhile, Wu recently resurfaced as Bitmain CEO after both he and Zhan announced plans to step down from their co-CEO positions in January 2019.
Bitcoin Miner Canaan’s Shares Valued At $8.04 After Surging 80%
After steadily depreciating well into the last quarter of 2019, Canaan certainly rebounded slightly today.
The company was the first example of a large Bitcoin miner to go public on Nasdaq. However, after its initial public offering (IPO) on Nov 21, Canaan stock price values dropped nearly 40% within a few weeks.
Competition With Bitmain Helped Stocks Surge?
Some healthy competition may have helped the bitcoin miner to regain some traction in the market. Canaan came out ahead of Bitmain, another major China-based bitcoin miner, to become the first company traded in a US stock market. Unfortunately, this introduced Canaan to the United States with an IPO valued at under 75% of what was expected.
The mining giant’s stock took a beating from its original value $13 on the day of the launch to drop to $5.25 in mid-December. As of closing today, The Block reported Canaan’s shares are valued at $8.04, a surge of over 80% from its opening price of $4.42.
Canaan has been facing stiff competition from Bitmain and racing to develop technology to stay on top. Most recently, the company unveiled 5-nanometer chips to improve power and performance.
Bitcoin Mining Unit Manufacturer MicroBT Nibbles At Bitmain’s Market Share
Bitcoin miner maker MicroBT has rapidly expanded market share by selling over half a million units in 2019, chipping away at rival Bitmain’s dominance.
MicroBT sold about 600,000 units of its flagship WhatsMiner M20 series last year, Vincent Zhang, sales head of the Shenzhen-based company, said in an online panel hosted by Chinese mining pool Poolin on Thursday in a WeChat group.
These products generate a computing power of about 60 terahashes per second (TH/s) on average, he said. That means the newly delivered 600,000 units may have contributed over 30 exahashes (EH/s) of hashing power to the bitcoin network in 2019. (1 EH = 1 million TH).
Amid bitcoin’s price jump throughout 2019, the network’s two-week average computing power more than doubled from just 40 EH/s around the end of 2018 to nearly 100 EH/s in December. That’d mean close to half of bitcoin’s computing power growth in 2019 may have come from equipment delivered by MicroBT.
Zhang didn’t specify the precise average unit price of these batches, as they could fluctuate depending on bitcoin’s price over the year. But the firm’s various models in its M20 product line are generally priced between $24 to $30 per terahash, meaning the firm has brought home a high nine-figure revenue in U.S. dollars for 2019.
Bitcoin’s current computing power stands at 110 EH/s. That also means MicroBT may account for around 30 percent of bitcoin mining power sold right now, making it one of the largest and fastest-growing miner makers in the world.
Situation In Flux
Meanwhile, crypto research firm Coinshares estimated in a report on Dec. 12 that Bitmain’s dominance of sold bitcoin hash rate was about 65 percent at the time, already down from 75 percent in 2018.
But this number may already be slightly outdated as bitcoin’s computing power has since then grown by yet another 20 percent, jumping from 92 EH/s in mid December to about 110 EH/s at the moment.
Hangzhou-based Canaan Creative, maker of the Avalon miner, which went public in the U.S. in November, estimated in its IPO filing that it accounted for around 20 percent of bitcoin computing power sold for the first six months of 2019. The firm has yet to release its full-year results.
That said, Bitmain’s mining equipment still dominates the market, resulting from the successful sales of its AntMiner S7 from 2015 to 2016 and later its S9 model from 2017 to 2018.
According to Bitmain’s IPO filing in September 2018 in Hong Kong, the firm delivered about 500,000 bitcoin miners in 2015 and 2016, and further sold 3 million units from the beginning of 2017 to June 30, 2018, amid the crypto market’s bull run.
While S9s – with an average 14 TH/s computing power – are still the most widely used miners, they are facing an increasing risk of becoming obsolete as bitcoin’s halving event approaches in May, which will reduce bitcoin’s mining rewards from 12.5 bitcoin per block to 6.25.
CoinDesk reported earlier this month that mining farms have been procuring the latest and most powerful miners to expand their facilities or replace older models in preparation for the upcoming halving.
While Bitmain its latest AntMiner S17 series last year to rival MicroBT’s WhatsMiner M20 product line, the latter has significantly outrun Bitmain in terms of mass production and shipments.
The two firms are also racing to deliver even more powerful machines in 2020 ahead of the halving event, namely, the AntMiner S19 and WhatsMiner M30. That said, the actual production quantity of these products still largely depends on the supply of wafers from semiconductor companies such as Samsung or TSMC, which, according to Zhang, is “very limited.”
Meanwhile, as the coronavirus outbreak in China delays manufacturing and logistics, bitcoin’s computing power growth has stagnated for the time being. In fact, data from mining pool BTC.com estimates that bitcoin’s mining power is poised to decrease by 1.78 percent in about eight days.
Zhang said in the WeChat group that MicroBT has resumed its production.
“Currently, part of the logistics has also gone back to work. … So now the supply of miners is not a big issue but not every mining farm is physically accessible,” he said.
“Large scale of investments may be affected because investors may not be able to do physical due diligence on facilities,” Zhang said.
Ahead of Bitcoin Halving, Bitmain Announces Upcoming Antiminer S19
Leading mining hardware manufacturer Bitmain has announced two new upcoming miners — the Antminer S19 and the Antminer S19 Pro.
According to a press release on Feb. 27, the Antminer S19 will boast a hash rate of 95 terahashes per second (TH/s), and the Pro will offer 90 TH/s. However, Bitmain’s website claims that the Pro model can produce 110 TH/s.
Both miners will have a power efficiency of 34.5+/-%5 joules per terahash. No release date or price information has been announced for either model.
The S19 series will replace the Antminer S17 67 TH/s and the T17 55 TH/s as Bitmain’s flagship models. The S19s will weigh 3.5 and 4.5 kilograms heavier than their predecessors, weighing 15.5 and 16.5 kilograms. The S17 and T17 are priced at $1,567 and $939 respectively.
Bitmain’s press copy invokes the upcoming halving, stating: “with the price of block rewards to be reduced, the Antminer 19 series safeguard miners for future mining.”
Bitmain Miners Drive Riot Blockchain Expansion
On Feb. 20, the Nasdaq-listed crypto mining company Riot Blockchain announced the operational commencement of 4,000 Antminer S17s.
Riot purchased the Antminers during December 2019, 3,000 of which were deployed in its Oklahoma City facility during January. The facility is now fully operational — producing 240 pentahash per second and consuming 12 megawatts of electricity.
Competition Heats Between Bitmain And MicroBT
After years of Bitmain miners dominating hash rate, the company appears to be facing increasing competition from rival MicroBT.
MicroBT sold roughly 600,000 units of its flagship 60 TH/s WhatsMiner M20 in 2019 — outselling Bitmain’s S17 last year.
MicroBT plans to launch its forthcoming M30 with 88 TH/s capabilities, signaling fierce competition between the two companies during 2020.
Riot Reports 147% Monthly Growth In Average Daily Run Rate of BTC Mined
Nasdaq-listed cryptocurrency mining firm Riot Blockchain has demonstrated a remarkable monthly growth of average daily run rate of Bitcoins (BTC) mined, in February.
The United States-based firm has seen a 147% increase in the average daily run rate of BTC mined, against the average daily production run rate for December 2019, Riot revealed on March 5. Riot attributed the boost to its mining equipment upgrade. At the beginning of the month, it had 2,940 Bitmain S17s and 1,751 S9s machines, while by the end of the month, it was running 4,000 S17s.
Riot’s Mining Facilities Upgrade
Riot Blockchain started deploying around 3,000 new units of S17 Pro Antminers as part of the full upgrade of its Oklahoma City mining facility, in January. The company purchased the mining machines from Chinese mining giant Bitmain.
At the time, Riot anticipated that the upgrade would bring its aggregate operating hashrate at the Oklahoma City mining facility to approximately 248 petahashes per second, representing a 240% increase in hardware power efficiency compared to Riot’s mining hashrate.
Worth noting, Riot’s shares dropped by over 5% following the announcement that the company was planning to sell its cryptocurrency exchange, which was launched in the second quarter of 2019, to focus on BTC mining ahead of the halving in May of this year.
Investor Sues Crypto Mining Firm Riot Blockchain To Pay $728K In Legal Fees
An investor sued Nasdaq-listed cryptocurrency mining firm Riot Blockchain for $728,200 that the investor owes in another contract breach lawsuit.
According to court documents filed on April 3, the aforementioned sum is the money Riot Blockchain investor Barry Honig and consulting firm GRQ Consultants spent on the legal proceedings over the contracts between the parties. The filing reads:
“All of the agreements contain robust indemnification provisions which require Defendant to defend and indemnify Mr. Honig and GRQ against any subsequent lawsuits or claims ‘with respect to any of the’ securities purchases that they made, and/or ‘any violation or alleged violation by [Defendant] of the Securities Act, [or] the Exchange Act.’”
Securities Regulation Violation Lawsuits
According to the documents, in March 2017 Honig and GRQ — of which he served as a trustee — entered into securities purchase agreements and registration rights agreements with Riot Blockchain for $1,725,000 million. The next year multiple legal proceedings were moved against Honig and GRQ alleging that the securities transactions included in the contract violate the regulations. The filing reads:
“Honig vigorously denies each and every one of the claims asserted against him in those proceedings, and has expended significant sums to mount his defense.”
Still, while Honig believes the legal actions against him to be unfounded, he claims that those lawsuits trigger the indemnification obligations to him and GRQ. Riot Blockchain, on the other hand, refused to cover the legal fees in question, and the plaintiffs point out that the firm’s most recent quarterly report shows that it held over $20,324,000 of assets.
Lawsuits In Crypto
The cryptocurrency industry, as any other space with a large quantity of money involved, sees a large number of lawsuits. As Cointelegraph recently reported, seven cryptocurrency firms were targeted in lawsuits filed in the New York federal court on April 3.
Yesterday, Cointelegraph also reported that an entity representing the more than 100 victims of the alleged $35 million Q3 Ponzi scheme filed a class-action lawsuit against Wells Fargo Advisors.
Mining Issues In The Run-Up To BTC Halving
As Cointelegraph reported last month, major mining hardware manufacturer Bitmain announced two new upcoming miners — the Antminer S19 and the Antminer S19 Pro. Both miners will have a power efficiency of 34.5+/-%5 joules per terahash.
In the meantime, Alex de Vries, the founder of the Digiconomist, asserted that 98% of mining rigs will never verify a transaction, resulting in an enormous and unproductive electricity expenditure. De Vries explained:
“The shocking thing is the average lifetime of a bitcoin mining machine is one and a half years, because we have a new generation of machines which are better at doing these calculations. So the rest are just running pointlessly for a few years, using up energy, and producing heat, and then they will just get trashed because they can’t be repurposed.”
Pump And Dump Complaints Dismissed Against Crypto Mining Firm
Riot Blockchain’s lawsuits dismissed by a New Jersey judge, ending a 2 year lawsuit alleging the mining firm misled shareholders.
New Jersey District Judge, Freda Wolfson, granted seven motions of dismissal that ended a lawsuit targeting crypto mining firm, Riot Blockchain, on April 30.
The plaintiffs claimed that Riot had made false and misleading statements to its shareholders concerning its investments in crypto assets and blockchain technologies.
The lawsuit accused Riot of issuing misleading materials concerning shareholders who were selling their shares in the company, alleging that “related-party transactions” had not been adequately disclosed by Riot.
Riot Blockchain Escapes Class-Action Suit
Judge Wolfson found that the plaintiffs provided insufficient evidence to demonstrate that Riot’s press releases and public statements contained false or misleading information.
“I have examined all three categories of statements and find, for the reasons set forth below, that plaintiff has failed to adequately allege that those statements were false or misleading,” the judge said.
The plaintiffs first filed the class action against Riot, then known as Bioptix Inc, in February 2018, alleging that the firm made “material misstatements” to shareholders after the publication of a negative article from CNBC.
The judge noted that the lead plaintiff may refile a revised suit within 30 days of the order.
Riot Purchases 1,000 Anterminer S19’s
Also on April 30, Riot Blockchain announced that it had purchased 1,000 Bitmain Antminer S19 Pro ASIC miners for $2.4 million.
During April, Riot announced that it had struck a deal to relocate a portion of its mining operations into a New York facility operated by fellow mining firm Coinmint. The agreement saw recently purchased Antminer S17s moved from Riot’s Oklahoma facility.
The deal came after the mid-March crypto crash impacted the profits of many mining operations.
New York Power Plant Mines $50,000 of Bitcoin A Day
A New York power plant turns to Bitcoin mining in a successful bid to increase profitability.
Bloomberg reported on Mar. 5 that a power plant in New York’s Finger Lakes region now mines about $50,000 of Bitcoin (BTC) each day using the electricity it produces.
Atlas Holding, the private equity company that owns the facility, installed 7,000 crypto mining machines at the Greenidge Generation’s 65,000-square-foot power plant in Dresden, New York. The firm pointed out that since it produces the power consumed by the machines on its own, the mining operation is extremely low cost.
An Extremely Profitable Operation
Cryptocurrency mining is extremely energy-intensive. Mining facilities tend to concentrate where electricity prices are the lowest. In this case, the power cost is equivalent to production costs.
Atlas Holding’s mining operation consumes about 15 megawatts of the 115 megawatts of the power plant’s total capacity. In the past, the Dresden power plant used to operate only when there was higher-than-usual energy demand during summer and winter, but now it operates the whole year.
Bitcoin Block Reward Halving Is “Favorable”
The cryptocurrency community is afraid that Bitcoin mining will become unprofitable for most miners after the block reward will be cut in half in about little over two months. Dave Perrill, the CEO of colocation service for crypto miners, recently told Cointelegraph that the profitability of all but the most efficient mining operations will be greatly challenged after the halving takes place.
Still, the profitability of Atlas Holding’s mining operation is high enough to be safe after the block reward cut. Greenidge’s chief financial officer Tim Rainey said that he expects the operation will stay profitable after Bitcoin’s halving:
“We are in a favorable market position regardless of how the halving materializes. […] Due to our unique position as a co-generation facility, we are able to make money in down markets so that we’re available to catch the upside of volatile price swings.”
Canaan Faces Class Action Lawsuit Alleging Dubious Practices During IPO
Blockchain services and cryptocurrency mining hardware producer Canaan is facing a class-action lawsuit filed by investors following claims of dubious practices for attracting investments.
Investor rights-focused law firm Rosen Law Firm has initiated the suit on behalf of Canaan securities purchasers in the company’s initial public offering (IPO). The law firm claimed that Canaan investors suffered damages as the firm had made false and misleading statements and failed to disclose a number of issues.
Canaan Allegedly Misled Investors Regarding A Partnership
According to the announcement, Canaan did not reveal to its investors that a purported “strategic partnership” — apparently with Hong Kong Exchange-listed company Grandshores (HK 1647) — was actually a transaction with a related party. Also, Canaan allegedly did not provide the investors with correct information about its financial condition, which was allegedly been worse than was reported. Among other allegations, the lawsuit said:
“The company had recently removed numerous distributors from its website just prior to the IPO, many of which were small or suspicious businesses; and (4) several of the Company’s largest Chinese clients in prior years were clients who were not in the Bitcoin mining industry and, thus, would likely not be repeat customers.”
Rosen Law Firm is seeking restitution for affected investors.
Canaan carried out its IPO last November, wherein it raised $90 million — more than 75% less than was expected. Canaan has initially planned to raise considerably more, with a funding figure of $400 million circulating prior to the event.
The failure was purportedly a result of losing Canaan’s biggest banking partner, Credit Suisse, just a week before the IPO.
An Investigation Into Claims Against Canaan
Additionally, a shareholder rights litigation firm, The Schall Law Firm, has begun an investigation into purported violations of securities laws by Canaan. The law firm states that it is acting on behalf of Canaan investors and aims to indicate whether Canaan actually issued misleading statements and failed to disclose information pertinent to investors.
Both the investigation and lawsuit came in the wake of an analysis produced by Marcus Aurelius Value, which argued that the ASIC manufacturer had misrepresented its potential revenue for 2020 and that at least one of its customers is an alleged related party who is unable to honor a $150 million purchase contract.
The analysts based their claims on a highly irregular transaction relating to Canaan’s IPO on Nov. 27. This refers to the $150 million deal between Grandshores one month before the IPO, which would represent an equipment order almost equal to Canaan’s revenue in the past twelve months, which amounted to $177 million.
The analysts argued that Grandshores had no way of honoring the agreement, citing the company’s $50 million market capitalization and $16 million cash balance.
AsicBoost Dominates Bitcoin Mining, Solving Bitmain’s 2017 Controversy
Bitcoin (BTC) miners openly using AsicBoost are now comprising 63% of its network hashrate. This vindicates community concerns from 2017 that accused Bitmain of using the “covert” version of AsicBoost.
The statistic was highlighted on March 9 by Bitmex Research, building on a similar report from December 2018. Though the overt AsicBoost was only used by 30% of miners at the time, the analysts argued that the 2017 controversy was largely settled. They wrote:
“If covert AsicBoost was used by some miners to obtain a secret advantage, with significant adverse effects on Bitcoin, this problem now appears mostly solved.”
Bitmain was the target of strong criticism from notable Bitcoiners in 2017 after it allegedly introduced covert AsicBoost into its hardware. The company was also chastised for opposing the network’s Segregated Witness (SegWit) upgrade — a proposal which would have limited the usefulness of their covert AsicBoost tactics.
What Is AsicBoost?
AsicBoost is the name of a technique developed by cryptography experts, Timo Hanke and Sergio Lerner. The solution was patented under a framework named “Blockchain Defensive Patent License,” which was specifically designed to limit competitive advantages in mining and preserve network security.
In a Proof of Work system, miners must generate a cryptographic hash of some important block information, which is contained in the block header. In order to make it a difficult task, the hash must satisfy the “difficulty” condition, which generally requires it to be lower than a certain number. Since hash functions are completely unpredictable, the only way to satisfy the condition is to simply try many different combinations of input data.
AsicBoost exploits the fact that Bitcoin block hashes are created from separate chunks of 64 bytes of data. Since the entire header is 80 bytes, there are two chunks that need to be hashed during the mining procedure.
With the technique, one of the chunks can remain unmodified over multiple hashing attempts, which saves resources. The difference between overt and covert AsicBoost lies in which chunk is kept unchanged.
Under overt AsicBoost, the “version” bytes are used as an extra nonce to modify the resulting hash. Thus, the second chunk does not change for a number of attempts.
With covert AsicBoost, miners need to shuffle or even remove transactions in order to keep the last four bytes of the Merkle root — the signature of the block’s transactions — unchanged.
While the latter technique is less efficient, it is more difficult to detect and thus would allow a miner to maintain a competitive advantage. Crucially, the activation of SegWit would have broken the exploit.
Bitmain Criticized For Using Covert AsicBoost
In April 2017, news broke that Bitmain had implemented the covert AsicBoost exploit in its hardware. The discovery was made by Gregory Maxwell, at the time CTO of Blockstream.
The findings were used by the community to allege that Jihan Wu — Bitmain CEO and strong SegWit critic — had ulterior motives for his position.
AsicBoost was estimated to increase mining performance by 20-30%. Andreas Antonopolous and others argued that covert AsicBoost would eventually destabilize the network, as some miners would have an unfair advantage.
Bitmain Cleaning Up
The ever-increasing figure of overt AsicBoost miners, currently at about 63%, means that the advantage of using it covertly is dwindling.
Even if there are fewer incentives of foul play now, in a conversation with Cointelegraph, Kristy Leigh-Minehan noted that Bitmain “cleaned up its act” in preparation for the initial public offering (IPO).
The initial plans of the 2018 IPO were thwarted by a protracted bear market. Though a new attempt in late 2019 was discovered, internal company issues prevented it from continuing.
The pressure from the Bitcoin halving has allegedly forced Bitmain to slash over 50% of its staff. Even though some may have hoped for a halving-induced rally, the already-significant cut may not be enough to sustain the company amid a global market panic just two months before the upcoming block reward decrease.
Huobi’s Mining Arm Records 547% Surge in Operating Revenue In 2019
Huobi, the fourth-largest cryptocurrency exchange by daily trading volume to date, saw significant progress in its crypto mining business in 2019.
Huobi Pool, a cryptocurrency mining arm of Huobi, says its operating revenues surged 547% in 2019, reaching $320 million year-over-year from $53 million in 2018.
PoS Staking Continues To Be The Huobi Pool’s Most Profitable Business
Originally launched in March 2018, Huobi Pool released its first annual financial report on March 19, announcing the news for Huobi Group’s digital assets mining business and trading pool for the fiscal year ending December 31, 2019.
Alongside major growth in operating revenue, Huobi Pool recorded notable profits. According to the report, Huobi Pool’s operating profit jumped 218% from $2.5 million in 2018 to $6.3 million in 2019.
As outlined by the company, the two main triggers for Huobi Pool’s growth in 2019 were Proof-of-Stake (PoS) and Proof-of-Work (PoW) mining. Having accounted for 35.62% of the total net income, PoS continues to be the Huobi Pool’s most profitable business segment so far, the firm noted. Huobi Pool also projected that PoS will continue to be a focus in 2020.
PoW Consensus Is Also Still Contributing To Total Net Income
As reported by Cointelegraph, PoS is a consensus blockchain algorithm that operates on the basis of the validator’s stake in the network. PoS is opposed to PoW, which relies on physical miners instead of network validators.
Despite some blockchain projects like Ethereum trying to get rid of PoW consensus, the algorithm is apparently still profitable to date. According to Huobi Pool’s latest report, at least 23.5% of the firm’s total net income in 2019 was contributed by PoW mining. Additionally, PoW mining became one of the fastest-growing business segments of 2019 for Huobi Pool, as its Bitcoin (BTC) hashrate reached a high of 6,578 PH/s.
In the report, Huobi Pool also highlighted its Huobi Pool Token (HPT) as a central part of the company’s business model. In contrast to Huobi’s native token Huobi Token (HT), Huobi Pool Token is specifically designed for the company’s mining arm, acting as a reward mechanism for hashrate contribution as well as a way for users to participate in Huobi Pool developments.
As of press time, both Huobi Pool Token and Huobi Token are seeing significant surges over the past 24 hours, up nearly 15% and 14%, respectively. The growth comes amid a major green trend on crypto markets, with Bitcoin getting back above $6,200 and jumping more than 18% over a 24-hour period as of press time, according to data from Coin360.
Bitmain S19 Antminers Sell Out, Won’t Ship Until May 11
The world’s largest manufacturer Bitcoin ASIC miners, Bitmain, has sold out its first round of domestic Antminer S19 sales within 24 hours of accepting orders.
On March 23, Bitmain tweeted that it opened up its first phase of domestic sales for its long-await Antminer S19s — before selling out on the same day.
Antminer S19s Will Ship From March 11
The first version of the Antminer S19 will have a hashrate of 95 terahashes per second (TH/s) and an energy efficiency of 4.5±5% joules per terahash (J/TH), while the Antminer S19 Pro boasts a hash rate of 110 TH/s and an energy efficiency of 29.5±% 5 J/TH. The second version of both S19s will feature a reduced hashrate by 5 TH/s.
The regular S19 costs roughly $2,180 while the pro costs $2,920. Bitmain states that international sales will be coming soon.
Customers who managed to get in on the first round can expect the units to arrive between May 11 and May 20.
Bitmain Accused Of Front-Running Miners
With the Bitcoin (BTC) halving currently expected to take place on May 12, the estimated shipping dates for Bitmain’s S19s have drawn the ire of the mining community.
Many of the comments in response to Bitmain’s announcement insinuate that the company chose the date so that it could mine using its next-generation ASICs without competition before the next fork occurs.
Jason Urgo, The CEO Of Social Media Analytics Company Social Blade, Posted:
“Shipping May 11thish. Gee I wonder why you picked that date lol. I thought you guys said you didn’t use them yourself first before shipping them? Or is it just to make sure the ones you do have for you get the most out before you ship these.”
A user posting under the pseudonym ‘dua’ sarcastically added: “They don’t use it. They just stress test it for a ‘while’ for Quality assurance.”
Cointelegraph reached out to Bitmain but had not received a response as of press time. This article will be updated should a response come in.
Bitcoin Miner Maker Canaan Lost $148M in 2019
Chinese bitcoin miner manufacturer Canaan Creative disclosed a net loss of $148.6 million for 2019 on revenue of $204.3 million, reflecting declining profitability over the past three years.
On Thursday, the firm released its first unaudited earnings report since going public in the U.S. in November. Canaan said it sold computing power totaling 10.5 exhashes per second (EH/s), which accounted for roughly 20 percent of the Bitcoin network’s computing power growth last year.
Since its $90 million IPO, Canaan’s share price has been on a downward trend and is currently around $3.5 per share – 61 percent below its offering price.
The firm said it recorded $114.7 million in net loss in Q4 2019 alone, which widened its $31.2 million net loss for the first nine months in 2019.
Nangeng Zhang, CEO and founder of Canaan, said in an earnings call on Thursday morning Eastern time that, although the firm recorded sales uptick in October and November, it saw a “considerable drop” in volume in December amid volatility in bitcoin’s price.
“As a result of the impact of the COVID-19 outbreak, a widespread health crisis that adversely affected general commercial activities, the economies, financial markets, as well as the cryptocurrency market activities, we have lowered our expectations for business in the year of 2020,” according to the report. “For the first quarter of 2020, the Company expects total revenues not less than RMB60 million [$8.5 million].”
Also notable in the report is the increasing ratio of the “cost of revenues” for Canaan’s sales of bitcoin miners over the past year, which leads to declining profitability. In 2019, the cost of revenue for Canaan was $278 million, $78 million more than the total revenue made for the year, largely due to inventories and prepayments write down of $104.7 million in Q4.
Canaan’s cost of revenues generally include the costs of raw material, production and logistics for the manufacturing of mining equipment, as well as write-downs of prepayments and inventories.
Selling At Loss?
To put this into perspective, in 2017, Canaan’s total cost of revenues was $100 million with no inventory write-down, accounting for 54 percent of its $183 million revenue on the back of the crypto market bull run at the time. It brought home $53 million with a 30 percent net profit margin.
In 2018, its total cost of revenues went up to $307.4 million, taking up 80 percent of its $378 million revenue. But the total cost included a write-down of $110 million in inventories because the market downturn made it hard for Canaan to sell those machines.
The increase in the cost of revenues is perhaps also due to the fact that more advanced mining equipment relies on more costly chip technology.
According to Canaan’s IPO prospectus, the cost of its Avalon 10, the latest range of miner launched to help weather bitcoin’s halving event, is around $751, compared to $354 and $600 for its older Avalon 8 and 9 series. Prices had been around $1,200 in December for the Avalon 10.
Based on information advertised by Canaan’s authorized distributors, several Avalon 10 models are currently on sale, as a buying spree from investors has cooled down in recent months.
