BITCOIN MINING; A SERIES - PART 6: WHERE IT'S HEADED

There is an emerging trend carving a path for the future of Bitcoin mining. With how the industry is structured now, key players in the field see the profitability of mining is becoming exclusive to only those who can afford it.

In previous entries in this series, we’ve covered just how expensive the equipment for Bitcoin mining can get. As the value of Bitcoin rises, mining profitability can only increase for those who are able to scale their operations at the right rate. Remember, mining rewards halve every four years, so it becomes less efficient to mine for hobbyist miners with smaller setups. Some are looking to preemptively decentralize this imbalance by cutting more of the community into the profits; without the hassle of spending thousands on their own equipment.

IMPROVING EFFICIENCY

With environmental concerns becoming unavoidable, companies are starting to take note. Intel, the global semiconductor juggernaut, has unveiled a brand new, ultra-low-voltage microprocessor specifically designed for mining. Intel claims the new Blockscale ASIC will have a hashrate of up to 580 GH/s with a power efficiency of just 26 J/TH. For comparison, the Antminer S19, one of the most popular miners on the market, has an energy efficiency rating of 31.5 J/TH. Miners equipped with this chip will reduce operating costs while maintaining a high standard of mining hashrates.

Block, previously better known as the Square payment app, is looking to create their own Bitcoin miner. In an effort led by current company head, Jack Dorsey, previous CEO of Twitter, they are aiming to make mining as simple as plugging a miner into an outlet. They want to increase the efficiency of bitcoin mining and further decentralize the mining industry by putting miners in the hands of anyone with a standard power outlet. This comes in the light of rising fears that mining will eventually be limited to the financially capable.

MINING FROM AN ARM’S LENGTH

Those who want to cash in on Bitcoin mining are finding ways to do so without going through the hassle of building their own rig. The most common way is to invest in publicly listed stocks of Bitcoin mining companies. 

Some publicly traded mining companies have also had a lot of activity in recent months. From Bitcoin’s all-time-high back in November 2021, to the most recent crash, almost all mining firms have reported losses in the beginning of 2022. In the past six months, Toronto based mining company Hut 8 Mining Corp (HUT) has dropped more than 80% in share value, while Core Scientific (CORZ) has lost more than 70% of it’s value, dropping from around $13 per share in December 2021 to just over $3 during May 2022. This is to be expected though. The margin of profits for the mining firms are significantly going down with the BTC price plummeting. Adding to that global hashrate is also increasing. To put it simply, it's getting difficult to mine Bitcoin but the cost of reward i.e. Bitcoin price is significantly lower. 

Image Source

Companies are even doubling down on the mining trend. Celsius Mining, a Bitcoin mining subsidiary of the Celsius Network - one of the largest crypto lending companies with nearly $17 billion in managed assets - has announced plans to go public. They have invested over $500 million in their mining efforts and even with the recent dip in Bitcoin price, they are looking ahead, and investors should too.

An alternative way to get exposure to Bitcoin mining is by purchasing hashrate-denominated structured products. Blockstream pioneered this idea with the Blockstream Mining Note (BMN). BMN is a security token allowing investors to buy hashrate at a fixed price for a three year period. After this three year maturity, investors get access to whatever Bitcoin is mined, minus the cost. We hosted the start of this project on STOKR at the beginning of 2021, and over $40 million has been raised so far from qualified investors. It is also now open for trading on the Bitfinex Securities Exchange and Merj. Investors can also peer to peer trade BMN on SideSwap. 

Image Source

This concludes the Bitcoin mining series. We hope that this has been able to teach you something about mining! We will have more series to educate you on other interesting investment and crypto topics. Until next time, and thanks for reading!

Diamaan Gueye