The firm has also recently been hit with a lawsuit filed by an investor who bought its shares and then accused the company of making misleading statements about its operations and financial data, and of violating the U.S. securities laws.
New York Power Plant Sells Bitcoin Hashpower to Institutional Investors
A Bitcoin-mining power plant in upstate New York has sold 106 petahash of its computing power to an undisclosed buyer using a “hashpower contract” settled in Bitcoin (BTC).
The contract — brokered by BitOoda Digital — first launched in January with the aim of providing institutional investors to purchase large blocks of Bitcoin hashpower in over-the-counter markets.
On April 10, The Chief Financial Officer Of Greenidge Generation Claimed That The New Instrument Provides:
“The same kind of time-tested hedging capabilities seen in traditional commodity markets […] bring[ing] the benefits of clean and energy-efficient bitcoin mining from Greenidge to institutional investors throughout the United States.”
A Sweet Deal For Investors?
The Greenidge power plant uses a pipeline bringing natural gas directly to the plant, thereby generating the power consumed by its mining facility — up to 100 megawatts of energy an hour — and lowering its costs. The firm argues that this set-up offers investors a chance to tap the profitability not only of crypto, but also the energy markets.
The new, regulated contract enables investors to own Bitcoin cheaper than the market spot price, with the instrument being physically settled — i.e. delivered in the Bitcoin generated at the power plant. For Greenidge, the deal provides upfront capital for expanding its mining operations.
Resources And Mining Profitability
As recently reported, Greenidge is owned by private equity Atlas Holding, which installed 7,000 crypto mining machines at the Greenidge 65,000-square-foot power plant in Dresden, New York.
Given the forthcoming 50% reduction in rewards for mining each block on the Bitcoin network — an event known as “halving,” scheduled for May 2020 — research by TradeBlock has indicated that access to efficient mining equipment, together with cheaper electricity and resources, can help the sector to ward against losses.
Are Bitcoin Cash Miners Driving Up the Price of Bitcoin?
Bitcoin (BTC) price has been a sight to behold over the last week. After successfully breaking through the resistance of $7,200 on Monday, April 6, all eyes were on the leading digital asset to hold $7K as fresh support, but as soon as the weekend was upon us, the price fell through this floor finding a new temporary bottom of $6,750.
So are these weekend dumps a sign that interest in Bitcoin is waning? Or is this simply whales taking advantage of thinner weekend volume to accumulate before the next big run?
Bitcoin keeps finding itself in a descending channel that formed 10 months ago. The last time the king of cryptocurrencies broke out of this channel, it encountered fierce resistance at 5 different levels ranging from $8,750 to $10,500.
Currently, Bitcoin is once more above this channel, with a new ascending channel taking form. From here Bitcoin needs to form support by closing the daily above $7,100 for history to start repeating itself, and this is not the only pattern repeating itself this year.
History Repeats Itself On The MACD
The Moving Average Divergence Convergence (MACD) indicator on the weekly timeframe looks almost identical to that of Jan. 14, which is when Bitcoin last closed above the descending channel. This resulted in a rally from $9,000 to $10,500.
However, much like the last few days, Bitcoin did fall back into the channel before pushing forward to the yearly high.
At the time this was attributed to the mining difficulty increasing every 2 weeks, a trend that seems to be returning.
Mining Difficulty Pushes Higher
After the Black Thursday event, which saw the price of Bitcoin plummet by 50%, the mining difficulty adjustment dropped by nearly 16%. This was one of the largest drops in a single period that Bitcoin had ever seen.
However, last week saw the difficulty increase by nearly 6% and the next adjustment is already looking to increase by 7%. With only 8 days left to go, it’s highly probable that this will wipe out the negative adjustment seen this year, so does that mean that price will follow?
If the price action at the beginning of 2020 is anything to go by, it might suggest another big price surge is due over the week ahead.
Are Miners Dropping Bch For BTC Driving The Price?
Last week Bitcoin Cash (BCH) had its halving and this caused a lackluster price spike of about 11% before the digital asset slowly settled back to its pre-halving price. However, as a result of the halving, the hash rate dropped off a cliff as can be seen in the chart above.
The most likely reason for this drop is due to the fact that those mining Bitcoin Cash use exactly the same hardware as Bitcoin miners. So when faced with a 50% reduction in profitability it would make more sense to point your miners to the real Bitcoin.
With more miners heading to the Bitcoin network, it would entirely make sense that the difficulty would start to rise. This is something that I expect to continue happening over the next 30 days ahead of the real Bitcoin halving.
However, this will also lead to the difficulty in mining BCH to plummet, so this little dance is something that will cause some very interesting price action over the coming weeks.
If Bitcoin closes above $7,100 it will be incredibly bullish for the week ahead. Once more $7,200 is the first level of resistance, however, $7,400 and $7,700 are the next two levels holding Bitcoin back from breaking $8,000.
With the growing number of miners driving up the difficulty on the Bitcoin network, a run to $9,200 isn’t something that would be unreasonable to expect before the week is over.
It still feels like Bitcoin is recovering too soon and the pullback this weekend doesn’t seem like it was enough. Should the weekly candle close below $7,100 I would first be looking at $6,750 and $6,500 as the last levels of support before opening up mid $5k range for buyers to step in.
Oil Companies Will Dominate BTC Mining in Five Years: Marty Bent
Mining Bitcoin (BTC) has often been criticised for its exorbitant power usage, but podcaster Marty Bent has embraced a solution that he says actually reduces waste in the oil and gas (O&G) sector.
In an April 15 blog post, Bent revealed that since last year he had been mining Bitcoin with the Great American Mining (GAM) company, using excess gas formed as a byproduct of mining oil to power the rigs.
GAM deployed their first small mining operation in the form of a shipping container in an oil field last December. Bent said it was the first step in encouraging O&G producers to become “some of the biggest miners within the Bitcoin network”.
He Elaborated On The Topic In A Podcast:
“What we’re trying to do and achieve at Great American Mining is to sort of have these oil and gas companies have the ‘aha’ moment and realize that they should be investing in this and building out a mining infrastructure on their field so that they can be more efficient with their wasted gas… and overall in the long term, help Bitcoin out, help protect Bitcoin, and distribute Bitcoin further from a mining perspective.”
Bitcoin miners are looking for cheap and abundant energy sources, while O&G companies are looking to be as efficient and profitable as possible. GAM uses gas normally disposed of as a waste byproduct or sold off — sometimes at a loss — into a crypto mining energy source.
“If designed correctly, containers filled with Bitcoin miners have far superior uptime and are 5x more profitable (on average) than sending the gas to a pipeline to sell.”
Bent said there was no need to use warehouses or or build steel structures to mine Bitcoin when stacked ordinary shipping containers would do:
“You’re seeing a trend now, where even centralized locations are adopting. Instead of building like a large warehouse and doing all the infrastructure, they’re actually using the container model as the way to build on site…. a year or so ago, that wasn’t the case at all. And now you’re seeing very, very large places, you know, stack 40, 50, 60 containers… it’s just cheaper to do it that way.”
The concept is becoming more popular. The Winklevoss Twins have invested in Crusoe Energy Systems, a Texas company that converts the waste from surplus natural gas to mine cryptocurrencies. Up in Canada oil mining company Black Pearl Resources are mining Bitcoin to help offset operational costs. Another Canadian company Upstream Data sells and rents mobile mining equipment to O&G producers for the same purpose.
U.S. Doesn’t Have Much Mining Infrastructure
At present, China is the go-to destination for industrial-scale cryptocurrency mining facilities. With its affordable energy costs the country accounts for approximately 60-70% of the energy consumption from mining worldwide.
As of today, the Bitcoin network has an estimated annual electricity consumption of 73.374 TWh. As mining has become more expensive over time, its energy consumption will most likely also increase, leading entrepreneurs to look for alternative solutions.
Bent said that he believed that Bitcoin mining needed to be further distributed geographically — China currently dominates mining of the cryptocurrency. He said mining Bitcoin was a huge economic opportunity for the U.S. Oil and Gas industry:
“We are still very early in this game and on our personal journey at GAM, but we are confident that we will see this vision come to fruition over the course of the next five years. We could definitely fail (unless the government starts bailing out bitcoin miners), but we’re sure as hell going to try.”
Bitcoin Mining Hardware War Is Heating Up Ahead of the Halving
Shenzhen-based MicroBT is rolling out three top-of-the-line bitcoin miners amid heated competition with Bitmain ahead of the network’s halving event in less than 30 days.
Chen Jianbing, COO of MicroBT, announced in an online event on Friday that the three new models – the WhatsMiner M30S+, M30S++ and M31S+ – are available via both warehouse inventory and pre-orders that can be delivered in up to 30 days.
The move underscores MicroBT’s neck-and-neck competition in the multi-billion-dollar mining hardware market with major rival Bitmain, which is scheduled to deliver the first batch of its latest AntMiner S19 and S19 Pro miners in May.
At the event, Chen reemphasized MicroBT’s rapid growth in 2019, having achieved sales of 600,000 units of its WhatsMiner M20 series, which, as CoinDesk reported in February, has chipped away at Bitmain’s longstanding market dominance.
The COO said 2019 sales volume had also doubled compared with 2018, boosting its sold computing power to 35 million terahashes per second (TH/s). That accounted for 35 percent of the Bitcoin network’s total hash rate as of the end of December.
The new models add to MicroBT’s existing M30 product line, which includes the previously launched WhatsMiner M30S and M31S.
With the latest equipment from both major manufacturers soon to start shipping, the bitcoin mining hardware market is now entering what Chen called the “3X era,” referring to a mining efficiency that’s below 40 watts per terahash (W/T).
For context, W/T measures how much electricity a mining machine consumes for each terahash of computing power. Since bitcoin mining is an energy-intensive computing process, a miner with a lower W/T ratio would be able to bring home a higher gross margin.
This metric has become considerably more important given the upcoming bitcoin halving, which will reduce the amount of bitcoin earned by the mining industry in a day from around 1,800 to 900 units.
According to the firm’s specifications, the M30S+ is able to compute at a 100 TH/s with 34 W/T efficiency, while the M30S++ can compute as much as 112 TH/s at 31 W/T. The previously launched M30S is claimed to deliver an efficiency of 38 W/T.
Meanwhile, the M31S+ and the earlier M31S both deliver an efficiency of 42 W/T. However, Chen said the new model has the option to switch to a lower voltage mode in order to improve the efficiency to below 40 W/T.
To put this into perspective, by Bitmain’s specification, AntMiner S19 and S19 Pro machines are said to be able to compute at 95 TH/s and 110 TH/s with an efficiency of 34 W/T and 30 W/T, respectively.
But arguably miner manufacturers are all facing a tough time selling equipment under current market conditions, with mining operations taking a step back to wait and see how bitcoin’s price will play out after halving.
Major manufacturers have had to mark down the prices of their mining equipment following bitcoin’s price crash on March 12, the largest sell-off since 2013.
Vincent Zhang, MicroBT’s head of sales, said during the launch event the WhatsMiner M30S is now priced at $1,962 – down from around $2,500 when it was initially released. For the new models announced today, the M30S+ and M30S++ are priced at $2,740 and $3,899 per unit, respectively.
Following the recent price cuts, manufacturers such as Bitmain have also had to partially refund customers who placed pre-orders at the higher price, a policy the firm has had in place for the past several years.
Zhang said MicroBT is now also enforcing such a policy in its bid to keep customers happy. Users who have placed pre-orders at a higher price than the retail value at the time of delivery will be compensated for the difference, like with Bitmain, in cash coupons. These can only be redeemed at up to 10 percent of the value of additional goods purchased by MicroBT.
Although MicroBT gained a large amount of market share in 2019, it had issues delivering devices on the timeline it had promised to customers, suffering up to several months of delays.
Zhang said the firm will now compensate customers in cash coupons worth 0.3 percent of the value of a pre-ordered machine for each day a delivery is delayed beyond the promised date.
Also notably, MicroBT will extend its warranty policy for the M30 series to one year post-delivery – longer than the industry’s average six-month warranty period.
Next-Generation Bitcoin Mining Hardware Arrives Just In Time For BTC Halving
MicroBT has unveiled its coming series of 100 TH/s miners for the post-halving block rewards, igniting competition with Bitmain.
Bitcoin (BTC) ASIC manufacturer MicroBT has revealed its new mining hardware, boasting a hash rate of 100 terahashes per second (TH/s). This product unveiling demonstrates that competition is heating up among major ASIC manufacturers, following Bitmain’s pre-sale of its S19 Antiminers.
MicroBT’s forthcoming M30 series of Bitcoin miners, the MS30S++ and the MS30S+, were revealed to 4,000 attendees of an online launch event on April 17.
The company says that its flagship unit (the ++ model, of course) is capable of 112 TH/s at a power efficiency of 31 joules per terahash (J/TH). The M30S+ reportedly clocks in at 100TH/s with 34 J/TH of efficiency. These miners will expectedly sell for $3,900 and $2,800, respectively.
They come with a 12-month warranty, as opposed to the 180-day coverage previously offered by MicroBT.
While the company estimates the hardware will ship throughout the month of June, supply chain disruptions as a result of COVID-19 have left many in the crypto community expecting delays.
Rising Competition Between MicroBT And Bitmain
Bitmain revealed its post-halvlng S19 ASIC series at the end of February, with its first round of units selling out within 24 hours of going on sale.
The Antminer S19 Pro boasts a hash rate of 110 TH/s at an energy of efficiency of 29.5 J/TH, while the standard S19 generates 95 TH/s at 34.5 J/TH. These units are priced respectively at $2,633 and $1,964 each, but shipping has been delayed from May until June.
MicroBT was founded in 2017 by CEO Yang Zuoixing, a former Bitmain employee who claimed to have acted as the lead director behind the Bitmain Antminer series, including its popular S7 and S9 series’.
By 2018, the company had sold approximately 90,000 M1 and M3 units, estimated to represent 7.2% of the total BTC hashrate at the time. Over the next 12 months, the firm would sell a further 300,000 M3 units, bringing its share of hash rate up to 9%.
MicroBT launched its M20 series in May 2019, selling 600,000 units and accounting for 35% of hashing power by the end of the year.
Bitcoin Mining Chip Producer Ebang Files for $100 Million IPO in US
Major mining chip manufacturer Ebang has filed for an IPO in the United States.
Major Bitcoin (BTC) miner manufacturer Ebang has filed for a $100 million initial public offering (IPO) with the United States Securities and Exchange Commission (SEC).
Ebang is seeking to distribute Class A ordinary shares at a face value $of 0.00013 per share. The firm plans to list on either Nasdaq Global Market or the New York Stock Exchange under the ticker EBON.
The move comes nearly two years after the company sought to conduct a $1 billion IPO in Hong Kong. After submitting its filing in June 2018, the offering had been halted by the end of the year.
Ebang Faces A Downturn In 2019
In 2019, 82% of Ebang’s revenues came from its application-specific integrated circuit (ASIC) chips and fabless integrated circuits for miners.
Ebang’s annual revenue was $109 million last year. Declining demand for mining hardware amid falling crypto prices resulted in a 66% drop in growth from $319 million in 2018.
Gross profits swung from $24.4 million in 2018 to $30.6 million in gross losses during last year Ebang’s chip sales fell from 415,930 at an average price of $737 to 289,953 chips for $304 on average.
Mining Hardware Demand Directly Correlates With Bitcoin Price Swings
Ebang’s filing asserts that demand for its products is directly tied to fluctuations in the price of Bitcoin:
Market demands and unit price of Bitcoin mining machines correlate with the economic returns of Bitcoin mining machines and are primarily affected by the Bitcoin price. A rise in the Bitcoin price will generally increase the market demand for Bitcoin mining machines, which in turn will allow us to price our products higher, and vice versa.
“The decrease in the Bitcoin price in 2018 and the first quarter of 2019 resulted in a material decrease in our sales volume and in the average selling price of our Bitcoin mining machines,” said Ebang, adding:
Although the Bitcoin price started to recover in the second quarter of 2019, our operations generally lag behind the increase of Bitcoin price.
Ebang Explores Altcoin Mining Chips
The filing states that Ebang has completed the design for its proprietary 8 nanometer (nm) and 7 nm ASC chips, adding that it is ready to mass-produce the 8 nm units “when the market conditions become suitable.”
Ebang is also working on the development of “proprietary 5 nm ASIC chips and mining machines” for altcoins, including Litecoin (LTC) and Monero (XMR).
The company states that it intends to begin “applying blockchain technology into non-cryptocurrency industries, such as the financial services and healthcare industries.”
Canaan IPO Falls Short Of Expectations
In November 2019, mining manufacturer Canaan Creative raised $90 million in an IPO — less than one-quarter of its $400 million target.
Since launching on Nasdaq for $9 per share, Canaan’s stock price has fallen over 50% to trade for $4.23.
Chinese Officials Support Renewable Energy-Powered Cryptocurrency Mining
Chinese officials from the Yaan municipality released a statement on the use of the local hydropower-derived electricity for cryptocurrency mining operations.
Chinese officials from the city of Ya’an in Sichuan have come out in support of using locally produced hydropower for cryptocurrency mining operations.
On April 20 the Municipal Economic and Information Bureau and the Municipal Development and Reform Commission of Ya’an announced an opinion statement on local crypto mining implementation. The document encourages the consumption of hydropower-generated electricity for mining operations.
The document stated that the municipality will build a “hydropower consumption demonstration zone” and “big data industry gathering area.” Officials believe the province will thus attract investment and development in blockchain companies.
Cryptocurrency Mining In China
China is known to be a major player in the cryptocurrency mining industry. According to a report released at the end of 2019, Chinese Bitcoin miners were at the time responsible for as much as 66% of the global hash rate, with 54% coming from the province of Sichuan.
Still — after the coronavirus pandemic struck the country — China recently started losing ground in the cryptocurrency mining space. As Cointelegraph reported earlier this month, Baite — the former top Chinese Bitcoin mining pool — decided to leave the Bitcoin mining business.
Furthermore, aging hardware is also taking its toll on the local mining enterprises, Recently the Chinese publication Securities Daily reported that over 40 mining operations were forced to stop their activity due to the fact that the now-old Antminer S9s Bitcoin mining ASICS were no longer profitable to operate.
Bitmain Earned Over $300 Million In 2020 Despite Rumored Problems
New report suggests that the Chinese crypto mining giant might be getting back on its feet.
Chinese cryptocurrency hardware manufacturer, Bitmain, made over $300 million in profit in the first four months of 2020. This news comes despite the COVID-19 outbreak and recent rumours about in-house problems, a recent report suggests.
Bitmain allegedly earns over $300 million, rewards employees with massive bonuses
According to the industry blog, Wu Said Blockchain, Bitmain announced internally that the company had earned over $300 million so far this year. Further, the mining giant reportedly regained some market share as it opened four new mining facilities and saw the hashrate increase on two of its mining pools.
Notably, the report mentioned that Bitmain’s Artificial Intelligence, or AI, business has also grown rapidly. The company entered the sector in 2018, planning to use its ready-made chip designs to power AI systems and software.
After a January report suggesting massive staff layoffs, the firm is now said to be rewarding its employees with individual bonuses of up to 70,000 yuan (about $9,900) on the Labor Day, which is scheduled for May 1. The bonus payments will amount to “millions of yuan”, as per the report.
New Report Contradicts Previous Rumours And Legal Problems
The new report might come as a surprise, given that Bitmain is considered one of the biggest victims of the “crypto winter”, and the upcoming Bitcoin halving is also expected to hinder mining profits. Along with the above mentioned job cuts, Bitmain experienced a noticeable market share decline in the second half of 2019.
The pandemic has also reportedly undermined the mining industry in China, although a Bitmain representative has previously told Cointelegraph that it prompted the company to explore alternate methods of working.
More recent problems for Bitmain include reports suggesting that its mining rig, Bitmain S17/T17 Antminer, has a high failure rate. There is also a well documented legal fight between two of its co-founders, Jihan Wu and Micree Ketuan Zhan. In October 2019, Wu ousted Zhan, who was Bitmain’s partner and chairman at the time, from the company. Additionally, Wu warned employees to cease any interaction with the ex-senior executive, threatening to fire those who disobey.
Since then, Zhan has filed two complaints against Bitmain and its AI subsidiary, Fujian Zhanhua Intelligence Technologies, attempting to regain his position as a shareholder. Bitmain believes that Zhan’s claims are baseless, and reassures that the results of the case will not have any impact on the company’s operation.
Cointelegraph has reached out to Bitmain for further comment, but has yet to hear back from the company. This story will be updated, should we receive a response.
Older Mining Machines Turn Profitable Again As Bitcoin Rises Ahead Of Halving
With bitcoin’s price jumping to a two-month high above $9,000, even mining equipment thought obsolete is becoming profitable again, at least for a short time.
According to the miner profitability index, tracked by mining pools PoolIn and F2Pool, older mining rigs, such as Bitmain’s AntMiner S9 or Canaan’s Avalon A851, can now generate a 10% to 20% gross margin at an average electricity cost of $0.05 per kilowatt-hour (kWh).
For those that have adopted miner efficiency improvement methods, such as merging two S9s into one or lowering voltage to boost efficiency, gross margin could increase to as much as 30% to 40% at bitcoin’s current price.
And as CoinDesk reported earlier this week, the upcoming rainy season in China – which is estimated to account for 70% of bitcoin’s total mining power – brings excessive hydropower that will result in electricity costs going under 3 cents per kWh.
Should bitcoin’s price and mining difficulty remain constant, older generation mining models like the S9s could remain marginally profitable at these utility rates even after the halving takes the daily number of newly mined bitcoin down from 1,800 to 900 units.
Meanwhile, major manufacturers’ flagship machines including Bitmain’s AntMiner S17 and S19 series as well as MicroBT’s WhatsMiner M20 and M30 series can bring returns of over 60%, even at an average 5 cents per kWh utility cost.
“Today’s price movement would bring back even those miners that were recently disconnected due to profitability concerns,” said Dmitrii Ushakov, chief commercial officer of Russia-based miner hosting firm BitRiver. “After halving, we believe that the price range of 3 to 4 cents [USD] is sufficient to continue mining profitably with S9 miners if the current price movement continues.”
Following bitcoin’s price crash on March 12, its worst sell-off in seven years, a wide range of older mining rigs have been forced to unplug from the network, resulting in a 16% mining competition drop in late March.
The mining competition drop, together with bitcoin’s price rebound after March 12, initially helped older miners become marginally profitable. As a result, Bitcoin’s total hash rate climbed to a near all-time-high of 110 exahashes per second (EH/s) over the past several weeks.
But during the same period, bitcoin’s price stagnated around $7,000 for weeks, which put pressure on farms relying on older models ahead of the halving and cooled the purchasing spree for more powerful and top-of-the-line equipment at large scales.
That said, bitcoin mining is a dynamically changing game. As bitcoin’s halving approaches in under two weeks, those relying on older mining equipment, without access to cheap electricity resources, face being squeezed out by those running efficient operations.
Mining farm operators previously estimated that older models like the S9 accounted for around 20% of the bitcoin network’s total computing power in March, which is a significant drop from a year ago because major players have been replacing these older models with more powerful new equipment during late 2019.
Iranian Authorizes Issue License For 6000-Rig Crypto Farm
Iran’s Ministry of Industry, Mining and Trade issued a license to Turkey-based company iMiner for operating in the province of Semnan.
Iran’s Ministry of Industry, Mine and Trade granted a license for cryptocurrency mining company iMiner to operate in the country. With 6,000 rigs, iMiner’s setup would purportedly make it one of the largest crypto miners in Iran.
According to an article published on April 29, the Turkey-based company has invested nearly $7.3 million into a Bitcoin (BTC) mining farm in the Semnan Province of Iran, where it will mine digital currency with 6,000 rigs capable of 96,000 terahashes per second (TH/s) in total. This equates to 16 TH/s per rig on average, the same as the Aladdin Miner listed on the company’s website.
In addition, iMiner will continue to offer trading and custody services for the Middle Eastern nation through Semnan and their offices in Tehran.
Crypto Mining In The Iranian Economy
The Iranian government authorized cryptocurrency mining as an industrial activity in July 2019, and has since issued over 1,000 licenses to crypto mining companies including iMiner. The country’s low energy prices make it appealing for miners, who are well known for having high electricity bills.
Iran’s economy is suffering both from the continuing pandemic the sanctions enforced by the United States and other western countries. Some military officials have suggested turning to digital currency to help facilitate trade while importing foreign currency and skirting such sanctions.
However, the push for innovative technology has led to smuggling unregistered crypto mining equipment. As Cointelegraph reported in November 2019, Iranian authorities even offered a bounty for those willing to expose unauthorized mining operations.
Bitmain Produced Bad Batch of Units Ahead of Bitcoin Halving, Miners Claim
Chinese mining hardware giant Bitmain released a batch of Antminer products with a particularly high failure rate, according to a group of miners.
The Telegram group, started by Arseniy Grusha on May 1, co-founder of United States-based cryptocurrency consulting and mining firm Wattum, contains several complaints about Bitmain products, primarily the Antminer S17+. “I have never seen such defective production before,” Grusha wrote on his LinkedIn page on May 4. “In case you have a similar problem, I have created a telegram group where you can share your experience with the latest deliveries of these miners.”
30% Failure Rate Reported
In an interview with Cointelegraph, the mining entrepreneur explained that his company received 420 Antminer S17+ devices in March after a month-long delay caused by the COVID-19 pandemic. According to him, around 30% of the machines started glitching after only one month of use. Normally, defective miners account for just 5-7% of the whole order, Grusha noted.
Among the units, 32 stopped working due to ‘ERROR_SOC_INIT’ error, while 99 now only work using just one or two hashboards out of three, with 80% of the latter group ostensibly having this problem straight out of the box, according to Grusha.
“Part of the miners just stopped working,” he said, clarifying that all of the purchased miners have been using the latest official software from Bitmain. “The other part have bad hashboards and their power is lower by 30 and 60%.”
The Wattum exec has already contacted Bitmain, who apparently appointed him a specialist and new firmware. “Will have results in couple days,” Grusha told Cointelegraph, adding:
“But we still have 32% of bad units. They should be sent to China, and as a result, we lost money on mining before [the] halving and will [have to] wait two months for repair, which of course does no good for us.”
When Asked Whether He Was Considering Going To Court, Grusha Replied:
“I sent a request for compensation, and asked to send new miners instead of the bad miners. Let’s see what they answer first.”
Others in the group, which boasts almost 140 members after being created on May 1, reported somewhat similar failure rates. Mike Hamilton, chief technology officer at New York-based energy startup Griid, shared his experience after receiving a large batch of Antminer S17 50T units:
“We’ve got about 700/1800 machines with at least 1 hashboard down after 3 months. About 300/1800 with at least 2 hashboards down, and probably 150/1800 with all 3 hashboards and/or PSU failures.”
Matt D’Souza, CEO at Blockware Mining, recalled having a 19% defective rate after deploying a thousand Antminer S17+ units in a hosting facility based on freight containers. He got a much lower defective rate of 2% after launching another 1250 of the same model miners at a different facility.
Earlier in April, Samson Mow, Chief Strategy Officer of blockchain infrastructure firm Blockstream tweeted that Bitmain customers have a 20-30% failure rate with Antminer S17/T17 units. Mow also speculated that Bitmain CEO Jihan Wu blames ousted co-founder Jihan Wu for the problems and “is begging customers to give the S19 a chance.”
As previously reported by Cointelegraph, Antminer S19 were designed to produce increased mining output after the Bitcoin halving, which will make it more difficult to mine new coins. Bitmain sold out its first round of domestic Antminer S19 sales within 24 hours, while the units would not be shipped until May 11 at the earliest, which is roughly the same day the halving occurs.
Ukraine Considers Using Nuclear Plants For Cryptocurrency Mining
Ukraine’s Ministry of Energy believes that using power plants for crypto mining could be one of the best ways to take advantage of a current energy glut.
Cryptocurrency mining is a contemporary and efficient way to use excess energy, Ukraine’s Ministry of Energy argued in a May 6 statement published on Facebook. According to the post, local nuclear plants have generated the surplus due to the COVID-19 lockdown.
The Course Toward Digitalization
The bureau is now looking to apply progressive solutions to avoid wasting energy as part of the government’s course toward digitalization championed by president Volodymyr Zelensky. Leaving the situation unchanged might create “conditions for corruption offenses, which will ultimately be paid at Ukrainian citizens’ expense”, the ministry warns.
Crypto Mining, In Turn, Could Prove To Be One Of The Efficient Solutions, The Post Continues:
“There is a way to transfer this ‘liability’ into an ‘asset’. One of the modern approaches for using excess electricity is to devote it to cryptocurrency mining. That would not only allow to maintain the guaranteed load on the nuclear power plants, but also ensure that companies can attract extra funds. Therefore, it would open the way to a fundamentally new economy, new approaches, a new market model.”
As previously reported by a Russian-language crypto news outlet Forklog on May 5, the acting head of Ukraine’s Ministry of Energy requested the state-owned enterprise Energoatom to study potential ways to implement cryptocurrency mining at the country’s nuclear energy generating facilities by May 8.
A Potentially Profitable Operation?
Power plants have been used for cryptocurrency mining before, although not on a government scale.
As reported by Cointelegraph in March, a privately-owned power plant in New York’s Finger Lakes region turned to Bitcoin (BTC) mining, adding about $50,000 worth of BTC each day to daily revenues.
Crypto Mining Giant Bitmain Confirms Problems With Antminer S17 Units
After several customer complaints aired on social media, Chinese mining giant Bitmain confirms that some of its Antminer S17 units have issues.
Chinese mining hardware company Bitmain has admitted to having issues with some of Antminer S17 units.
“Antminer is paying close attention to the issues of some products from the 17 series, which has recently been mentioned by the media,” a Bitmain spokesperson told Cointelegraph on May 6, adding:
“During this process, we have begun to negotiate solutions with customers who have encountered issues from the product. Antminer has always been adhering to the concept of placing customers first. If any customer has any product issues, please contact the official customer service of Antminer at any time.”
As recently reported by Cointelegraph, a mining entrepreneur started a Telegram group earlier this month after supposedly receiving a “bad batch” of Antminer S17+ devices, with around 30% of the ordered machines glitching or breaking down after only one month of use. The group, which now has over 160 members, contains several complaints of a similar nature.
Identical concerns were previously articulated by Samson Mow, chief strategy officer of blockchain infrastructure firm Blockstream. Mow tweeted last month that Bitmain customers have a 20–30% failure rate with Antminer S17/T17 units.
More Antminer Units To Be Shipped Out Soon
With the Bitcoin halving taking place in one week, Bitmain has recently sold out its first round of domestic Antminer S19 sales, although the units will not be shipped until May 11 at the earliest. The new product was designed to produce increased mining output in post-halving conditions.
US Mining Firm Plans To Nearly Double Hash Rate After Halving
Riot Blockchain has announced the purchase of an additional equipment for its post-halving operations.
U.S.-based mining firm, Riot Blockchain, has more than doubled the number of next-generation Bitcoin (BTC) miners it has purchased, buying 1,040 Antminer S19s from Bitmain on May 6.
The additional miners cost the firm $1.9 million, following Riot’s purchase of 1,000 S19s Pros, revealed on April 30.
Riot Predicts 80% Increase In Hash Rate After Deploying S19s
Anticipating that the units will have been shipped and deployed during the third quarter of this year, Riot expects the coming 2,040 S19s will increase its operational hashrate by 80% by 2021.
In total, the Riot predicts that it will command an operating hashrate of 457 petahashes per second while utilizing approximately 16.5 megawatts of electricity after deployment.
A spokesperson representing Bitmain in North American stated that the firm “has been working with Riot Blockchain for several years,” with Riot “using [Bitmain’s] Antminer products for operating their data centers.”
S17 Failures Cast A Dark Cloud Over S19 Launch
Riot’s near-multi-million dollar purchase from Bitmain came on the same day that the ASIC manufacturer acknowledged having problems with a recently shipped batch of S17s — with miners reporting failure rates as high as 30% among the units.
The company told Cointelegraph that it is currently in negotiating solutions with customers who have purchased defective units, encouraging affected users to contact it directly.
Riot Partially Relocated Due To Pandemic
After reporting that the COVID-19 outbreak had impacted the business activities at its facility in Oklahoma, Riot Blockchain relocated a portion of its recently purchased S17 miners to a facility operated by mining firm, Coinmint, in New York during April.
Last week, a New Jersey judge granted seven motions of dismissal ending a two-year lawsuit against Riot Blockchain alleging that the firm misled its shareholders at the start of 2018.
Binance’s Mining Pool Could Disrupt The Entire Mining Industry
Binance’s entrance to the Bitcoin mining industry could create a great disparity for the Bitcoin community.
Binance has launched its own mining pool. This could spell bad news for miners, but probably not for the reason you’re thinking of. We’re all aware that Binance is continuing to extend its reach across the industry. The exchange’s purchase of CoinMarketCap for a reported $400 million signaled a bold step toward grabbing attention at the top of the crypto funnel, and its recent foray into mining just ahead of the 2020 halving shows that Binance is also interested in having influence at the source.
By all accounts, the company culture at Binance appears to be one of innovation and experimentation. CEO Changpeng Zhao is known to be approachable, and when good ideas come from within the company, it is able to exercise its enormous user base and war chest to enter new markets.
The question is, what impact will Binance’s pool have on miners themselves?
To start with, the impact may be minimal. Binance’s initial target market will be miners who currently mine via the pools of other Chinese exchanges, such as Huobi and OKEx. There is fierce competition among those exchanges, and Binance launching a pool can be viewed through this lens. Binance even recruited directly from within Huobi as well as Bitmain to build its own pool’s business development team.
It’s still early days, but the change in global hashrate distribution since Binance launched their pool tells the same story. Both Huobi and OKEx have lost a couple of percentage points of share in global hashrate. OKExPool and Huobi fell from 6.74% and 5.92%, respectively in April 2020 to 4.5% and 4.0% at the start of May, while Binance has attracted 4.5% of the network’s hashrate since launch.
Meanwhile, established mining pools such as F2Pool and SlushPool have seen a growth in their share of hashrate during the same period.
Up until now, Huobi and OKEx have predominantly used their pools as a way to attract exchange customers and support the services already on offer. While the older pools compete in a different way.
Exchanges have massive reserves of Bitcoin and other liquid assets. They can operate at a loss, or close to cost, for extended periods of time.
Edward Evenson from SlushPool and Ethan Vera from Luxor recently discussed this short-term advantage on the mining pool-focused HASHR8 Podcast. They posited that Binance’s pool will be used as a loss leader because it can afford to drive prices into the ground. As Edward Evenson, director of business development at SlushPool, said:
“When you have 80,000 BTC on reserve, it becomes pretty easy to do whatever you want, especially when you’re vertically integrated across a bunch of different sectors of the industry.”
Another reason why Binance may be focused on the Chinese mining market is that the majority of their team, their base and their connections are still mostly in China. It also makes good business sense: 65% to 70% of the global hashrate is in China.
My concerns about this are not the typical narratives of over-centralization in China, as were recently expressed by Philip Salter from Genesis Mining. Indeed, as with the lessons everybody can learn from how Genesis handled their customers’ hashrate during the 2018 bear market, it’s much more important to focus on how you treat miners than where your company is based.
I’m of an opinion similar to my Australian colleague, Thomas Heller — global business director at F2Pool — who was also part of the debate on the HASHR8 Podcast. He underlined:
“The people who launched Bitcoin companies in Asia, such as pools or manufacturers, are Bitcoiners. They’re no different to Bitcoiners in Europe, North America or elsewhere.”
Bitcoin Mining And The Real Threat
Centralization is not a direct function of geographic location. Bitcoin doesn’t have a nationality, and pools don’t need to be labeled that way, either. As well as the increased development of farms in North America, large mining operators own and run machines in China, Russia, Kazakhstan and anywhere else with an abundance of low-cost energy — regardless of where the operators call home.
The fundamental risks in China are outside the control of Bitcoiners, and it makes sense for everyone who wants to profit from contributing to the security of Bitcoin try to find ways to not be dependent on single points of failure.
Economic factors such as the proliferation of hardware manufacturers and the logistical benefits of mining without having to export the machines halfway around the world will continue to support a disproportionate level of mining activity in that region.
Bitcoin mining is a permissionless, antifragile system where the barriers to entry are low-cost electricity and access to efficient hardware.
The future success of SBI’s focus on supplying hardware for large North American mining operations, or the potential entrance of even more well-equipped manufacturers like Samsung could change the mining landscape reasonably quickly. As low as electricity prices are in China now due to the lasting wet season, not even they can compete with some of the opportunities being explored by the likes of the Peter Theil-backed Texan’s Layer One or Greenidge Generation in New York.
So the threat that Binance poses is not geographic. The real threat is whether this crypto behemoth will drag down the circular economy that currently exists for the established pools.
SlushPool is the oldest pool, and it spends a large portion of its resources developing proposals such as Stratum V2. F2Pool had a loud voice in the SegWit 2x debates, and history suggests its founders came down on the right side of the argument. These kinds of pools make their profits by building up a reputation and experience in mining Bitcoin.
The real risk is Binance turning mining into a short-term game where the only rules are how low you can offer fees. What will be the consequence if pools focusing on the long-term success of their miners get squeezed out? As with everything within the beautiful game that Satoshi created: The market will decide.
Unprofitable Miners Already Leaving Bitcoin Network Ahead of BTC Halving
The halving is just a few hours away — and many miners are already shutting their soon-to-be unprofitable rigs, says Poolin VP Alejandro De La Torre.
With the halving scheduled to happen in just under four hours, unprofitable miners have already begun shutting down their equipment, vice president at major mining pool Poolin Alejandro De La Torre said in a May 11 interview with Cointelegraph. Per his estimations, these miners account for “15-30%” of the entire Bitcoin (BTC) hash rate.
“Mining farm personnel are shutting [their units] off as we speak since they will not want to do it after the halving — because then they’re losing money,” De La Torre told Cointelegraph.
The miners who are now fleeing will likely never come back online if they don’t upgrade their equipment or find extremely cheap electricity sources, because the mining reward will be halved once the event occurs:
“All older machines will no longer be profitable unless they are mining on nearly free electricity or if the price shoots up by 2x or more.”
According to De La Torre, unprofitable mining operations based in China will be the first to switch off. The halving will take place at early morning local time, which is why Chinese operators are now shutting down profitless units before punching the clock.
Hash Rate To Decrease Post-Halving, Bouncing Back Afterward?
This shutdown will affect the total hash rate, De La Torre added, since the soon-to-be unprofitable units generate “about 15-30%” of that number.
As previously reported by Cointelegraph, Bitcoin’s mining hash rate has seen major volatility ahead of the halving, and is likely to fall soon after it takes place — but could then start to bounce back as the new generation of mining machines gets shipped out.
New Cryptic Chinese Operation Instantly Becomes Sixth-Largest BTC Mining Pool
A new Chinese mining pool swiftly takes 5% of the Bitcoin mining pie, while its origins remain unknown.
New China-based mining pool Lubian accounts for 5.15% of the total Bitcoin (BTC) hash rate, just three weeks after processing its first block. The pool was originally spotted by BlockBeats, a Chinese blockchain news outlet, on May 12.
Lubian is currently the sixth-largest mining pool, with a 6.30 EH/s hash rate, data obtained from btc.com shows. The operation first surfaced on April 24, when it found block #627,441.
According to Dovey Wan, Primitive Ventures’ founding partner and industry commentator, Lubian could be an ex-private pool that has recently gone public. She tweeted:
“It must be a private pool before now reveals itself to be public as hashrate didn’t see a pop.”
Wan also noted that Lubian is picking up pace at an “interesting time,” since the Bitcoin halving happened yesterday. “Whoever owns the pool, must have owns the bootstrapping hashrate to start with as other pools didn’t see a major drop off,” she wrote.
Mining Industry Expects Major Changes
The mining sector is poised for major changes due to the Bitcoin halving, which has cut miner rewards from 12.5 BTC to 6.25 BTC.
Most miners operating older equipment are expected to leave the network, which in turn could lead to a 30% drop in the total hash rate. However, a new generation of mining devices, which will be shipped starting mid-May, could potentially drive the metric back to its previous levels and above.
Earlier in April, Chinese mining company Valarhash, which runs Bytepool and 1THash pools, suddenly dropped out of the BTC mining race in favor of altcoins.
Cointelegraph reached out to Lubian for additional details, but received no response as of press time.
4 Reasons The Bitcoin Halving Won’t Trigger A Big ‘Miner Capitulation’
Bitcoin miners are not likely to see capitulation and especially a “mining death spiral” after the 2020 halving due to four major reasons.
A popular narrative revolving around the Bitcoin (BTC) halving is that it may trigger the capitulation of miners. But, it is premature to suggest many miners will shut down in 2020 and bring the price of cryptocurrencies down as a result.
Some industry executives believe that the price of Bitcoin may drop following the May 11 halving. After the block rewards of Bitcoin miners get cut in half, their revenues also drop substantially. Typically, it affects overleveraged and small miners, forcing them to shut down their machines.
Digital Asset Manager Charles Edwards Said:
“This will be the most brutal Bitcoin Halving in history. Production cost is about to double to $14,000. 70% above the current price. During the last halving, the price was just 10% below Production cost, and Price & HR collapsed -20%. Without FOMO now, expect a big miner capitulation. 30%+”
A widespread theory is that as miners capitulate, they will begin to sell Bitcoin in the cryptocurrency exchange market and add significant selling pressure, which leads to more miners leaving and so on, resulting in the mythical “mining death spiral.”
This year, there are many variables that may prevent such a trend from occurring. Four main arguments against the capitulation of miners are: cheaper electricity in China decreased operational expenses due to weaker currencies, drop in energy price due to government lockdowns worldwide, and the adjustment of mining difficulty.
Cheaper Electricity In China & Less Demand For Energy Worldwide
China reportedly comprises roughly 65% of all Bitcoin computing power, according to the latest data.
Moreover, the Chinese province of Sichuan is soon to enter the rainy season. Many electricity service providers in the province rely on hydropower to generate energy. When there is an abundance of water, it allows hydro plants to generate more energy than usual.
The increase in the supply of electricity in Sichuan gives large-scale mining centers in the region the ability to negotiate electricity prices. For the next few months, big miners are likely to receive major discounted electricity rates, decreasing operational costs.
Worldwide implementation of stay-at-home measures and strict lockdowns further decrease the level of electricity usage. Major factories and millions of small businesses remained closed for around two months.
Low electricity rates, record low global oil prices and the tendency of industry-leading mining firms to maintain a large cash buffer tremendously reduce the risk of miner capitulation.
Weaker Currencies Result In Lower Operational Costs
According to Whit Gibbs, CEO at Hashr8, the decline of the ruble’s value may affect mining centers based in Russia.
The entire revenue of mining firms derives in the form of Bitcoin. But operational costs are often paid out in local national currencies. When the price of Bitcoin increases but the value of fiat currencies decline, it drops the expenses for mining firms as local fiat currencies lose value against BTC.
The geopolitical risks in the global economy and their possible impact on Bitcoin mining are not being accounted for. Hence, to state that miners are likely to capitulate in the latter half of 2020 can be premature.
This halving COULD be the most brutal in history but it’s all just a best guess. There hasn’t been a comprehensive report in the last week to talk about current geopolitical and economic conditions, and how they’ll impact mining/ the price of bitcoin.
Bitcoin Mining Difficulty Adjustment
When the number of miners mining Bitcoin declines as a result of low price and fewer block rewards after the halving, the difficulty of mining BTC automatically adjusts to maintain a steady block interval.
The term “mining” refers to the creation of new Bitcoins as a reward for contributing computing resources to the network. The network automatically adjusts how difficult it is to mine BTC every 2,016 blocks if the computing power, also known as the hash rate, drops (or rises).
The mining difficulty adjustment mechanism stops a cascade of miner capitulation from occurring, as it will get cheaper to mine BTC when the hash rate drops.
Bitcoin Miner Riot Blockchain Racks Up $221 Million Deficit
Despite increasing revenue, Riot Blockchain’s first-quarter financials reveal that the company has relied on equity and debt financing to fund its operations.
U.S. mining firm Riot Blockchain has published its financial report for Q1 2020 — painting a picture of a company heavily reliant on equity and debt financing to fund its operations.
The firm reported recurring losses and negative cash flows from its operations, with Riot anticipating continued losses over the near term.
But the mining outfit is pinning its hopes on the arrival of 2000 next generation mining machines it believes will enable it to double its operational hash rate.
Riot Improves Year-Over-Year Performance
As of March 31, 2020, Riot Blockchain reported holding cash and cash equivalents worth $14 million; $5.3 million in crypto assets — predominantly Bitcoin (BTC) — along with working capital of $17 million.
In a press release, Riot emphasizes its improved performance when compared with the first quarter of 2019 — with its margin on mining operations up to $955,000 from a loss of $65,000. Revenue increased 68%, from $1.4 million to $2.4 million, when compared to Q1 2019.
The firm also emphasizes a sharp increase in corporate liquidity since the start of the year, with liquidity up to $19.2 compared to $11.3 million as of December 31, 2019.
Yeah, But About That $221 Million …
However, Riot’s accumulated deficit exceeded $221 million, with the company relying on equity and debt financing to fund most of its operations.
Further, the company “expects to continue to incur losses from operations for the near-term,” noting that the losses may be significant as legal and administrative costs, and expenditures associated with acquisitions, continue to mount. “The company is closely monitoring its balances, cash needs, and expense levels,” the report stated.
Riot Bets Big On Next-Generation Antminers
The firm notes that its Q1 gains in revenue and gross profit can be primarily attributed to changes in cryptocurrency prices and its recent deployment of next-generation cryptocurrency miners.
In December, Riot purchased 4,000 Antminer S17 Pro ASICs from Bitmain for roughly $6.3 million. While all of the units were deployed by the end of February, disruptions stemming from COVID-19 saw the firm relocate a significant portion of its S17s to a facility in New York operated by Coinmint in April.
Riot has recently purchased 1,000 Antminer S19s and 1,040 S19 Pros Bitmain, expressing expectations that their deployment will double its operational hash rate.
However, with debts exceeding $220 million, it remains to be seen whether the S19s will be able to significantly improve the company’s performance, especially after this week’s halving saw the block reward reduced to just 6.25 BTC.
Hackers Are Using Supercomputers To Mine Crypto
Hackers attacking supercomputers across Europe, trying to get their hands on mining crypto.
Hackers have attacked multiple supercomputers across Europe this week with the intention of mining cryptocurrency. Clusters of supercomputers have been forced to shut down in order to investigate the intrusions, according to a ZDNet news report on May 16.
These security incidents were reported in the UK, Germany, and Switzerland. Additionally, another possible attack occurred in a high-performance computer center in Spain, according to the report.
College Campuses Are The Main Victims
Most of the attacks appear to have targeted universities. University of Edinburgh,which runs the ARCHER supercomputer, reported the first incident on Monday.
Then, major universities’ high-performance computing clusters in the state of Baden-Württemberg, Germany also announced that they were attacked on Monday with similar security incidents, and had to be shut down.
More attacks happened in institutions in other parts of Germany, Spain, and Switzerland later in the week. Clusters in the Leibniz Computing Center, or LRZ, an institute under the Bavarian Academy of Sciences, the Julich Research Center in the town of Julich, Germany, the Faculty of Physics at the Ludwig-Maximilians University in Munich, Germany, and the Swiss Center of Scientific Computations, or CSCS, in Zurich, Switzerland were all counted amongst the victims.
SSH Logins Are Compromised And The Goal Is To Mine Crypto
The malware samples released by the Computer Security Incident Response Team were reviewed by a US-based cyber-security firm, says the news. The Computer Security Incident Response Team, or CSIRT, is a pan-European organization that coordinates research on supercomputers across Europe.
The cyber-security company said the attackers appear to have stolen university members’ SSH credentials in Canada, China, and Poland in order to gain access to the supercomputer clusters. Secure Shell, or SSH, is a cryptographic network protocol for operating network services securely over an unsecured network.
Chris Doman, Co-Founder Of Cado Security Explained That:
“Once attackers gained access to a supercomputing node, they appear to have used an exploit for the CVE-2019-15666 vulnerability to gain root access and then deployed an application that mined the Monero (XMR) cryptocurrency.”
As Cointelegraph reported previously, university campuses were ranked the second biggest miners of digital currency across industry.
Critical Mining Hardware Manufacturer To Launch Second US Factory
Major mining hardware manufacturer TSMC has announced plans to build a $12 million facility in Arizona.
The world’s largest semiconductor manufacturer and third-largest chip manufacturer, Taiwan Semiconductor Manufacturing Co., or TSMC, has announced plans to build a $12 million factory in Arizona.
The move comes after TSMC suffered significant disruptions across its supply chain amid the coronavirus outbreak in China.
With Bitmain relying on TSMC for its next-generation chips and wafers, disruptions to TSMC specifically have been cited among the reasons for delays in shipping for its new Antminer S19 ASICs.
TSMC To Open Arizona Factory
The factory’s construction is slated to commence next year, with TSMC hoping the facility will begin producing 5-nanometer transistors in 2024.
Roughly 1,600 jobs are expected to be created through the factory’s creation, with TSMC expecting to invest $12 million into the facility between 2021 and 2029.
TSMC currently operates a factory in Washington and design centers in California and Texas.
Trump Administration Frames Factory As Security Victory
TSMC’s decision to launch the Arizona facility has been welcomed by the Trump administration — described the United State’s reliance on Asian semiconductor and chip manufacturers as a national security risk for several years.
U.S. Secretary of State Mike Pompeo applauded the news, tweeting: “The U.S. welcomes TSMC’s intention to invest $12B in the most advanced 5-nanometer semiconductor fabrication foundry in the world.”
“This deal bolsters U.S. national security at a time when China is trying to dominate cutting-edge tech and control critical industries,” Pompeo added.
Miner Revenues Crash, But This Has Always Marked Bitcoin Price Bottoms
The drop-off in Bitcoin mining revenue to 2019 levels show a macro bottom for BTC is near as the impact of the halving is starting to be felt.
The revenue of Bitcoin (BTC) miners dropped to early 2019 levels for the second time in 2020. Every time it declined to a multi-year low, it marked the start of a bullish trend for BTC.
The last time the daily revenue of Bitcoin miners hovered at around $7 million was on March 13, 2020. At the time, the price of BTC dropped to as low as $3,600 on BitMEX following a cascade of more than a billion dollars in long contracts.
After mining revenue plunged on March 13, the price of Bitcoin rose from $3,600 to over $10,000 with a 177% gain over the next month and a half.
Bitcoin May See A Similar Trend In The Coming Months
When Bitcoin mining revenue falls steeply, it indicates that over-leveraged miners are capitulating due to unfavorable market conditions.
From March 12 to March 13, the mining revenue declined as a result of a 50% drop in the price of Bitcoin in a span of 24 hours. This time, the drop-off is seemingly caused by the effect of the Bitcoin halving on the mining ecosystem.
Before the halving, miners were generating about 1,800 BTC per day in revenue. Today, miners are expected to make around 900 BTC per day.
But the price of Bitcoin is currently at a similar level as where it was before the halving was activated. For small or over-leveraged miners, the stagnancy in the price of Bitcoin following the halving is enough to cause a temporary halt in their operations.
Typically, this marks a bottom for Bitcoin because it indicates a peak level of fear in the market. Some unprofitable miners are shutting down while BTC is stagnant. Therefore, Bitcoin could see short-term volatility as on-chain data suggests the generational bottom before a new bull cycle is seemingly being established.
Other Macro Indicators Also Flipping Bullish
The Puell Multiple, a macro indicator that uses the daily issuance of BTC to measure the trend of the market, shows that BTC is close to its bottom.
While the Puell Multiple suggests there may be another minor pullback in the short-term, it is showing a 2018-esque trend wherein BTC is gearing towards a bullish trend as seen in early 2019.
From early to mid-2019, the price of Bitcoin rose from $4,000 to $14,000, and various on-chain data suggests BTC is now showing similar signs.
Technical indicators such as the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) for large time frames also show that BTC is nowhere near the top following a 160% price spike.
Bitazu Capital Founding Partner Mohit Sorout Said:
“Notice how major BTC cycle top & bottoms were printed against the backdrop of peak volatility? Simple look will tell you $10k is a small hiccup.”
The price of BTC nearly tripled since March 13 from $3,600 to $10,085 and yet, historically accurate indicators are not showing a top-like structure for BTC.
Layer1 Stabilizes Texas Grids With ‘Bitcoin Batteries’
Layer1 Technologies has deployed its proprietary mining containers as electricity storage systems to stabilize Texas’ electricity market.
U.S.-based Bitcoin (BTC) mining datacenter operator Layer1 Technologies has deployed its mining containers as “Bitcoin Batteries” comprising large-scale energy storage systems.
Layer1 asserts that its bitcoin batteries will help stabilize Texas’ seasonally volatile energy market by releasing electricity to meet demand.
“By centralizing the consumption and release of multiple megawatts per data center container, Layer1’s Bitcoin Batteries stabilize national and local energy grids that frequently suffer from the demand shacks,” the firm stated.
Bitcoin Batteries To Stabilize Electricity Market
With the installation of the Bitcoin Batteries, Layer1 co-founder and CEO Alexander Liegl claims the mining firm is “the first company in the global Bitcoin mining industry that can curtail large amounts of energy consumption during times of market need and release it to the grid at the push of a button.”
We are the first company to perfectly align the economic incentives of large-scale energy consumption for high-performance computing, such as Bitcoin mining or cloud computing, and the need for grid stabilization by energy market regulators.
The firm plans to deploy energy in response to local spikes in consumer demand, such as during heat waves — where amplified use of air conditioning may threaten blackouts.
Layer1 To Repatriate 30% Of Global Hashpower
In February, Layer1 Technologies outlined an ambitious plan to repatriate 30% of Bitcoin’s total hashrate back to the United States by the end of next year.
Layer1 plans to comprise the industry’s first fully vertically integrated miner — boasting wholly owned electricity creation, proprietary ASIC chips, and mining containers featuring a patent-pending liquid immersion cooling system that reduces electricity expenditure by 75%.
Large Chinese Miners Want To Operate In US
Speaking to Cointelegraph, Adam Traidman, the head of Ripple SBI Asia, attesting to already seeing a “massive” shift from east to west in the mining sector.
Traidman predicted a “huge influx” of “wealthy Chinese miners [moving] into the United States” over the next three years, highlighting that Texas offers electricity prices often significantly lower than the $0.03 to $0.05 per kilowatt-hour that miners pay in China.
However, Traidman noted that President Trump’s tariffs against China are “really hurting things,” adding: “As soon as those are lifted, it’ll be a huge acceleration.”
Bitcoin Miners Will Use Derivatives Like Traditional Commodity Producers
Miners need traditional financial products in order to hedge against the risk of increasing hash rate and difficulty.
Bitcoin (BTC) mining has become a multibillion-dollar industry. Pools, manufacturers and farms contribute to the growth and professionalization of the space. Financial service companies bring institutional-grade products and capital that increases liquidity for the biggest operators.
There’s a fundamental shortage of United States dollars available relative to the overall demand when the sector encounters certain market conditions. The dollar shortage is one of the contributing factors to volatility in the markets.
Just like traditional commodity producers, Bitcoin miners will likely become large users of derivatives — whether it’s with futures to lock in prices or options to hedge against losses. Everybody with a business that has relatively predictable cash flow is going to have an appetite for access to debt in order to reduce the capital requirements necessary to fund their growth.
For Bitcoin miners, it’s no different.
At their core, the Bitcoin lending markets have been supported by the proliferation of crypto derivatives — through BTC/USD swaps and futures — that people are now able to trade with. Derivative trading generates an implied interest rate on BTC, with which miners and other parties can use to borrow BTC against USD, or vice versa.
Finding scalable sources of low-cost capital and educating more institutional players about mining will lead to increased funding opportunities. Expanding access to capital is going to play a role in securing the Bitcoin network. Everything is becoming more sophisticated, and you don’t have to look far to find analogies for what we can expect will happen to this space over time.
The Current State Of Play
The trend of miners opting to borrow fiat to pay expenses without selling their coins has been growing.
Financiers from Genesis Trading and Three Arrows Capital suggested that terms are getting tighter, but demand is increasing.
Su Zhu, The CEO of Three Arrows Capital, Said:
“If firms can get a better understanding of where their yields come from, who and why is borrowing, and how people will pay for it, that will be a good step forward for this industry.”
For firms doing the arbitrage trade, we need a pledge for quality especially when we reflect on the consequences of the most recent price crash, in March 2020.
Recently, many counterparties, particularly in China, were completely wiped out through liquidations. There was a concept of false diversification where the thoughts were: Lending to many different firms doing the same thing is safer than lending to a few larger firms.
Six or seven years ago, on sites like BTCjam, people were simply lending money and hoping that they would get paid back. Fast-forward to today: People are now able to do things like look for different Loan-to-Values, or LTVs, as an arbitrage against the underlying market.
Zhu noted that firms sat back when the market crash occurred, even though it was a very profitable time to lend BTC.
When the market became safe again, they wanted to lend again even though the LTVs became more burdensome and terms got tighter.
Leon Marshall, The Head Of Institutional Sales At Genesis Trading, Said:
“The explosion of derivative markets and basis trading has been a key part of the recent growth in Bitcoin lending. Miners and institutions make up a fair amount of the dollar-borrowing demand at our firm.”
What miners think about the most is interest rates and collateral requirements. One thing that should be more on their radar is to also find trusted and reliable counterparties. Some financial services providers protect themselves by only providing lending to the best clients and highly rated counterparts. This makes it harder to get loans but safer in the long run.
Reputable firms understand the wishes for low rates and low collateral and try to balance that with the need to reduce risk. Every party needs to protect themselves, and the best firms will try to ensure that miners are still alive when prices move lower.
The regulatory requirements and stringent collateral requirements for licensed financial services are a consequence of the fact that those firms deal with the capital of other parties when sending loans to miners and mining pools.
People have started to step back and ask: Okay, what do we actually know about these operators, and what funds do we think they would have available to meet a margin call? It comes down to how the counterparties think about risks and black swan events.
The other factor that will affect liquidity is that banks around the world, and in Europe in particular, have started to become comfortable working with crypto companies. JPMorgan recently announced it will bank Coinbase and Gemini. When banks start accepting Bitcoin as collateral, we will see new sources of capital entering the industry that will have a profound impact on lending rates.
One source of liquidity for the markets, up until now, has been Tether (USDT). The recent growth in the market cap of stablecoins is an indication of the increasing demand for liquidity for crypto assets. The demand for USDT trading is particularly strong in Asia where it makes up 70% of Bitcoin trades. The collapse of Tether would likely lead to a crash in crypto markets.
Yama Zhang, the host of the Crypto Tonight YouTube channel — where several of the leaders from the finance and mining world met in a livestream — reported that there is a big community of USDT users in Asia but that the people who have been in the space for a longer period of time are actually quite concerned about Tether. There is a feeling in the established Bitcoin community that it is a real threat.
Hash Rate Futures
As players get more comfortable with mining futures, more products come onto the market. Earlier this month, FTX announced the launch of its hash rate futures. Its futures are priced by the average difficulty per quarter, meaning that as of May 2020, where the difficulty is roughly 16 trillion, the index is at 16.
Hash rate futures should allow miners to hedge their exposure to difficulty adjustments, letting them reduce their risk while maintaining operations.
Sam Bankman-Fried, The CEO of FTX, Said:
“You could potentially buy hash rate futures to protect against difficulty changes and then sell BTC futures to hedge against market moves.”
Professionalization For Miners
The current trend is for mining operations to scale up and become more professional. For mining pool operators without a deep financial background, it’s unclear for them how to assess the risk of certain financial products, or to even know who would be willing to take the other side of these trades. If the finance industry continues to work with trusted leaders from the mining industry, we will see liquidity increase and risks minimized.
Miners Have Been Selling More Bitcoin Than They Generate, Recent Data Suggests
Last week, Bitcoin miners reportedly sold 11 per cent more coins than they generated over the same period.
Last week, Bitcoin (BTC) miners sold 11 per cent more coins than they generated over the same period, June 1 data from on-chain analysis portal ByteTree suggests.
According to the portal’s metric that tracks Bitcoin wallet addresses associated with miners, around 5,800 BTC was generated over the past seven days, compared to over 6,500 ‘first spend’ transactions.
The ‘first spend’ that is used for the calculation is “the first time that a Bitcoin leaves the wallet it was generated in,” a ByteTree spokesperson explained to Cointelegraph, elaborating on how their metric works in greater detail:
“The miner wallet can be owned by an individual, a company or a mining pool. When the coins get generated by the miners and appear in the miner wallet, they are counted as ‘generation’. Those coins can then sit in their respective miner wallets for days, months, years or forever. It is up to the controller of that miner wallet to decide when they want to move the coins. If these coins are generated by a mining pool, the coins will either be distributed to the pool subscribers (ie. paid in btc) or sent to an exchange at some point in order to cover the fiat costs of operation.”
It Might Be Premature To Call ‘Capitulation’ Even Among Currently Inefficient Miners
Crypto Twitter commentator Conner Brown has used this data to argue that inefficient miners are capitulating, but some experts warn that the term ‘capitulation’ might entail different meanings.
Thomas Heller, global business director at F2Pool, told Cointelegraph that even when it becomes unprofitable to mine with certain equipment due to the increased difficulty, the owners normally sell their machines to places where electricity is cheaper instead of quitting the game.
“As these older machines are no longer profitable to mine at the electricity price in China, Canada, USA, or Europe, they eventually end up in other locations, such as Kazakhstan, Russia, the Middle East and South America,” Heller said, concluding:
“So far in 2020, there have been very few cases of mining farms going out of business”.
As previously reported by Cointelegraph, the Bitcoin halving has affected the network in numerous ways, as the hash rate, block time, fees, and miner revenue have changed considerably as a result of the event.
In order to mitigate the increased difficulty and provide pre-halving levels of mining efficiency, a new generation of mining hardware is being released by industry leaders like Bitmain and MicroBT. Earlier today, Bitmain unveiled its new Antminer T19 Bitcoin Mining ASIC, which will reportedly start getting shipped out in late June.
Bitmain Debuts New T19 Bitcoin Miner After S17’s Troubled Launch
World-leading mining hardware producer Bitmain launched its new Antminer T19 Bitcoin Mining application-specific integrated circuit (ASIC).
According to a June 1 announcement, Bitmain’s new Antminer T19 features a SHA256 hash rate of 84 terahash/second with a 3% error margin and a power efficiency of 37.5 joules/terahash with a 5% error margin.
The new ASIC model will be sold on the producer’s official website starting today and shipments will start between June 21 and 30.
The chips used in the new device are the same as those featured in the Antminer S19 and S19 Pro, but it also uses the new APW12 power supply and an upgraded firmware. Those changes reportedly allow for faster start-up speeds for an optimized mining experience.
Riccardo Mori, the manager of a small scale mining operation in Venezuela, told Cointelegraph that the T19 is a major improvement over the T17 and its introduction will probably increase Bitcoin’s hashrate. He also believes the introduction the new hardware will help Bitcoin’s network gain hashrate once again:
“With the introduction of the T19 we can expect the network hashrate to substantially rise and consequently the mining difficulty to rise as well. This will lower the profitability and extend the expected ROI time once again.”
Bitmain’s Production Pain Points Recently Manifested
The T19 announcement follows recent community reports that Bitmain’s recently-launched Antminer S17+ mining ASICs were defective. Co-founder of United States-based cryptocurrency consulting and mining firm Wattum Arseniy Grusha said:
“I have never seen such defective production before.”
Shortly after the early-May critiques, Bitmain confirmed that many ASIC units of the series had major problems. A spokesperson told Cointelegraph that the company was already in talks with customers who encountered the issues.
Antonopoulos: Drop In Oil Prices Give US Miners A Competitive Edge
Crypto miners based in the United States will greatly benefit from the falling electricity prices worldwide, says Andreas Antonopoulos.
Bitcoin educator Andreas Antonopoulos sees the recent downturn in oil prices as a net positive for crypto miners worldwide, particularly those at the Bitmain mining facility in Texas.
In a video he posted to his YouTube channel on May 27 titled “Down the Rabbit Hole”, Antonopoulos said the falling oil prices will benefit crypto miners by providing cheaper electricity worldwide, but “not equally worldwide.”
Miners based in the United States — which gets 36% of its energy from petroleum — and Texas in particular will reap the rewards of these cheaper costs.
One of the biggest new mining operations opened in the United States in the state of Texas and I can’t imagine that that is a coincidence… it probably had a lot to do with the fact that the U.S. had 12,000 barrels per day. It is the largest oil producer in the world because of fracking. Therefore, there may be really good opportunities for cheap power, which would suddenly make U.S.-based miners much, much more competitive and profitable.
Chinese Miners Also Benefit
China remains a major player in the cryptocurrency mining industry. Cointelegraph has reported Chinese Bitcoin miners were responsible for as much as 66% of the global hash rate in 2019.
Antonopoulos acknowledged that most Chinese crypto mining is completed with rigs primarily powered by coal plants — though some companies are pushing for renewable power.
However, he said that falling oil prices would still result in financial benefits for Chinese miners. According to the Bitcoin educator, energy producers not reliant on petroleum might attempt to stay competitive by operating at a loss, resulting in cheaper electricity for miners while the price of oil is down.
Because energy and electricity is a fungible commodity, if you are connected to a coal-fired power plant and somewhere else, a gas-fired or oil-fired power plant has half the cost of energy because its oil is much cheaper, it’s going to cost less to get electricity from your coal plant…
The real competition between buyers, said Antonopoulos, is no longer determined by having the most modern mining rigs, which he says are generally fine to use for 18-24 months. Rather, it is based on “the unit cost of electricity, which is dominated in some places by the cost of oil.”
US Firm Announces Installation of 700 Mining ASICs With More On The Way
United States firm, Marathon Patent Group, announced that it installed 700 units of Bitcoin (BTC) mining application-specific integrated circuit, or ASIC, units.
According to a June 3 announcement, Marathon Patent Group installed 700 Whatsminer M30S+ ASICs produced by MicroBT. The company is also reportedly waiting for a delivery of 1,160 AntminerS19 Pro units produced by leading mining ASIC producer, BitMain.
In late March, Bitmain announced that it sold the first batch of Antminer S19s and S19 Pros within 24 hours after starting to accept orders. On June 1, the firm also announced the launch of its newest Antminer T19 features a SHA256 hash rate of 84 TH/second.
A Company Rich In Hashrate
The Antminer S19 Pro boasts a hash rate of 110 TH/s and an energy efficiency of 29.5±% 5 J/TH. That means Marathon Patent Group is waiting to add 127.600 PH/s to the hashrate under its control. Summed with the 70,000 TH/s coming from its 700 Whatsminer M30S+ ASICS (100 TH/s each), this will result in the company having a total hashrate of 197.600 PH/s.
The announcement comes shortly after Ripple SBI Asia CEO Adam Traidman predicted that the mining industry will continue to see hashrate migrate from east to west. He also stated that he is already witnessing the transition begin.
Antminer T19 May Not Affect Bitcoin Hash Rate But Keeps Bitmain Ahead
The Antminer T19 by Bitmain may not have a big impact on the Bitcoin network, and it comes out amid the firm’s internal and post-halving uncertainty.
Earlier this week, Chinese mining-hardware juggernaut Bitmain unveiled its new product, an application-specific integrated circuit called Antminer T19. The Bitcoin (BTC) mining unit is the latest to join the new generation of ASICs — state-of-the-art devices designed to mitigate increased mining difficulty by maximizing the terahashes-per-second output.
The Antminer T19 announcement comes amid the post-halving uncertainty and follows the company’s recent problems with its S17 units. So, can this new machine help Bitmain to reinforce its somewhat hobbled position in the mining sector?
T19: The Cheaper S19
According to the official announcement, the Antminer T19 features a mining speed of 84 TH/s and a power efficiency of 37.5 joules per TH. The chips used in the new device are the same as those equipped in the Antminer S19 and S19 Pro, though it uses the new APW12 version of the power supply system that allows the device to start up faster.
Bitmain usually markets its Antminer T devices as the most cost-effective ones, while the S-series models are presented as the top of the line in terms of productivity for their respective generation, Johnson Xu — the head of research and analytics at Tokensight — explained to Cointelegraph. According to data from F2Pool, one of the largest Bitcoin mining pools, Antminer T19s can generate $3.97 of profit each day, while Antminer S19s and Antminer S19 Pros can earn $4.86 and $6.24, respectively, based on an average electricity cost of $0.05 per kilowatt-hour.
Antminer T19s, which consume 3,150 watts, are being sold for $1,749 per unit. Antminer S19 machines, on the other hand, cost $1,785 and consume 3,250 watts.
Antminer S19 Pro devices, the most efficient of three, are considerably more expensive and go for $2,407. The reason Bitmain is producing another model for the 19 series is due to what is known as “binning” chips, Marc Fresa — the founder of mining firmware company Asic.to — explained to Cointelegraph:
“When chips are designed they are meant to achieve specific performance levels. Chips that fail to hit their target numbers, such as not achieving the power standards or their thermal output, are often ‘Binned.’ Instead of throwing these chips in the garbage bin, these chips are resold into another unit with a lower performance level. In the case of Bitmain S19 chips that don’t make the cutoff are then sold in the T19 for cheaper since they do not perform as well as the counterpart.”
The rollout of a new model “has nothing to do with the fact that machines are not selling well,” Fresa went on to argue, citing the post-halving uncertainty: “The biggest reason machines probably are not selling as well as manufacturers would like is because we are on a bit of a tipping point; The halving just happened, the price can go anyway and the difficulty is continuing to drop.” Product diversification is a common strategy for mining hardware producers, given that customers tend to aim for different specifications, Kristy-Leigh Minehan, a consultant and the former chief technology officer of Genesis Mining, told Cointelegraph:
“ASICs don’t really allow for one model as consumers expect a certain performance level from a machine, and unfortunately silicon is not a perfect process — many times you’ll get a batch that performs better or worse than projected due to the nature of the materials. Thus, you end up with 5–10 different model numbers.”
It is not yet clear how efficient the 19-series devices are because they have not shipped at scale, as Leo Zhang, the founder of Anicca Research, summed up in a conversation with Cointelegraph. The first batch of S19 units reportedly shipped out around May 12, while the T19 shipments will start between June 21 and June 30. It is also worth noting that, at this time, Bitmain only sells up to two T19 miners per user “to prevent hoarding.”
Hardware Problems And Competitors
The latest generation of Bitmain ASICs follows the release of the S17 units, which have received mostly mixed-to-negative reviews in the community. In early May, Arseniy Grusha, the co-founder of crypto consulting and mining firm Wattum, created a Telegram group for consumers unsatisfied with the S17 units they purchased from Bitmain. As Grusha explained to Cointelegraph at the time, out of the 420 Antminer S17+ devices his company bought, roughly 30%, or around 130 machines, turned out to be bad units.
Similarly, Samson Mow, the chief strategy officer of blockchain infrastructure firm Blockstream, tweeted earlier in April that Bitmain customers have a 20%–30% failure rate with Antminer S17 and T17 units. “The Antminer 17 series is generally considered not great,” added Zhang. He additionally noted that Chinese hardware company and competitor Micro BT has been stepping on Bitmain’s toes lately with the release of its highly productive M30 series, which prompted Bitmain to step up its efforts:
“Whatsminer gained significant market share in the past two years. According to their COO, in 2019 MicroBT sold ~35% of the network hashrate. Needless to say Bitmain is under a lot of pressure both from competitors and internal politics. They have been working on the 19 series for a while. The specs and price look very attractive.”
Minehan confirmed that MicroBT has been gaining traction on the market, but refrained from saying that Bitmain is losing market share as a result: “I think MicroBT is offering option and bringing in new participants, and giving farms a choice. Most farms will have both Bitmain and MicroBT side by side, rather than exclusively host one manufacturer.”
“I would say that MicroBT has taken up the existing market share that Canaan has left,” she added, referring to another China-based mining player that recently reported a net loss of $5.6 million in the first quarter of 2020 and cut the price of its mining hardware by up to 50%.
Indeed, some large-scale operations seem to be diversifying their equipment with MicroBT units. Earlier this week, United States mining firm Marathon Patent Group announced that it had installed 700 Whatsminer M30S+ ASICs produced by MicroBT. However, it is also reportedly waiting for a delivery of 1,160 Antminer S19 Pro units produced by Bitmain, meaning that it also remains loyal to the current market leader.
Will The Hash Rate Be Affected?
Bitcoin’s hash rate plummeted 30% soon after the halving occurred as much of the older generation equipment became unprofitable due to the increased mining difficulty. That spurred miners to reshuffle, upgrading their current rigs and selling older machines to places where electricity is cheaper — meaning that some of them had to temporarily unplug.
The situation has stabilized since, with the hash rate fluctuating around 100 TH/s for the past few days. Some experts attribute that to the start of the wet season in Sichuan, a southwest Chinese province where miners take advantage of low hydroelectricity prices between May and October.
The arrival of the new generation of ASICs is expected to drive the hash rate even higher, at least once upgraded units become widely available. So, will the newly revealed T19 model make any impact on the state of the network?
Experts agree that it won’t affect the hash rate to a major degree, as it’s a lower output model compared with the S19 series and MicroBT’s M30 series. Minehan said she doesn’t expect the T19 model “to have a huge impact that’s an immediate cause of concern,” as “most likely this is a run of <3500 units of a particular bin quality.” Similarly, Mark D’Aria, the CEO of crypto consulting firm Bitpro, told Cointelegraph:
“There isn’t a strong reason to expect the new model to significantly affect the hashrate. It might be a slightly more compelling option to a miner with extraordinarily inexpensive electricity, but otherwise they likely would have just purchased an S19 instead.”
Bitmain Continues To Hold Leadership Despite Internal Struggle
At the end of the day, manufacturers are always in an arms race, and mining machines are simply commodity products, Zhang argued in a conversation with Cointelegraph:
“Besides price, performance, and failure rate, there are not many factors that can help a manufacturer differentiate from the others. The relentless competition led to where we are today.”
According to Zhang, as the iteration rate naturally slows down in the future, there will be more facilities using “creative thermal design such as immersion cooling,” hoping to maximize the mining efficiency beyond just using most powerful machines.
As for now, Bitmain remains the leader of the mining race, despite having to deal with the largely defunct 17 series and an intensifying power struggle between its two co-founders, Jihan Wu and Micree Zhan, which recently resulted in reports of a street brawl.
“Due to its recent internal issues, Bitmain is facing challenges to keep its strong position in the future thus they started to look at other things to expand its industry influences,” Xu told Cointelegraph. He added that Bitmain “will still dominate the industry position in the near future due to its network effect,” although its current problems might allow competitors such as MicroBT to catch up.
Earlier this week, the power struggle inside Bitmain intensified even further as Micree Zhan, an ousted executive of the mining titan, reportedly led a group of private guards to overtake the company’s office in Beijing.
Meanwhile, Bitmain continues to expand its operations. Last week, the mining company revealed it was extending its “Ant Training Academy” certification program to North America, with the first courses set to launch in the fall. As such, Bitmain seems to be doubling down on the U.S.-based mining sector, which has been growing recently. The Beijing-based company already operates what it classifies as “the world’s largest” mining facility in Rockdale, Texas, which has a planned capacity of 50 megawatts that can later be expanded to 300 megawatts.
‘Bullish’ — Struggling Miners Done Selling Their Bitcoin, Says Analyst
Bitcoin’s Miner Outflow Multiple shows that buoyant miners are keeping their coins and weaker players have none left to sell, argues Tuur Demeester.
Bitcoin (BTC) miners are setting up a bullish trend despite large sell-offs around the halving, a new data metric suggests.
According to Glassnode’s Miner Outflow Multiple (MOM), outflows from mining pools compared to their one-year moving average are nearing all-time lows.
Demeester “Bullish” On BTC Miner Data
MOM calculates coins leaving mining pools and compares them to the yearly moving average as a ratio.
As of June 3, that ratio was 0.534 — less than half its value one day before the halving on May 10.
By comparison, December 2018 saw mass upheaval due to BTC/USD hitting $3,100. This produced a ratio of around 0.28.
Reacting to the latest reading, Adamant Capital founder Tuur Demeester argued that Bitcoin investors have every reason to be optimistic.
He Tweeted On Friday:
“Healthy bitcoin miners are hodling, and struggling miners have little BTC left to sell. Bullish.”
Bitcoin Channels 2018 Bear Market Bottom
As Cointelegraph reported this week, miner outflows have markedly decreased in the past two weeks. After the halving, there was a brief period in which sales totaled more than miners’ incomes.
Bitcoin’s mining difficulty, which automatically regulates the incentive to participate in the Bitcoin network, is currently on course to repeat another trait from December 2018 — three back-to-back downward adjustments in a row.
Such a phenomenon has only happened twice before, the other occasion being a record eight consecutive drops in 2011.
Bitcoin Mining Difficulty Makes Biggest Jump In 29 Months
Bitcoin has just posted its biggest mining difficulty increase in nearly 2.5 years.
At around 17:00 UTC on Tuesday, the network adjusted its difficulty level – a measure of how hard it is for miners to compete for block rewards on the blockchain – to 15.78 trillion.
The 14.95% rise is the biggest difficulty jump since January 2018, which saw a larger spike on the back of the 2017 crypto market bull run, data compiled by BTC.com shows.
As a result, miners contributing hashing power to the network are now facing the fourth-most difficult two-week mining period in Bitcoin’s history.
The latest increase comes after two consecutive declines in difficulty following the network’s quadrennial halving event on May 11, 2020, which reduced block rewards from 12.5 bitcoin per block to the current 6.25 bitcoin.
The reduction in block rewards initially forced some miners with inefficient hardware and/or more costly electricity resources to halt operations. That led to a decline in Bitcoin’s total hashrate and difficulty until earlier this month.
The difficulty drops on May 20 and June 4, and the sudden reduction in competition, meant that those miners able to continue operating could receive a bigger slice of the pie.
However, the lower difficulty also meant that some who had shut down older mining equipment immediately after the halving could once more turn a profit in the past two weeks. Meanwhile, major miner manufacturers in China have been delivering new, top-of-the-line equipment since May.
These factors have pushed up the average 14-day hash rate on Bitcoin from 98 million terahashes per second (TH/s) earlier this month to now around 113 EH/s.
Out With The Old?
All that said, the fact that Bitcoin’s mining difficulty has quickly bounced back to the pre-halving levels may bring pain for some existing players.
Bitcoin adjusts its mining difficulty every 2,016 blocks, roughly every 14 days, to ensure an average block interval of 10 minutes. When more people choose to plug in during a two-week cycle, the network will see a hash rate increase that will shorten the block interval and will subsequently increase the difficulty for the next cycle.
The current difficulty level of 15.78 trillion follows closely behind the highest three figures ever of 16.55, 16.1 and 15.95 trillion, respectively – all recorded in the two months prior the halving. In other words, miners are facing competitiveness close to that seen prior to the halving, but the daily block subsidies are now down from 1,800 bitcoin to 900.
As a result, each TH/s of computing power is now generating around 0.000008 bitcoin in 24 hours, worth around $0.08 at bitcoin’s current price.
“With the value of hashrate set to decrease to $0.075 cents per TH/s, not many of the existing, old-gen equipment will turn back on,” said Ethan Vera, co-founder and CFO of the Luxor mining pool. “New hashrate coming onto the market will likely be driven by new-gen and high-efficiency machines.”
Kevin Zhang, director of blockchain strategies at New York-based bitcoin mining-power plant hybrid Greenidge Generation, offered a similar view, saying the firm’s strategy is to stay competitive by procuring and running the latest-generation equipment.
“Despite limited price action, we expect the hash rate to continue rising in the near term as more older generation miners go offline and newer generation ones come online,” he said.
As a comparison, the most recent mining devices, like Bitmain’s AntMiner S19, can deliver computing power that’s nearly 10 times that of an older model like the AntMiner S9, but only consumes two times more power.
An on-going power struggle at Bitmain, the world’s largest bitcoin miner maker, will most likely cause delays to delivery of new mining equipment, said Vera, though he thinks the network’s hashrate could still reach 140 million TH/s by the year’s end.
Experts Say Bitcoin Difficulty Adjustment Might Prompt Miners To Switch Off Again
As the network gets readjusted and Bitcoin mining difficulty increases, older generations of mining machines might be out again.
Some Bitcoin (BTC) miners might become unprofitable again as a result of the latest difficulty adjustment.
Earlier this week, the network mining difficulty adjustment saw a 14.95% spike, its largest increase since January 2018. The regular update, which occurs every 2016 blocks, has been pre-coded into the blockchain to keep mining speed at approximately 10 minutes for a block.
The latest adjustment might thwart an emerging trend in the mining sector: older generation machines coming back online after the halving. In May, the Bitcoin block reward was halved, causing a substantial number of miners to pull the plug on older machines, looking to sell their equipment or relocate to places with cheaper electricity.
As Karim Helmy, a data analyst at Coinmetrics, told Cointelegraph, Antminer S9s — a cheaper and once extremely popular mining device produced by Bitmain — started to come back online as a result of two negative adjustments of 9.29% and 6% that preceded the latest upgrade earlier in June.
“So the S9s actually came back after the last difficulty adjustment, which was a large downward move, not this one. Their coming back online was the source of the increase in hashrate that caused this large upward adjustment.”
Thomas Heller, the global business director at leading Bitcoin mining pool F2Pool, confirmed that older generation units saw a comeback after becoming “borderline profitable again.” However, he added that the increased hash rate was also caused by a new generation of ASICs — such as MicroBt M30s and Bitmain Antminer S19s — being turned on for the first time after finally getting shipped to their owners:
“Prior to the difficulty adjustment, the recent hashrate increase is mostly from old-gen machines turning back on, and some M30, S19 and A11 machines turning on for the first time.”
Now that it has essentially become harder to mine Bitcoin, some units might be switching off or migrating to other coins supporting the SHA256 algorithm again, Heller noted:
“A leading indicator is daily mining revenue per TH/s, and right now 1 TH/s will earn you approximately $0.078 per day for BTC mining. It is likely some miners will switch to mine BCH and BSV, and some will turn off machines to wait it out.”
Helmy agreed that older generation miners are likely to come offline again, but noted that conditions on the ground should be “identical to what they were immediately after the halving” for that to happen:
“There are a lot of other factors at play here, including the Chinese rainy season and the price of Bitcoin.”
From the recent adjustment alone, there “won’t be any huge changes to the mining landscape,” Heller argued, concluding:
“The dance between price, hashrate and difficulty will continue, while miners will continue to optimize and try to reduce their OPEX costs.”
Hash Rate Might Experience A Slight Decrease
As observed by Cointelegraph, the BTC hash rate has been fluctuating above 100 EH/s, while a Blockfolio analyst argued that “more hashrate has joined the network than ANY TIME since the historic 2017/18 market bull run.”
Both Heller and Helmy agreed that the hash rate might decrease slightly as a result of a major spike in difficulty, but that would largely depend on other factors, such as electricity price and Bitcoin’s price.
The Coinmetrics specialist also observed that the intensifying power struggle at Bitmain might result in less state-of-the-art miners getting shipped out, which, in turn, could leave the network without extra hash power.
Chinese Mining Company Ebang To Reportedly List On Nasdaq This Week
Ebang will reportedly get listed on Nasdaq on June 26, hoping to raise $125 million in an initial public offering.
Chinese Bitcoin (BTC) miner manufacturer Ebang will reportedly be listed on Nasdaq Global Market under the ticker EBON later this week, becoming the second crypto mining company to go public in the United States.
According to a report from Chinese crypto news outlet Blockbeats, Ebang will be officially listed on Friday, June 26.
Additionally, Blockstream chief strategy officer Samson Mow tweeted a screenshot of an invitation to a Ebang event held at a hotel in Hangzhou, where the company is headquartered, which also starts on Friday.
Ebang Aims To Raise $125 Million, Extending The Original Goal
Ebang filed for a $100 million initial public offering (IPO) with the United States Securities and Exchange Commission in April this year. The firm decided to enter the U.S. stock market after an unsuccessful attempt to conduct a $1 billion IPO in Hong Kong in 2018.
On June 17, the company submitted its latest filing to the SEC, choosing the Nasdaq as its listing exchange.
The Chinese mining player aims to raise $106 million by putting 19.3 million shares on sale at a price range of $4.50 to $6.50, meaning that it now intends to raise up to $125 million, while the initial proposal was hard capped at $100 million. If the IPO is successful, Ebang’s market value could come close to $800 million.
Notably, Ebang’s sales have been decreasing since 2018. In 2019, Ebang’s annual revenue was $109 million, which constituted a 66% drop in growth from $319 million in 2018.
As per the latest filings, 2020 might not necessarily be the comeback year for Ebang despite the overall better market conditions. The company reported a net loss of $2.5 million for the first quarter of the year, blaming the “significant decrease in certain non-recurring local government’s tax rebates,” although it noted that its sales volume has increased since 2019.
“This is great for the Bitcoin mining industry because as more ASIC manufacturers go public we have more transparency and accountability,” Mow told Cointelegraph, stressing that Ebang is “one of the more reliable manufacturers in this space” in his experience.
Other Bitcoin Mining Companies’ IPOs
In November 2019, Canaan became the first Bitcoin mining juggernaut to be listed on a U.S. stock exchange, raising $90 million by selling 10,000,000 shares for $9 each in its IPO, over 75% less than the figure expected originally. Moreover, its stock has plunged since, as it currently trades below $2.
Another Chinese mining giant, Bitmain, quietly filed a Deutsche Bank-backed application for an IPO with the SEC toward the end of 2019, although no details have surfaced since.
Binance Adds Profit Maximization Service To Its Mining Pool
Binance has a new system for helping miners automatically mine the most profitable coins.
Shortly after the launch of its own cryptocurrency mining pool, Binance is adding specialized features to it to help miners make more money.
Earlier this month, Binance Pool launched a new feature called “Smart Pool.” It lets miners automatically switch hash rates to mine the most profitable of three supported coins based on the SHA- 256 algorithm — either Bitcoin (BTC), Bitcoin Cash (BCH) or Bitcoin SV (BSV).
Lisa He, head of Binance Pool, explained that Smart Pool detects the difficulty in different chains using the same algorithm, and it “helps users transfer their computing power to chains with less difficulty and higher rewards.”
Binance pays out the final settlement to miners in BTC regardless of which crypto they actually mine. Lisa suggested that this new feature can increase earnings for those who use it by 1% on average.
In line with the promise to secure maximum returns for miners, the Smart Pool uses real-time hedging to ensure that revenues generated by the service will not be lower than those generated via its standard option, called FPPS (Full Pay Per Share).
In cases where the revenue is lower than what would have been earned via FPPS, the exchange has pledged to pay back the difference to users.
Smart Pool service can be activated with a single click within the mining pool’s regular interface. Miners don’t have to change user ID or their mining stratum URL.
Mining Pool Competition
Although there were concerns about potential centralization effects following the launch of Binance’s pool, it does not appear to currently be commanding a significant share of the Bitcoin network.
Last week, Binance Pool was, however briefly, producing more BSV blocks than any other pool in the market — despite the fact that the coin itself has been delisted from the exchange itself.
As of press time, Huobi is now the single-largest mining pool on the BSV network, commanding a 21.53% share as against Binance’s 11.11%.
US Blockchain Firm Buys 17K Bitcoin Mining Rigs From Bitmain
Core Scientific signs deal to buy Bitcoin mining machines from mining hardware producer Bitmain, company says, as American mining interest goes up.
American blockchain hosting provider Core Scientific signed a deal to buy next-generation Bitcoin (BTC) mining machines from major Chinese mining hardware producer Bitmain.
Core Scientific will purchase more than 17,000 S19 Antminers from Bitmain on behalf of its clients and for its own use. It will be the largest number of S19 machines purchased by a single blockchain hosting company, according to Core Scientific.
Kevin Turner, president and CEO of Core Scientific and the former COO of Microsoft said, “Core Scientific has received and begun testing the first of Bitmain’s newest ASIC miners, and has seen material success in increasing existing hash rate to achieve a 110 TH/s ± 3%.”
The deal comes as Texas has started attracting a number of mining facilities.
Last October, Bitmain opened “the world’s largest” facility for Bitcoin mining in Rockdale, Texas. In January, it was reported that SBI and GMO, two Japanese blockchain-related companies, penned an agreement with Northern Bitcoin AG subsidiary Whinstone to process cryptocurrency transactions at their facility in Rockdale.
Increased Interest In North America
Speaking to Cointelegraph, Russell Cann, Chief Customer Service Officer of Core Scientific, acknowledged the increased interest in growing hash rate via North American mining operations and explained the reason:
“Our view is that this rise in interest and increase in capital allocation and investment can be attributed to the growing acceptance of crypto and/or digital assets as an investment asset class as well as the favorable investing characteristics of North America; specifically, the stable geopolitical and regulatory environment, suitable climatic conditions and multiple energy sources present.”
According to Cann, historically the regulations around mining in other jurisdictions have been “flip-flopped”, creating uncertainty for mining investors. In contrast, hosting mining facilities in North America is beneficial because of “the stability of the power system as well as the regulatory environment around land ownership.”
Moreover, he said the recent collapse of energy pricing makes the North America region more attractive:
“Importantly, with the collapse of energy pricing, the lower cost power areas in the US and Canada, are creating some unique project opportunities for larger-scale miners, like Core Scientific, to consider.”
Yet, it does not mean investors are abandoning other mining operations in such countries as China. Cann suggested that investors are looking to diversify their investments globally.
Stock In Crypto Mining Firms Riot And Hive Massively Outperforms Bitcoin
While shares in Riot Blockchain and Hive Blockchain eclipse Bitcoin’s YTD gains, other mining firms have not fared so well — with Canaan crashing nearly 70%.
The share price of Bitcoin (BTC) mining firms Riot Blockchain and Hive Blockchain has produced enormous year-to-date gains, with stock in Riot nearly doubling while Hive’s has tripled over 2020 so far.
However, not all mining firms have fared well throughout the COVID-19 pandemic, with Canaan’s stock falling nearly 70% since early January, and both Hut 8 and DMG Blockchain seeing scant YTD gains despite experiencing significant volatility this year.
Mining Firms Outperform Bitcoin
While Bitcoin is up more than 26% from roughly $7,200 to $9,100 since the start of the year, the leading cryptocurrency’s gains have been dramatically overshadowed by a handful of firms mining it.
Hive Blockchain has seen a dramatic performance this year, rallying more than 420% from the start of 2020 until mid-February, from $0.066 to $0.345.
The firm’s shares crashed back to $0.118 over the next month as immediate economic fallout from the coronavirus took effect. However, an expansion that led to Hive doubling its mining capacity saw its stock rebound to test the $0.033 area by mid-May.
The firm’s shares have since fallen back to $0.228.
After starting the year trading for $1.22, Riot Blockchain shares rallied to $1.60 by mid-February before crashing to $0.65 in roughly one month. However, Riot produced a strong recovery, gaining over 375% to trade for $3.10 on June 10.
The firm’s shares have since retraced to $2.29.
Riot’s recovery may have been boosted by announcements in May that its mining revenues had grown 70% in the first quarter year-on-year, its plans to roughly double its hash rate after Bitcoin’s block reward halving, and the dismissal of pump-and-dump complaints against the firm.
Riot also expanded its total hash rate capability after establishing a hosting arrangement for its Antminer S17s with fellow mining firm Coinmint in April after facing disruptions resulting from COVID-19.
Canaan’s Shares Plummet In 2020
However, the gains enjoyed by Riot and Hive are certainly not indicative of all miners, with Canaan suffering huge losses over 2020 so far.
After starting the year at $6.02, Canaan shed over a quarter of its value by mid-Feb — when a sudden spike pushed prices up to $8.04 in a single day. Canaan’s stock then plummeted to $2.81 in mid-March, before embarking on a steady recovery to retest $6 two months later.
Since May 14, Canaan’s price has crashed by more than two-thirds to currently trade for $1.82.
While the YTD performance for Hut 8 and DMG Blockchain are currently sitting at an approximate break-even, both firms have seen extreme volatility during 2020.
Both Riot and DMG produced sudden spikes of over 60% in February followed by crashes of at least 60% by mid-March and a recovery back to trade at early-January levels.
Venezuelan Authorities Seize Over 300 Bitcoin Mining Machines
Venezuelan authorities confiscated 315 Bitcoin mining systems.
The Bolivarian National Guard of Puerto Ordaz, Venezuela, seized 315 Bitcoin (BTC) mining machines manufactured by Bitmain. The owners of the mining rigs were told that they did not possess the necessary permits to own and operate the machines. They also were not authorized to be transporting the machines during the COVID-19 quarantine.
According to current legislation, Venezuelan citizens who are interested in conducting crypto-related mining activities must obtain the appropriate permits from a government office called the National Superintendence of Cryptoactives. Owners who fail to obtain these permits risk being fined, and having their equipment confiscated.
Kazakhstan Sets Eyes on Top-3 Spot For Global Bitcoin Mining
The post-Soviet country’s cheap electricity has been attracting Bitcoin miners, but will it manage to elbow out Russia and the United States?
Kazakhstan is becoming an important destination for Bitcoin (BTC) miners seeking cheap electricity in the post-halving market driven by thinner margins.
According to recent reports, the oil-rich Central Asian country expects the total amount of money invested in local crypto mining operations to double by the end of 2020 and attract $738 million over the next three years.
Unlike other countries in Central Asia, the Kazakh government has de facto legalized crypto mining, which makes the market more attractive for both local and foreign players. So, could this vast semidesert land become the new go-to spot for BTC miners?
From Blanket Crypto Ban To Legalization
The Kazakh government has adopted an overall friendly approach to crypto recently, although there is still little regulatory clarity on the subject. However, positive developments were preceded by regulatory turbulence, and at some point, its central bank went as far as to suggest a blanket ban on cryptocurrencies.
In early 2018, the chairman of the National Bank of Kazakhstan, Daniyar Akishev, declared that his agency was considering outlawing all cryptocurrencies.
Just a few months later, Kazakhstan’s president, Nursultan Nazarbayev, called for global cooperation in crypto regulation but did not mention whether this regulation should encourage the sector’s growth or its containment.
Previously in 2017, Kazakhstan’s government-supported Astana International Finance Center signed a deal with Malta-based firm Exante to develop the Kazakh digital asset market, while the central bank announced it was considering using blockchain to sell short-term debt notes to investors.
Things started to look more concrete and positive for local crypto miners in 2019. In December of last year, local media reported that Kazakhstan’s lawmakers wouldn’t be taxing cryptocurrency mining until the mined assets are exchanged for fiat money, as crypto mining would not be treated as an entrepreneurial activity but rather a “purely technological process.”
A recent bill, which was approved by the Kazakh Senate and signed into law by Nazarbayev earlier in June, essentially legalizes mining, saying that people involved in digital mining are obliged to inform the authorities about their activities. It also stresses that miners are the legal owners of the digital assets they produce.
Didar Bekbauov, founder of crypto mining marketplace Xive — a local company providing hosting services for large-scale international miners — and who previously worked at Hive Mining, told Cointelegraph that the current regulation is not strict, but stressed that the framework hasn’t been finalized yet: “The bill says miners need to report to [the] government about their activities. But nobody still knows how it will be in practice. Other than that no regulations.”
Cheap Electricity Attracts Foreign Players
According to Bekbauov, the main mining players in Kazakhstan are foreign companies from China, Japan and “other Asian countries.” There is also Genesis Mining, an international cloud mining company with farms located across several countries, and Bitfury, another non-Chinese mining powerhouse headquartered in Amsterdam.
“They are miners with experience, some private funds, private investors,” Bekbauov said of the companies mining away in Kazakhstan. The Xive founder added that around 90% of their mining activities are performed on the Bitcoin blockchain, and he said that the arrival of foreign companies doesn’t make it harder for local mom-and-pop mining operations, as Kazakhstan “still has excess electricity generation.”
Therefore, the main attraction for miners is not the regulatory framework, which still remains ambiguous despite some positive developments, but rather the abnormally cheap electricity rates. As of December 2019, the price of electricity in Kazakhstan was $0.041 per kilowatt-hour for households and $0.049 for businesses. For comparison, the average electricity price in the United States is $0.14, although some states such as Texas seem to be offering competitive prices under certain conditions.
The price of electricity has always been one of the main factors when it comes to cryptocurrency mining, but it has become even more important after the Bitcoin halving took place back in May. The halved reward prompted miners to either sell their equipment or relocate to regions with cheaper electricity such as Kazakhstan, Russia, the Middle East and South America.
Along with the abundance of cheap electricity, Kazakhstan’s geographical position also makes it “a fast-growing hotbed for Bitcoin mining action,” according to Thomas Heller, global business director of F2Pool, who also told Cointelegraph:
“Kazakhstan is located in an optimal location for mining. The climate is cool, and is in close proximity to China. It’s becoming a popular location for Chinese miners to move old-gen machines from China to Kazakhstan to take advantage of cheaper electricity prices outside of the Sichuan Hydro Season.”
Bekbauov said that most local mining operations are located in regions with high electricity generation — such as Ekibastuz, Karagandy, Pavlodar and Taraz — while the country has an overall good climate for crypto mining throughout most of the year. Dmitrii Ushakov, chief commercial officer of BitRiver — a major co-location services provider for Bitcoin mining in the Commonwealth of Independent States region — confirmed that the cheap electricity prices in Kazakhstan are luring investors in, telling Cointelegraph: “Miners can currently find very attractive electricity prices for mining in Kazakhstan and some other former Soviet countries. This is the main reason for the current interest in mining in Kazakhstan.”
However, Ushakov added that there are “no natural prerequisites for cheap electricity in the country,” as it is mainly produced by coal-fired power plants.
He elaborated, expanding on some other drawbacks of Kazakhstan-based mining, namely an overall unstable situation in the region and inadequate safety of local mining farms:
“This is risky because the markets and other factors affecting the price of such electricity within a nation can change quickly. Another aspect that should be considered here is the safety of these mining sites, which are often set up in a very short time by using pre-existing infrastructure that is old and unreliable.”
Will Kazakhstan Become A Top-Three Mining Destination?
Last month, Kazakhstan’s minister of digital development, innovation and aerospace industry, Askar Zhumagaliyev, announced that the department is planning to attract 300 billion tenge, or $738 million, worth of investments by 2023 for activities related to cryptocurrency mining.
Kazakhstan’s ambitious mining plans might seem staggering at first, but the country has some statistics to back them up. According to Zhumagaliyev, there are currently 14 cryptocurrency mining farms that have already brought in approximately $201.7 million of investments combined.
Further, the Bitcoin Mining Map designed by the Cambridge Center for Alternative Finance at the Judge Business School of the University of Cambridge shows that the countries in the CIS region combined comprise the fourth largest region for crypto mining globally. In the second quarter of 2020, mining in Kazakhstan has reportedly made up about 6.17% of the average monthly Bitcoin hash rate, which is only slightly behind Russia (6.9%) and the United States (7.24%), while China remains the undisputed king (over 65%). Alejandro De La Torre, vice president of mining pool Poolin, agreed that under certain conditions, Kazakhstan could become third in the near future:
“With the abundance of cheap electrical prices, mild temperatures and the governments ’hands-off’ approach to mining, I do indeed foresee Kazakhstan becoming a top-3 crypto mining destination.”
Other experts are more skeptical. BitRiver’s Ushakov argued that although low electricity prices are a solid advantage for Kazakhstan in the mining race, the region itself isn’t stable enough to witness significant growth:
“Although low electricity prices make Kazakhstan a hot destination to mine, we believe that China, Russia and the USA will continue to be the top-3 mining destinations in the world because of increasing investments in mining, predictable energy policies and a more stable political as well as economic environment for mining.”
Kristy-Leigh Minehan, a mining consultant and former chief technology officer of Core Scientific, told Cointelegraph that she does not expect Kazakhstan to become a top-three destination anytime soon due to an apparent lack of interest from institutional players: “Bitcoin mining is becoming the destination of institutional investment that seeks an alternate asset base; many are still very shy with regards to Kazakhstan’s politics.”
Switching Bitcoin to 100% ASIC Mining Could Increase Security 2,000X
ASIC miners are the best option for Bitcoin network security well into the future, new research has found.
The wholesale embrace of Application-Specific Integrated Circuits (ASIC) mining for Bitcoin (BTC) could increase the cost of a 51% attack by a factor of up to 2,000.
Rod Garratt University of California Santa Barbara presented the research he co-authored with Maarten van Oordt from the Bank of Canada at the Unitize conference on July 10.
It examined the varying costs of a 51% attack on the Bitcoin network based on the type of equipment used to secure the network. The research suggests by simply switching the network 100% ASIC miners ongoing security can be enhanced greatly.
The main reason is because ASIC miners have little use, and little value, outside of Bitcoin mining and an attacker would not be able to obtain much of a return from the sale of equipment used in an attack. Consequently, in order to perform a profitable attack, they would need to double spend a much higher volume of coins, which is more costly and difficult to do.
The research estimated that for an attack occurring after the next halving to be profitable, it would require between 157,000 – 530,000 Bitcoin if 100% ASIC mining was in place.
What Is A 51% Attack?
A 51% attack is when a malicious participant seeks to manipulate a blockchain network by controlling 51% of the mining power (this is the minimum needed to accept new blocks). The attacker then creates an alternate chain of blocks to the ‘real’ chain, and transitions the rest of the network to accept the new, manipulated chain as the correct one.
The most common use-case for this style of attack is to spend the same coins twice, commonly referred to as a double spend.
Concerns Over Bitcoin’s Security
Some in the Bitcoin community are adverse to ASIC miners, which caused a hard fork in 2017 that resulted in ASIC-resistant Bitcoin Gold being created. Garratt said this was why Bitcoin Gold had a number of successful 51% attacks resulting in the double-spend of $18 million in coins, while Bitcoin is yet to receive its first successful attack. However, it is vastly more expensive to attack Bitcoin, which is also a big factor.
Some Bitcoin network participants are concerned over the long term security of the blockchain network as block rewards are replaced with transaction fees, he explained, which leaves miners relying on transaction fees as their rewards.
The potential danger is that once miners are relying on transaction fees, they will react to large price fluctuations by turning off their miners, making it more cost effective to perform an attack on the network.
Garratt mentions another security benefit from using ASIC machines is that miners are much less likely to switch off their equipment as a result of price fluctuations, increasing the strength of the network against price fluctuations.
Bitcoin Mining Difficulty Hits Record High of 17.3 Trillion
Just two months after May’s Bitcoin halving event, both hash rate and difficulty have shrugged off post halving dips to hit new all-time highs.
Following last week’s record-high Bitcoin hash rate, the latest difficulty adjustment saw a change of +9.89%, bringing the level to a new all-time high of over 17.3 trillion on July 13.
Despite a lack of recent significant Bitcoin (BTC) price action, the fundamentals securing the network are as healthy as they’ve ever been. This is more positive news for investors concerned about a previous drop in hash rate and difficulty after May’s third reward halving event.
Concerns Over Halving Unsubstantiated
Some analysts predicted that the reward halving earlier this year would lead to mass capitulation from unprofitable miners.
There was a significant drop in hash rate immediately after the halving, followed by two reductions in the mining difficulty. But an upwards difficulty adjustment of 14.95% last month almost reversed the previous two falls on its own.
With both hash rate and difficulty now at historic highs, any concerns around the impact of the halving now seem to have been proven unfounded.
Keeping Bitcoin Ticking Along At 1 Block Per 10 Minutes
The mining difficulty gets automatically adjusted every 2016 blocks (or approximately 14 days), in order to ensure that new blocks are produced every 10 minutes on average.
It generally fluctuates with the hash rate (increasing hash power means quicker blocks so difficulty must also be increased), although the overarching trend tends to be upwards.
Higher difficulty can also have an impact on mining profitability, which causes some miners to sell up. When this happens, it can potentially force the hash rate back down again.
Fidelity International Doubles Stake in Bitcoin Mining Firm Hut 8
Billion-dollar fund manager Fidelity International has doubled its equity investment in bitcoin mining company Hut 8, bringing its total stake to over 10%.
- In a filing with the Ontario Securities Commission (OSC) last week, the fund manager disclosed it had acquired 4.1 million “units” in Hut 8 on June 23 in an overnight offering.
- Each unit represents a combined offering of one common share and the option to purchase another in the next 18 months.
- Fidelity International, a spin-off of Fidelity Investments, already held approximately 4 million common shares in Hut 8.
- Last month’s purchase, including the options, means it now controls over 10.5% of the Toronto-listed crypto mining company.
- Hut 8 closed a C$8.3 million funding round (US$6.1 million) on June 23, with the total raise being over C$800,000 above its target.
- Fidelity’s investment may have comprised nearly three-quarters of the raise, based on the total of around 5.7 million units changing hands.
- CoinDesk has approached Hut 8 for more information.
- In an overnight offering, a company sells equity once the market has closed at the end-of-day price to prevent short-sellers from depressing it any further.
- Hut 8’s share price spiraled since listing on the Toronto Stock Exchange, falling from $3.35 in April 2018 to a low of $0.50 in March 2020.
- Fidelity may be bullish about Hut 8, though, as the option for a common share is at a purchase price of $1.80 – more than double its current trading value of over $0.80 at press time.
- The news was tweeted by CoinDesk’s Matt Yamamoto earlier on Monday.
10,000 Antminers Go ‘Missing’ In Latest Chapter Of Bitmain Power Saga
Former Bitmain staff have been accused of “illegally” moving 10,000 Antiminers from a company-owned mining facility in Mongolia.
In the ongoing power struggle at cryptocurrency mining giant Bitmain, not only have accusations of “illegal power seizures” made headlines, but now the physical theft of mining hardware as well.
A new post on Bitmain-owned Antminer’s WeChat channel alleges that former Bitmain staff have “illegally moved” 10,000 Antiminer Bitcoin (BTC) mining rigs from a company-owned facility in Mongolia.
The machines — among them models from the S17 and T17 series and flagship S9 miners — were reportedly removed in mid-July, causing “serious economic losses to the company and customers.” The incident has been reported to the police and public security authorities.
At stake is not only Bitmain’s own hardware, but also that belonging to clients who choose to have their mining hardware operated and hosted at the manufacturer’s mining farms.
In a post to Bitmain’s Weibo account, co-founder Micree Ketuan Zhan — one half of the duo at loggerheads over power at Bitmain — accused his co-founder Jihan Wu of being responsible for the “illegal transfer” of the machines.
Power, Property And Office Brawls
The backdrop to this week’s moved miner saga is a conflict raging over which of the two co-founders has the position of legal representative at Bitmain.
Since October 2019 — when Wu reportedly ousted Zhan in what the latter referred to as an “illegal power seizure” — the pair have been embroiled in an extremely public battle over control of the firm.
Bitmain’s chief financial officer was arrested in May after allegedly participating in a purported “mob attack” on Zhan, in response to the latter’s controversial attempt to wrest back the role of legal representative at Bitmain’s Chinese subsidiary.
In June, reports on the intensifying struggle alleged that Zhan had hired guards to forcibly seize control of Bitmain’s Beijing office. Zhan has also pursued legal action in his bid to regain control.
At present, Wu retains formal authority over Bitmain’s Hong Kong-based operations, and the firm reaffirmed Zhan’s October ousting again this spring. Zhan continues — by various means — in his attempts to regain control of operations in the mainland.
Ethereum Miners’ Income Soars By 60% In A Month And Outruns Ether’s Price Jump
The daily income earned by Ethereum miners has soared by over 60% in a month, according to data tracked by Ethereum mining pool Sparkpool.
The surge in daily profit from Ethereum mining surge has also outpaced ether‘s (ETH) price jump of 40% over the same period.
The profitability rise comes thanks to soaring transaction fees on the network, as well as relatively slow growth in competition from other miners.
Sparkpool’s data shows Ethereum miners’ daily income was around $1.85 per 100 megahashes second (MH/s) on the network on June 27. Over the past month, and the last two weeks in particular, this has jumped by 60% and reached as high as $3.27 on July 25. The metric has since dropped back to around $3.
During the same period, ether’s price has gone up by nearly 40%, from $229 on June 27 to $327 at time of writing, the highest price point for over a year.
Transaction fees on the network, which form part of a miner’s daily revenue, have reached a two-year high as the hype around decentralized finance (DeFi) brought a spike in network activities.
However, the total computing power competing on the world’s second largest blockchain network by market capitalization has remained steady around 190 petahashes per second, blockchain explorer Etherscan shows.
In fact, data from Bitinfocharts indicates daily mining revenue on Ethereum had remained below $2 per 100 MH/s during the first quarter of the year and dropped to $1 per 100 MH/s following the crypto market crash on March 12. But in the four months since, daily mining revenue has tripled.
Currently, some state-of-art Ethereum mining equipment, such as InnoSilicon’s A10 Pro with a computing power of 485 megahashes per second (MH/s), can generate $12.92 in daily revenue at Ethereum’s current price and mining difficulty.
With an electricity of cost of $0.03 per kilowatt-hour (kWh), one A10 Pro machine is able to bring home a daily net profit of nearly $12, according to mining pool F2Pool’s miner profitability tracker.
Profit at that level exceeds some top-of-the-line Bitcoin miners by almost 100%, although bitcoin’s price has jumped above $10,000 over the weekend for the first time since early June. The sudden increase came after weeks of low price volatility that kept the cryptocurrency stuck between $9,000 and $9,500.
However, Bitcoin’s mining difficulty is still around its all-time-high. As such, even the most efficient Bitcoin miners, like MicroBT’s WhatsMiner M30S++ and Bitmain’s AntMiner S19 Pro, are generating a daily revenue of $9 per unit.
At an electricity cost of $0.03 per kWh, that would provide a daily profit of around $6.50 at bitcoin’s current price and difficulty, data from mining pool PoolIn shows. In general, industrial electricity cost for crypto mining can range between $0.03 to $0.06 per kWh.
Marathon Boosting Bitcoin Mining Game With 1,360 More Rigs Arriving In August
Publicly traded cryptocurrency mining firm Marathon Patent Group is planning to receive 1,360 additional bitcoin mining rigs in August in a rollout that will rocket its Quebec facility’s hashpower up 320% to 184 peta hashes.
* The company said in a press release it expects 700 newly bought M31S+ ASIC Miners from MicroBT and 660 previously ordered Bitmain S-19 Pro Miners to arrive in mid-August.
* Marathon has purchased 3,020 total rigs from the fiercely competitive mining rivals in the past few months. It already has 700 active MicroBT miners, and, in addition to the August arrivals, is waiting on 1,000 more from Bitmain coming in Q4.
* “Based on current bitcoin prices, the company would expect to become cash flow positive” once it installs the August rigs, CEO Merrick Okamoto said in a press statement.
Iranian Authorities Greenlight Power Plants Mining Bitcoin
According to Iranian authorities, power plants can mine cryptocurrencies like Bitcoin, but will not be able to take advantage of subsidies.
Iran has announced that it will now allow industrial-scale power plants in the country to operate as Bitcoin miners —- provided they don’t use subsidized fuel.
In a statement to the Islamic Republic News Agency (IRNA) on July 27, Mostafa Rajabi Mashhadi, a Deputy Managing Director at Tavanir, Iran’s Power Generation, Transmission and Distribution Management Company, said power plants in the country could operate as Bitcoin mines “if they comply with approved tariffs” and have the necessary licenses.
Mashhadi said that any power plant considering such a venture could not use subsidized fuel for crypto mining.
“Now we’re in a situation where the supply of electricity is of great importance to the public,” the energy spokesman said. “We will not allow anyone to misuse tariffs provided for the agricultural and industrial sectors to produce Bitcoin while it’s worth more than $9,000.”
All About Power
Cointelegraph reported in January that Iran’s Ministry of Industries, Mining and Trade had issued 1,000 licenses for crypto mining since the government authorized it as an approved industrial activity in July 2019.
According to the IRNA, a spokesman for the electricity industry said 14 crypto miners in Iran had requested more than 300 megawatt (MW) of power — equivalent to the usage across three provinces in the country.
The tariff scheme for crypto miners in Iran is dependent on market factors such as fuel prices in the Middle East. Mining requires a lot of power, but the country’s electricity is very cheap compared to the rest of the world. Mashhadi estimated in 2019 that the production of a single Bitcoin would use only about $1,400 in state subsidies.
People who expose illegally operating cryptocurrency mining companies in Iran also receive a bounty of up to 100 million Rials, or $2,375.
3 Reasons Not To Panic As Bitcoin Miners To Exchange Flow Spikes 46%
On-chain data shows miners have sold more than they mined in the past week, but this might not necessarily impact BTC price for three reasons.
The latest on-chain data from July 30 suggests miners are preparing to sell Bitcoin (BTC). According to data analytics resource Glassnode, miners’ outflows to exchanges increased significantly in the last 24 hours.
There are three possible reasons the miner to exchange flow might not largely affect Bitcoin’s price. First, the potential sell-off from miners coincides with the rejection of Bitcoin at $11,400.
Second, while a 46.5% increase seems significant, this is only $94,000 at current BTC prices. Given that the Bitcoin exchange market reportedly processes $24 billion per day, it is not a relatively significant amount of BTC. Third, some market commentators say the short-term market structure of BTC alongside strengthening fundamentals paint an optimistic picture.
Bitcoin Already Rejected From $11,400
On July 28, the price of Bitcoin peaked at $11,400 across many exchanges. Since then, BTC dropped to as low as $10,800, marking a 5% drop.
According to data from ByteTree, miners sold around 510 BTC more than what they mined in the last seven days. In one week, miners produced 6,556 BTC and sold 7,060, recording a minor negative net inventory.
Given that the price of Bitcoin already fell by 5% in the past 48 hours, there is a high probability that the market likely priced in the miner sell-off. If that is the case, this extra supply is unlikely to affect BTC/USD in the near-term.
Not A Big Net Spend
Additionally, the 500 BTC net spend is not high relative to the usual net spend of miners in most weeks. Miners likely sold slightly more BTC to cover expenses, but that could mean lower net spend in the upcoming weeks.
Historical data shows miners often sell most of the Bitcoin they mine regularly. For example, a 500 BTC sell order in the exchange market, which equates to $5 million, is not relatively high or uncommon.
Compelling Short-Term Market Structure
Meanwhile, traders see a positive near-term trend for Bitcoin due to its recovery from the recent dip. After BTC declined to $10,800, it rebounded quickly back above $11,000.
Initially, BTC saw a breakdown from the $11,200 to $11,400 resistance range. The recovery to $11,000 and a strong hourly candle could sway the momentum, according to recent technical analysis.
Jonny Moe, A Bitcoin Trader, Noted:
“If you caught shorts on the wedge breakdown, this is the kind of hourly candle that should make you consider covering.”
The market bias around Bitcoin is seemingly swaying bullish. Data from Binance Futures suggests 58% of “top traders” on the platform are holding long positions on BTC.
While the market remains majority long, the price action has cooled down since earlier this week. Funding rates of perpetual futures contracts, across the board, have declined. That suggests the market is less overheated, and traders see a favorable market structure in the short-term.
Moreover, despite the miner to exchange flow uptick, the amount of BTC held on exchanges has dropped to the lowest levels since right before the summer 2019 bull run. Thus, the confluence of a decent-size pullback, a neutral futures market, and a relatively small miner sell-off could sustain Bitcoin’s momentum.
Bitmain Delays Bitcoin Miner Shipments By Three Months As Co-Founders Battle On
The escalating internal power struggle at Bitmain is starting to have a more serious impact on its business and customers.
* The Beijing-based bitcoin miner maker said via the official WeChat account of its AntMiner brand Thursday that customers whose equipment were due in June and July will have to wait until September and October.
* The delay is caused by “external interference over the company’s management,” the official account said.
* It’s important to note that bitcoin miners are typically sold via pre-orders, which must be made two to three months in advance.
* That means customers who ordered the June and July batches could have placed their orders as early as March and April.
* The delay comes amid the escalating fight for control of Bitmain between its two co-founders, Wu Jihan and Micree Zhan Ketuan, which has essentially “hard-forked” the firm’s bitcoin miner production.
* Currently, the official WeChat account of the AntMiner brand is controlled by Wu’s faction within the firm.
* Zhan was ousted by Wu in October, but returned to power in June and has controlled Bitmain’s Shenzhen-based factory since then.
* The situation threatens to become a kind of stalemate: Zhan’s side will likely not have an easier time with shipments either, as Wu also controls the miner chip supply chain via Beijing Bitmain’s parent entity in Hong Kong.
* Bitmain is now offering two mutually exclusive options for customers whose orders are delayed.
* The first option is to send Bitmain a written request to speed up the delivery. If they still don’t receive their machines 60 days after the notice, they can request a refund.
* The second is to wait patiently until the actual delivery, with Bitmain saying it will compensate customers with their theoretical mining revenue between now and delivery in the form of cash coupons to be used in future purchases.
How Miners Can Hedge Their Inventory To Increase Return On Investment
Strategies from the world of traditional finance could offer promise for miners who want to lower the risk associated with holding inventory.
To a newcomer, crypto mining may sound deceptively easy — essentially, a way to switch on a machine, walk away and watch the lucrative crypto rewards roll in. But the reality is a little more complicated.
The oldest and most powerful crypto out there, Bitcoin (BTC), uses a proof-of-work algorithm to ensure it’s blockchain’s security, and plenty of other influential cryptos have followed suit.
Miners in PoW protocols receive a crypto reward whenever they’re the first to submit a correct answer to the cryptographic math problem that seals each new block of data on the blockchain. The more miners there are operating on one blockchain network, the stiffer the competition becomes to solve this problem and win a crypto reward.
To improve their chances, miners generally use hardware rigs that demand more and more hardware components and electricity to become more powerful.
Crypto miners need to make significant rig investments and pay high monthly electricity bills if they want any chance of earning a mining reward more than once or twice in a blue moon.
Regions with cheaper electricity tend to attract more miners, but even among these operations, profit margins tend to be tight.
As a result, miners generally sell off their mined crypto as soon as they can. Selling their earnings for fiat not only helps them keep their rigs turned on but also lowers the risk of wiping out their profits or even having their capital sunk into mining equipment if market prices drop.
That cautious business model also makes it harder for miners to earn a high return on investment, which is enjoyed by more institutional crypto traders — especially when they have access to sophisticated strategies borrowed from the world of derivatives and traditional finance.
But as crypto markets continue to mature, more and more asset classes become available to miners and can help them earn a higher ROI on their mining investment — without risking huge losses in a volatile crypto market.
High-interest accounts are an ideal low-risk solution for any crypto owners who feel bullish about their assets and prefer to hold. Miners can deposit their inventory with account providers, who use those held assets to provide loans to vetted crypto users looking for extra capital.
The borrowers repay their loans to the account providers over time with interest, and the account provider shares that interest with the account holder. These accounts tend to generate more interest the longer account owners agree to lock up their funds. Typical accounts with popular services such as Compound, BlockFi, Celsius and DeFiner offer 5%–10% annualized returns.
Crypto experiences market volatility like any other commodity — and futures contracts can help miners turn that volatility into a revenue generator. Futures contracts are securitized agreements to sell and buy an asset at a price and time agreed upon when the future is created.
Crypto miners can lock up some of their crypto inventory in a futures contract and sell that contract for more than the crypto’s current marketplace value.
During periods of a market condition called contango, futures contracts are priced higher than their current “spot price” — the market price traders pay to immediately acquire the asset.
The difference between futures prices and spot prices is also referred to as the premium to spot pricing. Instead of selling their newly mined crypto for the current spot prices, miners can sell a dated futures contract to lock in that premium.
While exploring futures contracts, miners should be aware that they’re often cash-settled, meaning upon expiration, the futures seller will transfer the cash equivalent of the buyer’s promised position in the underlying asset’s market rather than the asset itself.
Cash settlement is of limited use to crypto miners who actually own and eventually want to transfer their tokens, so miners should focus on physically settled futures contracts to ensure that their inventory actually changes owners.
Someone selling an option isn’t selling an asset itself — rather, they’re selling the right, but not the obligation, to buy that asset at a set price (called a strike price) at a later, agreed-upon time. Miners can sell options on their existing inventory and future inventory.
After selling options on future inventory, they can use revenue from the sale to increase their mining operation’s output per day, setting them on the right track to meet future obligations created by the options. Traders can also sell options that are “in the money,” which means that their eventual strike price is lower than the crypto asset’s current price.
If the market price is still above the strike price when the contract expires, the option holder is likely to exercise it, and the miner sells their inventory at the agreed-upon strike price as indicated in the options contract.
If the market price is below the strike price, then the holder won’t exercise it because they could get the same amount of crypto for cheaper going directly through the market. With the option expired and unused, the crypto miner gets to keep both the original crypto inventory and the premium they made selling the option in the first place.
Contracts are key to implementing a “Collar,” one of the most common hedging strategies for crypto inventory. To use a Collar, miners buy two kinds of options simultaneously. They would buy a put option below the market price of the asset, which is the right to sell the token at a set time and price. However, they would sell a call option above the market price of the asset, which is the right to buy the token at a set time and price.
Sale of the call option generates the revenue needed to cover purchasing the put and only cuts into the trader’s profit if the token’s spot price eventually increases above the price delineated in the call option.
If the token’s market price drops below a certain benchmark, miners can exercise their put option at its expiration and sell off their inventory at the put’s price rather than actual, lower market prices. The Collar thus keeps the miner from experiencing huge losses or huge gains even in a volatile market.
Collar Options Strategy Setup Example
In this example, the miner has asset protection in the event the price drops below $220, however, the profit is limited if the asset price rises past $260 due to the sale of the call option.
The net cost of protection is a profit here due to the difference between the sale and purchase of the call and put, respectively. The maximum profit is limited to $23 and the maximum loss at $17, given the current ETH/USD price of $239.
Over-the-counter negotiations go through avenues outside of exchanges and other public venues, happening instead mostly through brokerages and private transactions. Most crypto miners who use OTC services sell forward contracts. Forward contracts, much like futures contracts, consist of agreements to sell an asset at an agreed-upon time and price.
But while futures contracts are standardized to be bought and sold in trading venues, forward contracts tend to be customized to meet the needs of each buyer and seller.
Some customizable aspects include the amount of the asset and the agreed-upon date but can generally include any terms, given all parties involved agree to them.
Miners can sell forward contracts on inventory they don’t even own yet through OTC negotiations and use the sale revenue to expand their mining operation, which makes it more likely they’ll end the contract both meeting its inventory terms and possessing a more powerful mining rig.
The aforementioned strategies are from the world of traditional finance, and they can offer some promise for miners who want to increase their ROI without increasing the risk associated with holding inventory.
In addition to immediate ROI increases and higher inventory retention, these strategies could also make overall market conditions better for market participants as a whole. Without the constant supply pressure of miners trying to offload their mining rewards immediately, crypto prices are likely to go up, making rewards more valuable and mining more profitable.
In practice, sophisticated miners will likely use a combination of these strategies. For example, miners may opt to hold the majority of their inventory in interest-bearing accounts and a smaller portion on a derivatives trading venue where traders buy and sell options and contracts to hedge their overall position.
Derivative platforms typically provide leverage on the collateral posted at the venue, and miners will benefit from the time duration associated with the derivative contracts. Executing this strategy will undoubtedly both increase the return on the investment for the mine operators and improve market pricing as a whole.
Why Chinese Miners Won’t Stage A 51% Attack On Bitcoin
Jameson Lopp explains why attacks on Bitcoin won’t work and that he expects China’s mining dominance won’t last.
China accounts for more than half of the world’s Bitcoin mining capacity but Jameson Lopp, the co-founder and CTO of Casa, has hosed down fears that Chinese miners are a threat to Bitcoin in a blog post on Aug. 9.
Although many people have raised concerns over the concentration of such much hashpower being located in China, Loop pointed out that even in the event of a 51% attack on Bitcoin, attackers are limited in what they can actually do.
He explained that attackers can’t steal people’s Bitcoin arbitrarily, nor change the consensus rules. They can’t reverse valid transactions. The only thing they can do is double spend their own Bitcoin.
The best way for a 51% attacker to seek maximum profit is to cash out via crypto exchanges into “censorship resistant cryptocurrency or stablecoin”. However, this presents big problems in terms of withdrawal limits and Know Your Customer requirements among exchanges. It also doesn’t make much economical sense for attackers to dump a big chunk of Bitcoin at once:
“The value of the Bitcoin you still hold after the attack will likely have decreased substantially, thus a successful large attack could actually result in shooting yourself in the foot. You’d better not slip up while you’re accessing the exchange you target. For example, one hacker returned $25M in stolen funds after leaking their IP address.”
Bitcoiners To The Rescue
Loop thinks it would be nearly impossible for a nation state to get in total control of mining facilities and that Bitcoin stakeholders would take immediate emergency actions against such an act.
Even if the attack shifts from targeting individual mining facilities to an easier attack of mining — 70% of hashpower in China is coordinated via fewer than 10 mining pools — switching mining pools is incredibly easy for miners. It’s also difficult to pull off covertly as there are plenty of independent companies putting out social media alerts against malicious actors.
“It’s hard to imagine a scenario in which a state actor would be able to quickly and covertly seize enough hashpower to perform an ongoing attack that lasts more than a few hours.”
According to Lopp, the reason hashpower has been concentrated in China ever since 2015 is due to the fact most of the mining chips are produced in Asia. Most importantly China also has “an abundance of cheap energy” and has the political and economical stability to facilitate the mining infrastructures.
Loop concluded any large-scale mining attack is going to be “limited in its effectiveness”. As Cointelegraph reported before, in the long run, competition in semiconductor production and cheaper power sources will continue to rise globally and China’s mining dominance will not last.
Mining Firm Hut 8 Reports 28% Drop In Q2 Revenue Following Bitcoin Halving
Canadian bitcoin miner Hut 8 announced its Q2 2020 earnings Thursday, reporting a sharp drop in revenue. However, the rising value of the firm’s bitcoin holdings helped Hut 8 finish the quarter in the black.
The publicly traded company mined 795 bitcoin (BTC) last quarter, a 29% decrease from the 1,116 BTC mined during the prior quarter. As a result, revenue declined 28% to C$9.2 million (US$7 million).
Management mainly attributed this to the bitcoin halving that took place on May 11, writing:
“The network difficulty decreased subsequent to the halving by 15%, but quickly returned back to levels prior to the halving. This posed a difficult challenge to many bitcoin miners as they saw the bitcoin block reward drop by 50% with similar network difficulty rates meaning that revenue dropped by nearly 50% for all bitcoin miners, including Hut 8.”
Despite a C$6.4 million gross loss for Q2, Hut 8 reported C$2.8 million in net income – thanks to a C$9.4 million gain on the re-measurement of its bitcoin holdings. Hut 8 has 2,954 BTC on its balance sheet as of the end of Q2 2020.
The company also noted it had successfully raised C$8.3 million in gross proceeds from its public offering, which closed near the end of the quarter. According to management, the additional capital has already been committed to upgrading its existing mining equipment.
“This upgrade is a big step towards modernizing Hut 8’s equipment and increasing the overall efficiency of its bitcoin mining fleet,” the company said in a statement.
As of press time, Hut 8 shares have declined 2% following the earnings release.
Bitcoin Mining Firm Layer1 Accused of Copyright Infringement
Layer1 — a Bitcoin mining firm backed by PayPal co-founder Peter Thiel — was accused of copyright infringement.
United States-based cloud computing company Lancium LLC has filed a lawsuit against Bitcoin (BTC) mining firm Layer1 for patent infringement in the Western District Court of Texas.
According to a complaint filed on Aug. 14, the power usage model employed by Layer1 for Bitcoin mining violates Lancium LLC’s patent filed in March 2020.
The founder of Lancium LLC, Michael McNamara and Raymond Cline, had reportedly filed the patent after formulating a method to help data centers shut down or start operations depending on the cost of electricity in near real time.
The company claims that its data center power management system allows data centers to be more flexible with their energy consumption and more efficiently handle computing workloads including Bitcoin mining.
Layer1 had purportedly been using the exact same method to operate its Bitcoin mining operations while calling it “its proprietary demand-response software.”
Lancium alleges that Layer1 has violated U.S. patent laws by infringing on multiple parts of Lancium LLC’s patent “by manufacturing, using, offering to sell, selling, and/or importing infringing systems and methods for adjusting power consumption utilized in or by at least Layer1’s Bitcoin mining facilities.”
The firm argued in its statement that Layer1’s alleged transgression had caused “irreplaceable harm” to Lancium LLC. While the value of damages will be determined during trial, the company said the amount “cannot be less than a reasonable royalty” and requested compensation for the same.
Lancium has also requested the court to publish a permanent injunction that could prevent Layer1 or its employees from further violating the company patent.
Layer1 did not immediately respond to Cointelegraph’s request for comment.
Top Bitcoin Mining Pools See 15% Hashrate Drop Amid Continuous Rainstorms In China
Major Chinese bitcoin mining pools are each seeing daily hashrate drops of between 10% and 20% following continuous rainstorms in Sichuan.
China’s southwestern Sichuan province, a mountainous region that is estimated to have over 50% of the Bitcoin network’s total computing power, has been hit by heavy rainstorms since last week, which peaked over the last two days.
The heavy rainstorms have caused electricity outages in parts of the region as hydro-plants stop generating power to help discharge the floods. Some counties are also experiencing telecommunication and internet breakdowns, said Kevin Pan, CEO and co-founder of PoolIn.
As result, impacted bitcoin mining farms in the region are forced to unplug from the network for the time being. It’s not clear when the situation will prove as the rainstorms are still ongoing.
Data from BTC.com shows the world’s top four bitcoin mining pools – PoolIn, F2Pool, BTC.com and Antpool, all based in China – have each seen their hashrates drop between 10% and 20% over the last 24 hours. The computing power connected to these four pools accounts for around 50% of the Bitcoin network’s total.
Pan said in a Weibo post Tuesday China time that in addition to mining farms being forced to unplug due to electricity and internet disruptions, some have also proactively paused operations ahead of time and evacuated their on-site staff for safety precautions.
According to the Xinhua News Agency, the accumulated rain volume in a dozen most-impacted cities in Sichuan between Aug. 10-15 alone has already surpassed the average August monthly volume in any year’s record.
Further, one major highway that leads to Sichuan’s mountain area, where most of the mining farms are located, is shut down due to severe floods and mudslides.
Meanwhile, bitcoin’s last three-day and one-day average hashrate has dropped to around 123 and 110 exahashes per second (EH/s), respectively. These numbers are down over 3% and 10%, respectively, from the seven-day rolling average around 127 EH/s, which is still at an all-time high.
The monsoon season in China every year brings abundant rain and thus excessive hydropower resources especially in the country’s southwestern regions, including Sichuan and Yunan. Such energy excess leads to cheap electricity prices that have been attractive to bitcoin miners.
But over the years, the unpredictable weather also caused floods and mudslides, which resulted in bitcoin mining farms halting operations temporarily or even being completely destroyed.
Marathon Brings New Bitcoin Mining Rigs Online, Sees Itself Becoming Cash-Flow Positive
Nasdaq-listed cryptocurrency mining company Marathon Patent Group received and deployed two shipments of new mining machines, which increased the company’s hashrate by 130 petahash per second to 186 petahash per second.
* According to an announcement Monday, the company received 700 WhatsMiner M31S+ Miners from MicroBT and 600 S19 Pro Antminers from Bitmain.
* 1,000 additional S19 Pro Antminers are expected to arrive between September and December this year leading to an expected additional hashrate increase of 153.4 petahash per second.
* “We believe that the increased hashrate production will mean the company will become cash-flow positive on a go forward basis for the first time since we embarked on this pivot to become a bitcoin mining company,” said CEO Merrick Okamoto.
* Marathon shares, which were already down about 50% from their yearly high set earlier in August, are down 10% from their Monday open, trading around $2.52 at last check.
Nvidia Teases A Massively Improved RTX 3080, But Will It Be Good For Mining?
The performance gains probably won’t be enough to overcome Nvidia’s mining disadvantage.
Nvidia is set to release the next generation of its popular RTX series of graphics cards on Sep. 17. One of these will be the RTX 3080, which comes as the mid-range card among its peers the 3090 and 3070.
However, the performance of the card is set to eclipse the performance of the previous generation’s equivalent, the RTX 2080 Ti. According to Tom’s Hardware, the GPU is promised to be “twice as fast” as the last generation by Nvidia and its raw specifications suggest that the gains could even be higher.
All of this while the price is set to remain the same at $700. The RTX 3090 appears to be a less efficient model in terms of performance to cost ratio, with twice the price but only a 20% performance gain.
But all of these figures apply to gaming, not necessarily mining. AMD has traditionally been dominant in this sector as its cards generally achieve higher hashrates per Watt or unit cost.
The RTX 2080 Ti generally benchmarks lower even compared to its predecessor, the 1080 Ti. Part of this is due to the specific nature of these cards. The RTX series focuses on providing innate ray tracing capabilities, which is very useful for high-end gaming but does nothing for miners.
Philip Salter, head of operations at Genesis Mining, told Cointelegraph what the RTX 3080 could mean for the mining industry:
“What hashrate the 3080 can do remains to be seen. In theory, Ethereum hashrate might be 60%-70% faster, if you look only at memory bandwidth. The advertised 1 TB/s of bandwidth has already been delivered by AMD with the Vega VII, and you can reach 100 MH with that card.”
But he explained that reaching such hashrates requires optimizing the memory timings for Ethereum mining. That can only be done by changing settings in the GPU’s VBIOS, an internal firmware. “Nvidia does not allow you to use custom VBIOS mods however, so you will be stuck with the memory timings that are set by the manufacturer,” Salter added.
Nvidia could release an official VBIOS mod to enhance Ethereum mining, but so far this hasn’t happened.
In addition to the performance issues, the pricing is also likely to be a problem. Nvidia has a “strong position in the gaming market” and the price of its cards generally reflects that, Salter said. The premium for the ray tracing cores also contributes to souring the deal for miners.
“In the end, the 3080 will probably not be able to beat AMDs offering of affordable, tunable GPUs for mining,“ he concluded. However, should the current Ether (ETH) price rally continue, demand for GPUs may become so large that Nvidia cards could suddenly become attractive, similar to how it happened during the 2017 bull market.
‘Exclusive Mining’ Could Have Negative Implications For The Blockchain Industry, Say Experts
A new mining concept is facing criticism in the blockchain sphere.
Dr. Elias Strehle of the Blockchain Research Lab and Lennar Ante of the University of Hamburg recently warned that blockchain nodes engaging in exclusive mining “have no incentive to forward new transactions to their peers.”
They speculated that crypto miners may instead be incentivized to keep transactions confidential “in the hope of being the only one who can earn the associated transaction fees.”
Exclusive mining, which is a type of collusion between a transaction initiator and a single miner or pool, uses private channels to confirm transactions rather than broadcasting them on the public blockchain. It is only after they are recorded in a block that public blockchain that users become aware of such transactions.
The authors alleged that, since transaction costs represent regular income for miners, “significantly increased transaction costs could be used to launder money” by colluding with a miner.
As a result, criminals may see smaller blockchain networks “as more suitable vehicles for money laundering or tax evasion via exclusive mining”, the researchers noted.
Dr. Strehle and Ante identified two other possible motivations for engaging in exclusive mining: reducing transaction cost volatility and hiding unconfirmed transactions from the network to prevent frontrunning.
In June, Cointelegraph reported on a number of mysterious transactions that have stumped the wider community. Some suggest they could be examples of money laundering, or revenge from a disgruntled exchange employee.
DCG’s Foundry To Finance Bitmain Customers In North America
The new partnership targets Bitmain’s end customers.
China’s crypto mining giant Bitmain has entered a new partnership to streamline its operations in North America.
As Bitmain officially announced on Sept. 10, the company has officially partnered with Foundry, a wholly-owned crypto mining subsidiary of major cryptocurrency firm, Digital Currency Group, or DCG. Within the partnership, Foundry will provide financing to Bitmain’s end customers in North America.
According to Bitmain, obtaining financing is more difficult for crypto miners than for firms in other industries. Foundry, in its turn, will help “ship a significant number of machines into North America this year,” according to Su Ke, the global sales and marketing director of Antminer at Bitmain.
The announcement comes shortly after DCG officially introduced Foundry in late August 2020. Formed in 2019, Foundry offers institutional expertise, capital and market intelligence to crypto miners and manufacturers. According to Bitmain, Foundry has emerged as “one of the largest Bitcoin miners in North America” and helped to procure “almost half of the Bitcoin mining” in the region in 2020.
Bitmain has been collaborating with the company “for some time,” a Bitmain representative said. According to the firm, Foundry’s efforts not only “breaks down barriers to entry and growth for mining businesses,” but also “strengthens the overall mining ecosystem.”
This Crypto Mining Operator Was Named Bitmain’s Sole North American Cooperative Repair Center
North America now has its own Bitmain repair center.
Crypto mining operator Core Scientific is set to become the first North American cooperative repair center for major crypto mining hardware manufacturer, Bitmain.
According to an announcement shared with Cointelegraph, the company will offer repair services for Bitmain’s machines. The company says that this will reduce costs associated with shipping hardware to Asia, and curtail the time it takes to fix Bitmain’s proprietary hardware.
Core Scientific will also be able to perform repairs on out-of-warranty machines, with engineers certified by the Bitmain’s Ant Training Academy.
Speaking with Cointelegraph, Taras Kulyk, Core Scientific’s Senior VP of Blockchain Development, highlighted China as the dominant jurisdiction within the digital mining sector. He also noted that the country is currently the global leader in terms of Bitcoin’s (BTC) hashrate.
He acknowledged, however, that global hashrate diversification has increased in recent months as other countries (the U.S. in particular) vie for their place in the digital mining industry:
“This growth in demand has massively increased the strain on the repair services needed to maintain the fleet within the US and Canada. Importantly, being selected as the cooperative repair center for Bitmain will allow our customers, as well as other Bitmain product users, within North America to materially reduce downtime and the costs involved in repairing their bitmain hardware.”
Russell Cann, Core Scientific’s Chief Customer Success Officer, spoke with Cointelegraph on the benefits of a North American repair center:
“At a minimum, the Core Scientific warranty repair center will save customers the international shipping cost of units going to Hong Kong. More importantly, the customer downtime of a unit in-warranty repair will be significantly shortened by having a large US operator handle warranty repair. Current shipping savings is estimated to be as much as US$100/unit and having a repair center within North America should cut the repair time by as much as two weeks.”
Over the past year, the crypto mining industry in the United States has witnessed an uptick in activity, with Bitcoin’s hash rate increasing by 78% between September 2019 and April 2020.
Profit Taking Bitcoin Miners Won’t Stop The Next Bull Run: On-Chain Analyst
Bitcoin miners sold substantial amounts of BTC throughout the past two months, but on-chain analysts believe it won’t stop the next bull run.
Historical data shows that some miners began to sell Bitcoin (BTC) at the end of July, leading to increased selling pressure in the cryptocurrency market.
Eventually, the dominant cryptocurrency fell steeply from mid-August, recording a 13% fall and since then BTC has struggled to retake the $12K mark.
According to CryptoQuant CEO Ki Young Ju, continued selling by miners might not be enough to prevent a bull run. On-chain data analysis firms closely observe the movements of miners and whales because they hold significant amounts of BTC.
Willy Woo, an on-chain analyst, explained that miners represent one of the two external sources of selling pressure for Bitcoin. He previously said:
“There’s only two unmatched sell pressures on the market. (1) Miners who dilute the supply and sell onto the market, this is the hidden tax via monetary inflation. And (2) the exchanges who tax the traders and sell onto the market.”
When miners start selling their Bitcoin holdings, typically to cover expenses, it could trigger a correction in the cryptocurrency market.
For instance, From Aug. 17 to Sept. 5, the price of Bitcoin dropped from $12,486 to $9,813. During that time, several whales sold Bitcoin right at $12,000 and the same behaviour was observed amongst miners.
The selling pressure coming from miners and whales noticeably has been attributed to the current crypto market slump but in the longer term, Ki explained it is not enough to stop a prolonged bull run.
If miners abruptly sell a significant amount of BTC, it could cause a severe correction as a small price movement could trigger liquidations from heavily-leveraged traders. Hence, even a relatively small sell-off by miners could theoretically cause massive price swings.
Ki says the intensity of the sell-off from miners was not strong enough to halt future bull runs. He said:
“Miner Update: Some miners began selling at the end of July, but I think in the long-run, miners didn’t sell BTC large enough to stop the next bull-run.”
According to ByteTree, the net inventory of Bitcoin miners declined by 125 BTC per week in the last 12 weeks. The data indicates that miners sold approximately $1.362 million BTC per week week atop the BTC that they mined and sold.
As Ki emphasized, the data shows that miners sold substantial amounts of BTC, but not in amounts that were irregular to normal behaviour.
Post-Halving Bull Cycle Remains A Possibility
Bitcoin is still hovering above the critical $10,000 technical support level despite multiple attempts by bears to drop the price below the key level.
The resilience of Bitcoin amidst a heightened level of selling pressure suggests a cautiously bullish trend in the long term.
Several on-chain metrics also indicate that now is a healthy accumulation phase for Bitcoin. Rafael Schultze-Kraft, the CTO at Glassnode, said:
“Short-Term Holder Net Unrealized Profit/Loss (STH-NUPL) with a #bullish signal here imo. That bounce of the 0-line was important, is very characteristic for previous bull markets, and historically a good buying opportunity.”
Crypto Mining Activities Are Now Regulated By The Venezuelan Gov
But there is always a catch when it comes to Maduro’s government.
Venezuela’s National Superintendency of Crypto Assets and Related Activities, or SUNACRIP, has issued the first decree to officially regulate all crypto mining activities. In order to qualify, miners will need to meet specific requirements.
An official announcement was first published in the Gaceta Oficial and signed by the head of the SUNACRIP, Joselit Ramirez. It stated that residents in Venezuela who are interested in mining Bitcoin (BTC) and other cryptocurrencies must request a license and join the so-called “national pool.”
The legal framework asks people to disclose what kind of activities they would like to do in crypto mining, such as trading, importing, or using mining equipment. The government will also issue a special license for those who want to manufacture ASIC mining hardware or build mining farms.
About The “National Pool,” The SUNACRIP Defined It As Follows:
“A group of pooled miners agreeing to share block earnings in proportion to the contributed mining hash power. They share a similar operation to cooperatives, and it would be in charge of the National Superintendency of Crypto Assets and Related Activities (SUNACRIP).”
The decree also states that the SUNACRIP “may” offer benefits, incentives, and even “tax exemptions to encourage miners to join the national pool.” However, if Venezuelan crypto miners don’t join the national pool, they’ll be subject to the Comprehensive Crypto Assets System’s sanctions.
The new regulation doesn’t clarify if the government has the legal authority to freeze crypto mined within the national pool, or what type of sanctions will be imposed on people who mine outside such a public pool.
Crypto miners should apply for the licenses through the Comprehensive Registry of Services in Cryptoassets, or RISEC, a system run by the SUNACRIP.
Although Venezuela is known for having a highly active crypto mining population, the government has not always favored such activities.
Venezuelan Minister of Habitat and Housing, Ildemaro Villarroel, recently announced that crypto mining operations would not be allowed in any state-owned housing or neighborhoods that are part of the “Gran Misión Vivienda” project (Great Home Mission).
Preliminary Tests Suggest Nvidia RTX 3000 Series May Take AMD’s Mining Crown
The RTX 3080 is apparently twice as fast as the previous generation.
The newly released generation of Nvidia graphics cards, the RTX 3000 series, is generating some buzz among miners as it is expected to be a vast improvement over the previous generations.
While the cards were initially speculated to be only a minor upgrade, new information seems to confirm that they could reach hash rates of around 100 Megahashes per second for Ethereum and Ethash mining.
This would be more than a two-fold improvement over many of the top-of-the-line cards offered on the market today by both Nvidia and AMD. According to mining calculator Whattomine, the AMD RX Vega series, 5700 series and Nvidia’s previous RTX 2000 series all range between 40 and 50 MH/s with light optimizations.
Preliminary tests circulating in the community firmly place the RTX 3080 and 3090 — the mid to high range cards — between 90 MH/s and 115 MH/s depending on the GPU and the optimizations.
Kristy-Leigh Minehan, former chief technology officer of Core Scientific and Genesis Mining, said that these results are to be expected given the cards’ memory bandwidth. According to her, the “rule of thumb” is that the Ethereum hash rate is 10% of the memory bandwidth in Gigabytes per second. Leaked specifications suggest that the RTX 3080 ranges between 700 GB/s and 900 GB/s, while the RTX 3090 can reach more than 1000 GB/s.
Minehan also highlighted that while flashing the bios is impossible on Nvidia, optimizing the memory timings for Ethereum can be done on-the-fly with software, eliminating AMD’s purported competitive advantage. In a conversation with Cointelegraph, she claimed that the RTX 3000 series will be “beyond better than AMD.”
It is worth making a direct comparison between the RTX 3080 and its closest competitor from AMD, the Radeon 5700 XT. The 3080 can be obtained for around $600 to $700, while the 5700 XT sells for about $400. The AMD hashes at around 51 MH/s, while the Nvidia card is expected to reach at least 90 MH/s.
However, the Nvidia is hungrier than the AMD, having a thermal design power — an industry measure for maximum energy consumption — of 320 Watts. The card from AMD clocks in at 225 Watts. Nevertheless, the higher hashing rate more than makes up for this difference in energy efficiency. It is also worth noting that these figures are unlikely to be entirely accurate for actual mining usage.
While many miners located in regions with expensive electricity will often look only at energy efficiency, professional miners will also heavily focus on the unit price. “All three are important,” Minehan said referring to hash rate, price and energy usage.
From that point of view, the 5700 XT’s price-to-hash rate ratio is almost equal to that of the Nvidia. This measure would also immediately disqualify the beefier RTX 3090, which comes at a $1,500 price tag for a modest 10-15% hashing improvement over its smaller brother.
In summary, Nvidia’s new RTX 3000 series appears to be quite competitive with AMD in the field of Ethereum mining, in contrast to previous generations. The RTX 2000 series and, to a lesser extent, the GTX 1000 series were generally more expensive than AMD while featuring equal or lower hash rates.
The Top Crypto-Mining Graphics Cards To Get A Big Bang For Your Buck
Cryptocurrency miners are back in business, but which graphics card should you choose to not be left with an empty wallet?
Now that we are at the tail end of 2020, the big hardware manufacturers are starting to announce their latest, fastest offerings set to be released ahead of the holiday season. Meanwhile, the cryptocurrency mining market continues to expand rapidly against all odds. Here’s an overview of which producers offer the best graphics cards in the market and which cards suit specific types of mining.
Bitcoin or Ether?
In terms of choosing a cryptocurrency to mine in 2020, there have been no significant changes. This year, most video cards continue to be able to mine Ether (ETH) or its forks. As for Bitcoin (BTC), mining of the world’s first cryptocurrency stopped being available to ordinary people a few years ago, as it requires serious investments, special equipment and access to large amounts of cheap electricity.
This is even more so the case now, as BTC mining is bringing in half the income after the reward halving took place in May. The difficulty of mining continues to increase, and in September, it updated to an all-time high of 19.31 trillion at block 649,152.
As a result, many popular devices such as the Antminer S9 have become obsolete. After the halving, the most profitable miners became the Whatsminer M30S ++ from the Chinese company MicroBT, which can deliver a hash rate of up to 112 terahashes per second and bring in just over $8.50 per day in profit, and Bitmain’s Antminer S19 Pro, which can reach a hash rate of 110 TH/s and see a daily profit of just under $8.50. But the prices of these miners are rather steep: A Whatsminer M30S++ costs $1,800, and the Antminer S19 Pro comes in at $2,407.
When it comes to Ether and its forks, graphics-card mining is once again becoming popular for several reasons. First, over the past two years, Ethereum’s hash rate has decreased by 15% (when compared with August 2018), now sitting at 256.221 TH/s. This means that Ether is now easier to mine.
Second, both modern and old models of cards can still be used for mining. For example, the Nvidia 1050 Ti, released in October 2016, and the Radeon RX 580, released in April 2017, are still very popular. Prices for such old cards are constantly decreasing as newer cards come out, which is encouraging miners to return to the market. But most importantly, the price of ETH tripled from the start of 2020 to the beginning of September, making Ether still very profitable to mine.
There is another factor that attracts the interest of miners: the upcoming transition to Ethereum 2.0 and a proof-of-stake algorithm, which is expected to commence before the end of the year. A spokesperson from WhatToMine, a popular web-based calculator for evaluating the profitability of mining cryptocurrencies, told Cointelegraph that Ether will continue to be in demand, not only this year but also in 2021:
“This cycle we can expect further expansion of DeFi projects, which will in turn make ETH network more and more popular. As a result block reward for ETH (the fee part) should increase in cycles with general uptrend, making ETH mining the most profitable for GPU miners.”
What To Buy?
At the beginning of the year, Cointelegraph reviewed the graphics cards of the two largest manufacturers, Nvidia and AMD, and Nvidia cards seemed to have an upper hand in mining. However, taking into account the fact that Ether mining has gained a second life, AMD cards should not be written off, as the company’s Vega and RX generations are still very suitable for Ethash algorithms.
Regardless of the manufacturer, the most important factor is return on investment, as any miner must first invest a decent amount of money before turning any profit. A standard rig requires six graphics cards, and as a result, a miner can spend over $9,000 if buying the popular Nvidia RTX 2080 Ti with 8 GB or 11 GB of RAM memory. But what about those who can’t afford the top shelf but still want to make a profit? Here are the most popular graphics cards right now for Ether mining that cost under $400.
Nvidia GTX 1660 Super
This card was released in October 2019, meaning the tech is still fresh. The graphics card has 6 GB of memory and Turing architecture, which executes more clock frequency, uses less power and has 20% better performance than the GTX 1660. The price of this model ranges from $240 to $250.
AMD Radeon RX 5700 and RX 5700 XT
In summer 2019, AMD introduced a new line of RX 5700-series graphics cards to the market. These cards use fin field-effect transistor, or FinFET, technology, which results in better energy efficiency when mining due to the reduced size of electronic components and lower current consumption.
The specifications of the RX 5700 include 8 GB of GDDR6 memory and a power consumption of 180 watts. The RX 5700 XT has a power consumption of 225 W, but the base frequency is also 10% higher than in the RX 5700 model. These cards are slightly more expensive, costing around $430, but can be snatched up with a discount at around $400.
Nvidia RTX 2060 Super
The RTX 2060 Super card may not be an obvious choice, as apart from having 8 GB of memory, it is no different from the RTX 2060. But at the same time, it uses five different algorithms — GrinCuckarooD29, GrinCuckatoo31, DaggerHashimoto, X16Rv2 and BeamV2 — which makes it more stable, safe and suitable for mining.
In fact, this is an intermediate option between the RTX 2060 and the RTX 2070, but it can be found online for just $399, while the RTX 2070 will cost you around $530 — and a $130 difference is a lot of money in this business.
AMD Radeon RX 580
AMD’s RX 580 was released back in 2017 and is still one of the best low-budget GPUs for mining, with a price ranging between around $180 and $230. The card is used mainly for mining Ether and has 8 GB of memory, but it consumes little power at just 150 W. The only potential competitor might be the RX 570, but those card with only 4 GB of memory will no longer be able to mine Ether in 2021.
Nvidia has a dedicated series of graphics cards for crypto mining. The Nvidia P106-100 “mining edition” is based on the Nvidia GP106 GPU (Geforce GTX 1060), which is almost the same as a regular Geforce GTX 1060 but with some slight modifications. The P106-100 has no video outputs and no rear panel, and the card is equipped with 6 GB of memory.
The “mining edition” in the name does not mean that the new product is better at mining than the usual version but rather that it’s designed specifically for miners, as everything considered nonessential has been removed, allowing it to be sold for around $320, a whole $170 cheaper than a GTX 1060 unit.
So, Which One Is Best To Buy?
How long will it take for these budget cards to recoup their initial price? For comparison, one of the most popular cards for mining today, the Nvidia RTX 2080 Ti, brings in around $1.66 per day when mining Ether. If purchased for an average price of around $1,400, this graphics card will take about 28 months to pay for itself, without taking into account the cost of electricity.
So, here is what the calculations say: The Nvidia GTX 1660 Super, which can be bought for $240, would bring $0.65 per day and take 12 months to pay for itself. The AMD Radeon RX 5700 XT costs $400 and would have an 8.5-month payback time while bringing in $1.56 per day.
The Nvidia RTX 2060 Super can be bought for $399 and will bring $0.92 per day when mining Ether. This card will pay off in 14 months. The Radeon RX 580 is a very popular card due to its rather low price of around $200, and this card will recoup in just seven months, bringing in almost a dollar ($0.96) per day. Created specifically for mining, the Nvidia P106-100 will bring $0.85 per day and, at a cost of $320, will pay off in just over 12 months.
However, this is not an exact science, and every miner should keep in mind that the algorithms of any crypto are constantly becoming more complex, which makes it harder to mine and longer to recoup their investment into their mining equipment.
New Cards Right Now?
Given the excitement around decentralized finance, a crypto boom looms on the horizon once again, and the upcoming new products may take it further. In September, Nvidia released its new generation of GeForce RTX 3000 graphics cards, with some people already saying that it can produce 81–89 MH/s during Ether mining. And the upper-class model, the GeForce RTX 3090, is expected to demonstrate 120–122 Mh/s. If so, then Nvidia may face a shortage of cards, as miners will buy everything, leaving gamers with nothing.
But AMD is not lagging behind and will present its Radeon RDNA 2 line at the end of October, which will directly compete with the 3000 series from Nvidia. The emergence of new cards will be of great interest to the crypto mining community. Andrej Škraba, head of marketing at NiceHash — a crypto mining and trading platform — is confident that the technological innovations of AMD and Nvidia will bring higher productivity:
“Nvidia just launched 3000 series, but current availability is super low. New RTX cards will bring higher hash-rates and miners will be upgrading their used 1060s and old AMD cards (480s/580s). We still have to wait for the AMD announcement to see what they will bring to the market.”
Fidelity, Vanguard, Schwab Funds Have Been Loading Up on Crypto Mining Stocks
Three of the largest asset managers are diversifying their funds to hold blockchain stocks, throwing more establishment financial might behind bitcoin’s technology.
Charles Schwab has begun purchasing shares of Riot Blockchain, joining Fidelity and Vanguard – already investors in Riot, HIVE Blockchain Technologies, Hut 8 and BC Group – in allocating mutual fund holdings to a cryptocurrency company, according to financial filings with the U.S. Securities and Exchange Commission.
The stock purchases also double down on the mutual fund managers’ equity investments and experiments in the space. Schwab this summer invested in Alchemy, an Ethereum application platform, while Vanguard has been piloting Symbiont’s blockchain for foreign exchange transactions, and Fidelity has a digital assets arm – set to launch a trading service and a bitcoin index fund – and has backed Coin Metrics, Fireblocks and Everledger.
Filings for the first half of this year show Charles Schwab Investment Management, Inc. purchased 22,977 Riot shares for $52,000. Two Vanguard funds – the Vanguard Index Fund and Vanguard Valley Forge Index Fund – were invested in 954,229 Riot shares worth $2,118,000, and two Fidelity funds were separately invested in 176,242 Riot shares worth $230,115 (split between a NASDAQ index and three market indices) and 2,769,759 HIVE shares worth $1,003,163.
Riot Blockchain, based in the U.S., and HIVE Blockchain Technologies, based in Canada, provide services for mining bitcoin, a process where new cryptocurrency is minted.
Outside the U.S., a third Fidelity fund – Fidelity International – first acquired this year 10,451,094 shares valued at $1.80 each of Hut 8, a Canadian bitcoin mining company, and 17 million shares priced at HK$6.50 (US$8.30) of BC Group, a Hong Kong-based digital asset platform, earlier filings indicate.
The Riot shares in the two Vanguard funds and a third Vanguard fund – the Vanguard Institutional Index Fund – are back up from the last three years, which ended with them holding a combined 269,610 shares for $7,912,000 in 2017, 187,049 shares for $282,000 in 2018 and 826,391 shares for $925,000 in 2019.
Holdings also ticked up again for the Fidelity fund invested in Riot – the Fidelity Concord Street Trust – which bought 188,277 shares for $1,185,607 ending in 2018 and 159,263 shares for $270,375 ending in 2019. They dipped for the Fidelity Securities Fund invested in HIVE, with 5,792,880 shares for $82,433,000 ending in 2017, 4,972,700 shares for $821,000 ending in 2018 and 2,784,259 shares for $367,980 ending in 2019.
The Blackstone Group’s Alternative Investment Funds were also holding Riot Blockchain stock last year, but stopped including it in their portfolios.
The First-Ever Mining Hardware Marketplace Just Launched
This company presents an alternative to “sketchy” Telegram channels for second-hand mining equipment.
Asic Jungle has launched a beta version of what it calls “the first-ever mining hardware marketplace” for cryptocurrency mining hardware. The company’s CEO Artem Bespaloff told Cointelegraph that he has created a trusted platform for second-hand mining equipment that operates without any middlemen:
“[It’s] the first and only online marketplace where buyers can interact directly with sellers through the platform and not have to use any brokerage services or Telegram channels (I call them ‘sketchy’ Telegram channels) because all sorts of things go on there. And we decided to create this ecosystem where buyers and sellers deal together between themselves.”
The company’s solution to these problems is a two-sided marketplace that connects ASIC buyers and sellers in a secure and transparent environment. According to Bespaloff, ASIC brokers currently charge high premiums that are taking advantage of the market’s lack of price discovery mechanisms. He believes that these brokers create information asymmetry by withholding pertinent information.
Bespaloff said that Asic Jungle upholds a number of security features to ensure that transactions happen in a trusted environment, including an emphasis on AML compliance. As the Canada-based company will be serving customers from all over the world, they intend to comply with both local laws and regulations and the compliance laws of the United States.
Although mining equipment becomes progressively less efficient with the passage of time, Bespaloff assured that there is plenty of demand for second-hand equipment in places with very cheap or free energy sources, like some areas in Canada and Venezuela — though the residents of the latter may be excluded from participation in an effort to comply with U.S. sanctions.
Both Bitcoin and Ethereum (ETH) have recently experienced record-setting hashrate increases, indicating there will be no lack of interest in mining equipment in the near future.
This New Service Plays Matchmaker Between Solo Miners, Big Mining Farms
A first-of-its kind service wants to play matchmaker between big-scale mining facilities and individual miners looking for a hosting setup.
Bitcoin mining company HASHR8 just launched its Compass platform, a search engine of sorts for individual miners to shop for a hosting facility to operate their mining hardware for them. While mining farms hosting solo miners’ machines is nothing new, Compass is the first service to create a product to sync miners with hosting providers.
The initiative was born from a drive to keep Bitcoin’s hashrate distributed, and that starts with making sure the smaller-time miners can stay competitive.
Marathon Purchases Additional 10,000 S-19 Pro Miners From Bitmain
Nasdaq-listed bitcoin mining company Marathon Patent Group signed a contact to purchase an additional 10,000 Antminer S-19 Pro miners from Bitmain, according to a Monday press release.
* The machines, when delivered and fully installed, will add 1.10 exahash to the company’s existing mining power.
* Delivery of Marathon’s new machines is expected to begin in January 2021 with all miners fully deployed by the end of Q1 2021, according to CEO Merrick Okamoto.
* This latest contract marks the continued rapid expansion of Marathon’s mining power after signing another $23 million deal with Bitmain for 10,500 additional miners in August, as CoinDesk reported.
* The Las Vegas-based company also formed a joint venture early this month with Maryland-based Beowulf Energy to supply power to Marathon’s miners at a rate 38% lower than its current costs.
Bitcoin Mining Firm Hut 8 Appoints Jaime Leverton As CEO
Publicly traded mining company Hut 8 announced Jaime Leverton as its new CEO Monday, set to replace interim CEO Jimmy Vaiopoulos on Dec. 1.
Former CEO Andrew Kiguel stepped down in late April and then-CFO Vaiopoulos was elevated on a temporary basis while the company’s board of directors searched for a permanent replacement. With Leverton’s appointment, Vaiopoulos will return to his prior role for the Toronto-based company.
Leverton is joining Hut 8 from her current position at eStruxture Data Centers, where she’s chief commercial officer. From Leverton’s LinkedIn profile, it appears her role at Hut 8 will be her first position in the cryptocurrency industry.
On-chain Metrics Indicate Bitcoin Miners’ Influence On The Price Is Diminishing
Research suggests that Bitcoin miners are holding less of the asset.
A new report by on-chain analytics provider CoinMetrics suggests that miners’ considerable influence on the Bitcoin network is slowly diminishing.
The research analyzed miner and pool addresses and spending in order to determine whether their influence over the network as a whole had changed over time. As miners receive newly issued Bitcoin rather than buy it, they are natural net sellers of the asset.
Measuring the net flows from two types of addresses associated with block rewards revealed that there has been a gradual reduction in miners’ effect on liquidity:
“On-chain metrics like miners’ holdings and net transfer volumes indicate that miners’ influence on the network is slowly waning.”
Operating costs such as power and rent are fiat-denominated which adds pressure to sell BTC for fiat. The research found that the percentage of the supply held by miners has generally decreased over time.
The addresses that receive the block reward, and the ones that receive immediate transactions from them, have both seen a decline in the number of coins held.
When viewed in the context of total supply, the gradual reduction in supply held by miners and pools is even clearer. That said, the report confirmed that miners and pools still control a “substantial chunk” of the total supply.
Miners, especially those active in the network’s early days, control a significant amount of BTC.
But the number of coins held by miners has generally declined throughout the network’s history.
— CoinMetrics.io (@coinmetrics) November 3, 2020
The percentage of total supply held by pool and miner addresses has declined from around 25% in 2015 to approximately 18% today according to the chart. Lower holdings means that miners have less BTC to dump on markets which diminishes their impact on prices.
Net flows were volatile in the network’s early days as the amount sold varied wildly, along with prices. However, volatility has gradually decreased over time, likely due to halving events and reductions in block rewards.
“These flows have also experienced a gradual dampening in volatility, indicating a gradual reduction in miners’ effect on liquidity.”
Several other on-chain metrics have also been in decline recently such as hashrate, which has dropped due to seasonal changes in China where most of the mining is conducted. The recent difficulty adjustment has also been noted as its largest single downward adjustment during the ASIC era according to CoinMetrics.
Crypto Mining Is Now Drawing In The World’s Top Renewables Producers
At what point will greening crypto energy consumption be enough?
En+ Group, the world’s top producer of low-carbon aluminum and the largest private-sector generator of hydropower, has entered its first crypto mining joint venture.
The new venture, called Bit+, will focus on creating facilities that support crypto mining with a low carbon footprint. En+ Group’s partner in Bit+ is the Russian company BitRiver, which provides hosting services and turnkey solutions for large-scale, institutional crypto mining operations.
BitRiver currently operates the largest data center offering colocation services for Bitcoin (BTC) mining in the Russian Federation and offers similar services across the country and to CIS neighbors.
The first result of the Bit+ venture is the installation of a new facility close to BitRiver’s existing data center in Bratsk, located in the Irkutsk region of the Russian Federation. En+ Group has committed 10MW of electricity to the facility, which is composed of modular crypto mining units and is already operational. The companies have plans to scale the facility’s capacity to roughly 40MW.
For its initial phase, the facility is composed of 14 modular units, each of which is a converted shipping container that is as large as a full-scale crypto mining data center. Each unit can accommodate up to 400 of Bitmain’s S19 Pro miners.
In an official statement, En+ Group provided some context regarding the choice of the Irkutsk region and its apparent viability for lower-carbon solutions to cryptocurrency mining:
“Our energy assets in the [Irkutsk] region produce low-carbon, inexpensive electricity from renewable sources, and we are able to offer surplus energy to these partnerships. Moreover, the low average annual temperature reduces the energy required by the datacentres, making them more efficient and further minimising their carbon footprint.”
As reported, high energy consumption remains an Achilles’ heel for the crypto sector, particularly for coins such as Bitcoin, whose consensus algorithm is computationally intensive and thus demands exceptionally high levels of energy to maintain.
Several energy experts have attempted to reorient the energy debate surrounding Bitcoin away from energy consumption. They have instead focused on analyzing where that energy is produced and how it is generated, and have argued that it is most important to ensure that less harmful choices are made at the power generation stage.
With financial and geopolitical actors now entering the endgame of global climate politics, it remains to be seen how far greening crypto’s energy consumption, instead of aiming to reduce it, will be enough to make the sector truly sustainable.
Bitcoin Miner Revenue Surges To Pre-Halving Levels
Miners are likely starting to sell some BTC at this point.
As the Bitcoin (BTC) price is reaching its highest levels since January 2018, Bitcoin mining is getting more profitable due to a number of factors.
According to data from Blockchain.com, BTC miner revenue has soared to levels not seen since Bitcoin’s third halving in May 2020, which reduced the miner block reward from 12.5 BTC to 6.25 BTC.
As such, BTC miners’ revenue hit $20.8 million on Nov. 4. According to Blockchain.com, this is the highest point recorded since September 2019, when the miners’ block reward was twice as much as now.
A spike in BTC miner revenue levels is coming from the Bitcoin price doubling since May’s halving. On Nov. 4, the price reached a new 2020 high at $15,950, jumping more than 20% over the past seven days.
The jump is also due to the simultaneous rise in Bitcoin transaction fees. As reported by Cointelegraph, Bitcoin transaction fees surged by nearly 200% in late October. As such, the percentage of BTC miner revenue from fees has significantly increased, accounting for $4.15 million or roughly 20% of total miner revenue.
Amid parabolic growth in revenue, some miners are likely to start cashing out at this point.
According to analysts at CryptoQuant, some miners may be compelled to start selling BTC since the Miner’s Position Index is currently at around 4. Values above 2 indicate that most miners are selling.
Additionally, there is also a noticeable spike in transactions from miners to exchanges as the price crossed above $15,000. However, the amount is still relatively small compared to pre-halving outflow levels.
“Insurance,” CryptoQuant CEO Ki Young Ju, commented on the spike in outflows, suggesting that while miners are being cautious, most are still likely anticipating the price of Bitcoin to go higher.
Big Mining Move: Bitcoin’s Hash Power Increases 42% In Two Days
It appears many Chinese miners have completed their annual migration from Sichuan, with Bitcoin’s hash rate spiking more than 40% in two days.
The hash power of the Bitcoin (BTC) network has jumped by roughly 30% over the past 24 hours, which, if sustained, suggests a major difficulty adjustment may soon be incoming.
According to Coinwarz, Bitcoin’s hash rate currently sits at 157.5 exahashes per second, or EH/s, after briefly pushing above 160 EH/s. As of this writing, BTC hash power has increased by 42% in two days.
The spike follows a sharp decline in hash power in late October, which many analysts attributed to the end of the rainy season in the Chinese mining hub of Sichuan.
The province’s abundant and cheap hydroelectric power is estimated to attract around 80% of Chinese miners during the wet season. In December, CoinShares estimated that Sichuan accounted for 54% of global mining activity.
Quantum Economics analyst Jason Deane speculated that the sudden increase in Bitcoin hash power could be a sign that many Chinese miners have completed their migration from Sichuan and restored operations in other local mining hubs such as Xinjian and Inner Mongolia.
Whoa! big jump in #bitcoin hash rate over last 10 hours (+29.7% trough to peak) Large number of machines just came online somewhere, relocated Sichuan region miners possibly? pic.twitter.com/UKahgQ37Tm
— Jason Deane (@JasonADeane) November 9, 2020
The sudden spike in mining activity suggests the network is likely to produce another significant difficulty adjustment.
A major upward adjustment would come at the chagrin of non-Chinese miners who have been enjoying boosted profits after October’s apparent migration from Sichuan resulted in a 16% negative difficulty adjustment — the second-largest downwards adjustment in Bitcoin’s history.
Earlier this week, the world’s largest generator of hydroelectric power for the private-sector, Russian firm En+ Group, announced it would be launching a cryptocurrency mining venture in partnership with local company BitRiver.
Binance Launches Ethereum Mining Pool With 0.5% Fees
Binance users can now sign up to mine Ether as well as Bitcoin via the exchange’s mining pool.
After launching its Bitcoin (BTC) mining pool in April, crypto exchange Binance has now launched an in-house mining pool for the market’s largest altcoin by market cap, Ether (ETH).
For the first month, between Nov. 12 and Dec. 12, Binance is trying to attract miners by offering a zero-fee regime. After that, those contributing their hashin power to the pool will be charged a competitive 0.5% commission on their earnings.
Binance’s instructions for setting up a mining pool account note that participants will need to use a Windows or Linux operating system, GPU (NVIDIA or AMD graphics card memory of 4G minimum), 5GB virtual memory for each GPU, and mining software such as HiveOS or Easy Miner.
The Ethereum mining pool will use a similar system to the existing Bitcoin pool, called FPPS, or Full Pay Per Share. Binance’s Bitcoin pool notably also offers a feature called smart pool, which enables participants to automatically switch hash rates in order to mine the most profitable of three supported coins based on the SHA- 256 algorithm: Bitcoin (BTC), Bitcoin Cash (BCH) or Bitcoin SV (BSV). The settlement is still paid out in BTC.
An online pool distribution tracker for Bitcoin mining pools, BTC.com, indicates that Binance Pool accounted for 9.4% of Bitcoin’s total hash rate over the past week.
Centralization looks set to remain a concern for those committed to the founding decentralizing ethos of cryptocurrency. BTC.com’s data shows that over 50% of Bitcoin’s current hash rate is accounted for by four mining pools: F2Pool (18.5%), Poolin (12.2%), BTC.com (11.6%) and AntPool (11.5%).
The Rise Of Major Bitcoin Mining Institutions Is Inevitable
2020 marks a new era for mining institutionalization, bringing with it both benefits and challenges.
There are very few investments that can deliver an infrastructure-style downside case with a venture-capital-style upside. The combination of energy arbitrage with accumulating a balance sheet of Bitcoin (BTC) can deliver this.
That is why we are seeing a rush of institutions pouring into the Bitcoin mining space and starting to build out megafacilities.
Securing New-Generation Hardware
At its peak performance in 2018, Bitmain was able to produce over 95,000 rigs per week. However, since that point, production levels have come down, a partial result of its ongoing legal battle. In the other corner, MicroBT is set to deliver 1.3 million machines this year, adding 25,000 rigs per week to the mix.
The West only receives a finite allocation of these new machines, and with 17 publicly listed mining companies and ASIC financiers and large co-locations announcing purchases weekly, you can see how that fresh supply of equipment quickly dries up.
Building relationships with the manufacturers is now crucial to securing an ample allocation of new machines. How do you get in this queue? Have a big checkbook.
Reducing Capital Expenditure
Economies of scale stand in contrast to decentralization. Yet, like most other industries, the mining space rewards size. Large mining companies receive discounts on ASIC retail prices. With an average payback period of around 300 days for new-generation equipment, the discount can reduce it by over a month.
Large miners also have to put up less down payment, in some cases around 20% compared with over 50% for retail. This allows miners to acquire more machines and build out faster.
On the infrastructure side, in most cases, building out a 30-megawatt farm can be done at a much lower cost per MW than a 3 MW facility.
Maximining Operating Profits
If you want cheap power, it’s going to cost a great deal of capital for things like buying the land, building out large infrastructure, acquiring generators and other equipment, funding performance bonds, etc. While there are miners taking advantage of small sources of cheap power, in large, the most profitable miners are the big ones.
They are able to put up the necessary capital to secure the best locations. And as we know, the cost of electricity is one of the significant determinants of success.
Beyond sourcing cheap electricity, large miners can negotiate lower pool fees, firmware development fees and ASIC management software. They can reduce the amount of labor required per MW, drive efficiencies in their management, and improve their power usage effectiveness.
Access To Superior Funding Mechanisms
Mining is a capital-intensive business. It requires consistent equipment upgrades and new purchases. Filing out a 10 MW farm with new-generation equipment can cost nearly $10 million, depending on the purchase price.
Access to various forms of funding such as debt, equity, equipment financing and ASIC financing is crucial for mining farms to stay large and enjoy the benefits discussed above.
From 2018 to 2019, most of these mining operations were funded through a mixture of traditional company-level debt and equity. In 2020, we have seen an explosion of growth in ASIC financing.
Large and reputable mining farms are now able to raise money from financiers while using their purchased ASICs as collateral. There are still a limited number of these financiers, so they prioritize the best, lowest-risk operators to loan money to.
Manufacturers Putting On A Tie
One of the first questions boards ask when presented with an opportunity to mine is around the equipment: “Where is the equipment from?
Who is the manufacturer? Is there a warranty? What’s the pricing? Why is the price changing every day? When do the machines ship?”
Manufacturers like Bitmian are the pioneers of the Wild West mining industry. In 2016, the arms race for who could get the most machines to market began. Left behind were the corporate policies, the details on shipping and pricing, warranties, viable repair centers, and transparency.
When institutions came into the industry, the manufacturers’ mentality of production first and everything else later started to shift.
Now, manufacturers must hold weekly calls with big clients, discussing their production visibility and offering more transparency in their operations. Most of the manufacturers now offer machine warranties, they have opened repair centers, and they try to be more transparent on shipping and pricing — although they have a long way to go.
This trend of professionalization will likely continue with MicroBT, Bitmain and whoever else wants to compete in the West.
Mining Pools Falling In Line
“How do we get actually paid?” is another typical question an institution will ask. The answer is by a mining pool. Mining pools are the buyers of hash rate. So, questions arise on who this counterparty is and what the risks associated with dealing with them are.
Pools have historically been a black box in the mining value chain. Institutions have helped bring more transparency to mining pool pricing, reduced the number of pools that steal from the miners, and incentivized pools to build out new feature sets.
The mining pool industry is evolving rapidly, and if companies don’t keep up, they will get left behind. All of these trends will benefit institutions that are demanding better, more compliant counterparties to deal with.
A wave of consolidation is on the horizon for the mining industry. There are hundreds of great companies and teams fighting for elbow room, primed to be scooped up by institutions.
The main consolidation will happen at the mining farm level. These mergers and acquisitions will most likely be on a project basis rather than a corporate level, similar to the real estate industry.
Other verticals such as mining pools, container manufacturers, ASIC management software, mining media, firmware developers and ASIC resellers may also be consolidated into broader offerings.
Financial services companies will also be natural acquirers as they look to build an ecosystem that spans both the mining and financial value chain.
Financialization Of Hash Rate
In every traditional commodity industry, companies have the ability to leverage financial instruments to hedge their cash flows through futures and options, sell forward some of their production in purchase agreements or forwards, leverage up their bet, and more.
To date, there are very few hash-rate-based financial instruments. The entry of institutions will change this, as they are creating demand for these types of products. The need from miners must be met by other market participants such as traders to form liquid, robust marketplaces.
Five-Year Mining Outlook
In 2015, if you had told the miners where we would be today, they wouldn’t have believed you: millions of ASICs securing the network, gigawatts of power being used and institutions such as Fidelity with their own mining operations.
It’s hard to predict how the industry will evolve over the next five years, but I do think that institutions will continue to drive innovation in the space, creating a more secure network for Bitcoin. But this will bring new challenges such as censorship at the protocol level, more Know Your Customer/Anti-Money Laundering, less decentralization and so forth. Legacy Bitcoin-native mining companies must work hand-in-hand with these new entrants to shape a good future for Bitcoin.
Bitcoin Mining Revenue Hits Yearly High, After Return To Pre-Halving Levels
Bitcoin mining revenue has topped $20 million per day, its highest level this year.
Key on-chain metrics such as Bitcoin mining revenues have returned to pre-halving levels according to recent research.
Data from analytics provider, Glassnode, suggests that revenue from Bitcoin mining is now back at the same levels it was as when block rewards were double what they are now.
When the halving took place in mid-May, BTC prices were around $9,000. On November 18 they had doubled to $18,000 which suggests a correlation as miners need to sell enough of the asset to cover their expenses while remaining in profit. Higher prices mean greater profits.
#Bitcoin miner revenue is back at pre-halving levels.
— glassnode (@glassnode) November 18, 2020
Blockchain.com, which tracks the total value of coinbase block rewards and transaction fees paid to miners confirms the findings.
The daily revenue figure, which includes block rewards and transaction fees, for Nov. 18 was $21.2 million, its highest for a year. The previous peak was on May 6 when it reached $20.6 million. Following the halving event, which dropped block rewards from 12.5 BTC to 6.25 BTC, revenue plummeted to just over $7 million per day.
Mining revenue saw an earlier slump on March 18 this year following the pandemic-induced crypto market crash which wiped 45% off the price of Bitcoin in less than a week. When mining revenue falls steeply, over-leveraged miners can begin capitulating due to unfavorable market conditions.
The opposite appears to be happening at the moment as prices approach their all-time high.
Another factor indicating that the network is healthy and miners are happy is the hash rate, which is now just 10% away from its highest ever level.
Following the end of the rainy season in China, where the majority of Bitcoin mining takes place, rigs were powered down in preparation for relocation as cheap hydroelectric power dried up. This resulted in a seasonal hash rate slump of 37%, to below 98 Exahashes per second.
Since then, hash rate — which many believe is correlated to prices — has recovered to 143.4 EH/s which is not far off its mid-October peak of 157.6 EH/s according to Bitinfocharts.com.
The current mining revenue figures and hash rate recovery bodes well for the continuation of the bull market which may just take Bitcoin prices to a new all-time high before the end of the year.
With Share Price Outpacing Bitcoin, Riot Blockchain Appoints New Director
The Bitcoin mining giant appoints a new director with a stellar institutional background as stock prices surge.
Last week, as share prices ripped upwards of 50% to levels not seen since the 2018 cryptocurrency bullrun, Riot Blockchain (NASDAQ: RIOT) appointed former director of the listing committee for the Toronto Stock Exchange, Hubert Marleau, to the Riot board of directors.
The Colorado-based firm was in the market for a new director after the departure of former Canadian Cabinet member Remo Mancini. Marleau brings a wide range of regulatory and governing experience to Riot, having also served as governor of the Montreal and Vancouver stock exchanges. Marleau also boasts a strong academic background, and he currently serves as a chair for a lecture series in his name at the University of Ottawa.
Marleau’s appointment comes amid an unusually strong week for RIOT share price. RIOT closed at $6 even after opening the week at $4.10, easily outpacing Bitcoin’s nearly 20% rise. On the year, RIOT is up nearly 500% from $1.22.
Appointing a new director is not the only move that the mining giant has made in recent weeks. Riot agreed to a massive 8,000-unit, $17.7 million-dollar purchase of new Antminer S19 Pro Bitcoin mining rigs to expand operations in August.
The purchase may be an effort to stave off rival mining firm Marathon Patent Group’s efforts to swipe the “Top Miner in North America” crown. As Cointelegraph previously reported, Marathon themselves purchased 10,000 S19 Pro units in late October.
Like Riot, Marathon Patent Group’s MARA ticker is trading much higher on the week, closing at $3.39 price after a $2.38 Monday open.
Democratizing Bitcoin’s Hash Rate Takes Center Stage At Mining Summit
Bitcoin’s bull market is having a dramatic effect on demand for hardware resources as miners look to ramp up production.
Bitcoin (BTC) mining continues to ramp up following the successful May 11 halving, but growing industry concentration could undermine the “democratization of hash rate,” according to a panel presentation at this year’s Mining and Investment Summit.
Hosted by Matrixport and sponsored by Bitmain, the 2020 Mining and Investment Summit was held virtually Tuesday morning, bringing together the “leading companies in the fields of cryptocurrency mining and digital asset financial services.”
In a presentation called “Bringing Bitcoin Mining to a Broader Market,” Thomas Heller of HASHR8 provided an update on the mining industry, including trends in ASIC demand.
Heller indicated that the market is currently experiencing an “ASIC supply squeeze,” with a “large group of eager miners looking to buy.” He indicated that hardware suppliers Bitmain, MicroBT and Canaan are already taking orders for March to July 2021.
Commenting On The So-Called Bitcoin Supply Crunch, Heller’s Presentation Indicated:
“North American public and private companies continue to accumulate bitcoin, as well as expand their bitcoin mining operations. Leading to a supply crunch for BTC itself.”
A rush to accumulate Bitcoin by institutions and corporations has contributed to a rise in mining revenue, which, in turn, has caused a surge in demand for new and secondhand ASIC miners. Large miners are ramping up their operations amid the Bitcoin supply squeeze and are looking to bring as much hash rate as possible within their borders.
These trends could move the industry’s hash rate further away from democratization as China continues to dominate. As Heller notes, two-thirds of Bitcoin’s hash rate is concentrated in China-based mining farms.
China is generally believed to have one of the lowest breakeven rates for miners in the world. As of June, it cost between $5,000 to $6,000 to mine 1 Bitcoin in China, assuming an electricity cost of $0.04 kilowatts per hour. Globally, the Bitcoin mining breakeven rate could be as high as $8,500 in some jurisdictions.
Bitcoin mining is generally considered to be less accessible to individual miners due to the costs and resources involved. Over the years, the mining industry has come to be dominated by weighted pools, or groups of cryptocurrency miners that combine their computational resources. Although pool distribution isn’t as concentrated as it was before, in the last 12 months, three pools accounted for 45.3% of the hash rate.
Location and individual ownership of hash rate are important considerations when thinking about decentralization, Heller said on Tuesday.
HASHR8 recently announced the launch of Compass, a platform that matches Bitcoin miners with verified hosting facilities. The goal of Compass is to democratize mining profitability and bring more small-scale miners into the fold.
Long In China’s Shadow, The US Is Becoming A Bitcoin Mining Power Again
When it comes to the energy- and capital-intensive process of mining cryptocurrency, people tend to think of China, where about 65% of global hash power is located.
But like many other closely observed metrics in crypto, American hashrate is a number that seems to be on the cusp of significant increase.
Crypto mining, which harnesses data centers full of specialized computers to earn bitcoin by processing a so-called proof-of-work algorithm, is an industry that’s about to come out from under the radar in North America, say its proponents, and become new core infrastructure.
While the U.S. and Canada don’t have the cheapest energy on the planet, there’s plenty of underused power and energy infrastructure to repurpose. But the really deciding factor is stability, and with that comes access to capital markets and institutional investment.
There are at least 23 listed crypto mining companies, the majority of which are based in the U.S. and Canada.
“U.S. equity markets continue to be the most favorable listing venue for mining companies,” Ethan Vera, CFO and co-founder of mining company Luxor Technologies, told CoinDesk. “They can raise through [at-the-market] offerings, which provide a very solid financing method for public companies looking to scale up their operations. Foreign companies have more limited financing levers and have a relatively harder time raising capital through equity.”
A prominent example is Nasdaq-listed Marathon Patent Group, which spent $50 million on a fleet of Bitmain’s state-of-the-art S19 Pro Bitcoin mining computers earlier this year. Marathon is building out a 105-megawatt (MW) mining facility in Hardin, Montana, as part of a venture with Maryland-based power provider Beowulf Energy.
“As a public company, everything we do is transparent,” said Marathon CEO Merrick Okamoto on Tuesday at Bitmain’s Mining and Investment Summit 2020. “There are disadvantages to letting everybody know what you’re doing, but it’s also a benefit. It gives us unique access to capital markets. We’ve done two financings in the last year.”
China may have lorded it over the crypto mining space until now thanks to cheap labor and a massive over-build in dam and hydro generation infrastructure. But the U.S. has begun catching the attention of Chinese players looking to diversify, according to Peter Wall, CEO of London Stock Exchange-listed Argo Blockchain.
“I’ve had conversations with people in the mining industry in the last few months about Chinese miners coming over to North America,” Wall told CoinDesk. “There’s been talk about it for years, but it really now does appear to be a trend we’re seeing. Miners are always looking for more stability, which North America offers, and power and hosting costs in North America are competitive and sometimes even cheaper than Chinese options.”
The obvious geopolitical implication is that the U.S. could eventually take on China in this nascent arena. But the mining community would rather couch this in terms of greater decentralization, whether that means geographical spread or selling mining company shares to the public.
“Everybody loves the geopolitical angle,” said Mike Colyer, CEO of Foundry, a crypto mining investment company owned by Digital Currency Group (which is also the owner of CoinDesk). “But the goal is not for the U.S. to dominate bitcoin mining. That’s not gonna happen. The goal here is to decentralize it throughout the world.”
That said, Colyer anticipates a muscular market in the U.S. As well as the growth afforded public mining companies, there’s a bank of interesting opportunities available regarding private investment plays in the U.S. coming from the likes of hedge funds and private equity firms that own infrastructure.
“A lot of the power in the U.S. is deregulated, and private equity or hedge funds own a lot of power-generation facilities,” said Colyer. “They’re starting to recognize the idea they can make a lot of money mining bitcoin, and it also helps make their overall power generation more efficient. They actually save money on their core power generation, plus they can make money on bitcoin.”
Bitcoin mining comes in for some stick thanks to its gargantuan energy consumption, but less attention is paid to the fact it’s also at the forefront of energy innovation. Colyer calls the Bitcoin system’s mining algorithm “ruthless” in always driving for the lowest cost possible, which is generally towards renewables like hydro-power – the reason for a migration of up to 40,000 Chinese mining rigs at the end of Szechuan’s wet season.
Also on the renewable energy push is Layer1, the West Texas-based wind-powered mining operation backed by Peter Thiel.
A combination of smart investing and energy innovation is demonstrated by Greenidge Generation, a natural gas power plant in upstate New York converted into a crypto mining facility earlier this year by its owner, private equity firm Atlas Holdings.
Greenidge is a “cogeneration” facility where bitcoin mining can be used to add stability to the grid. Being connected to the Millennium Pipeline system, a very liquid forward, or over-the-counter, market, also allows Greenidge to hedge out input variable costs over multiple years, Tim Rainey, Greenidge’s chief financial officer, said at the Bitmain summit.
“We have positions all the way to mid-2022, so that’s a vehicle we use to lock in our mining economics,” said Rainey, adding that “25% of our overall capacity is dedicated to mining. Then the rest of it we use for sending power to the grid when it’s needed. So, prior to bitcoin mining, it would take us 12 hours to start up and put megawatts to the grid in periods of high demand. But now we can ramp up to full 100-megawatt power within an hour. So this provides additional stability to the grid as well as mining bitcoin.”
The U.S and Canada currently account for 15%-20% of global crypto mining hash power, with the rest split among Russia, Kazakhstan and the Nordic countries. There are around 15 mining facilities operating at scale in North America (above 50 megawatt), estimates Taras Kulyk, senior vice president, Blockchain Business Development at Core Scientific, the largest crypto mining operation in the U.S.
North America is now on a precipice of real growth, Kulyk says, thanks to its regulatory certainty and the huge amount of infrastructure built in the 1970s and 1980s in anticipation of growing manufacturing that never came. Now that people are starting to realize crypto mining is not some shady enterprise, the U.S. is better positioned at the boardroom level.
“The operational costs are a little bit more expensive in the U.S., but when you’re sinking $100 million or even a billion dollars into an ecosystem for infrastructure you’re looking at stability,” said Kulyk.
Some government support would also be helpful, said Kulyk. To this end, Core Scientific has put together a policy paper and will be working with the Chamber of Digital Commerce to get the word to the U.S. government.
“We want the folks in Washington, D.C., to understand that digital asset mining is not bad and that there’s a right way to do it,” said Kulyk. “I’m into crypto mining but I’m a ‘greenie’ at heart. I think the right way is through renewable power sources done at scale. The larger that becomes, the lower the burden on the environment.”
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