btc

An Industry-Wide Revolution? Clean Energy Innovators Flock to the U.S for Public Listing

The intensifying geopolitical conflicts have led to a surge in global energy prices, and the world is struggling in a new energy crisis. The price of international crude oil futures rose by over $130 per barrel, and the gasoline price in the US soared to over $4 per gallon, the highest record since 2008.

Affected by such factors, European countries that rely heavily on energy imports start to feel the pinch of the new energy crisis. Since early April, some European nations have been hit by cold air intrusions for an extended period, and a few regions have suffered the lowest temperature in a century. However, due to the surging demand for natural gas, as well as the skyrocketing gas price, many residents cannot afford the expensive gas fees. As such, in these regions, woodfire has become a “normal” way to deal with extreme weather conditions.

Energy transition is imminent

Although fossil energy still dominates the present energy system, the new crisis has encouraged countries to review the development of renewable energy. Recently, the European Commission launched a strategic plan on energy. More specifically, the plan involves targets such as promoting energy diversification in EU countries, accelerating the adoption of clean energy technologies, etc.

At the moment, providers of sustainable energy include well-established public companies such as NextEra Energy, Orsted, and Iberdrola, as well as rising stars like SAI.TECH and Crusoe Energy.

In particular, SAI.TECH is a clean energy driven Bitcoin mining operator that offers hosting services with the world’s leading energy-saving solutions to computing, power and heating industries. Relying on an integrated solution of “liquid cooling + waste heat utilization”, SAI.TECH collects the waste heat generated by mining machines during the computing process for secondary use,such as providing heating services for greenhouses, residential and commercial buildings or even district heating. This approach replaces the traditional heat source with clean energy while slashing the cost of electricity.

Maintain miners’ profit margin

According to data from CCAF, as of April 21, 2022, the annual power consumption of global bitcoin mining is about 137.36TWh (1TWh=10^9 kWh), which exceeds that of Sweden.

Tesla’s CEO Elon Musk previously tweeted: “I still believe in cryptocurrency, but it cannot rationalize the massive use of fossil fuels, especially coal.” Driven by the current advocacy for “carbon neutrality” and the impact of international turmoil, renewable energy is apparently more attractive in a world where the price of fossil energy has soared.

The BTC price has fallen by 42% from its peak in November 2021. Meanwhile, multiple intensifying factors have pushed up the price of fossil energy like oil and natural gas. In light of such circumstances, the profit margin of BTC mining has dropped from 90% to around 70%. At the same time, the UK-based research firm Wood Mackenzie suggested in its latest report that renewable energy is 12% to 29% cheaper than the lowest-cost fossil fuel. For miners, the use of renewable energy makes great economic sense —maintaining the profit margin.

Big mining companies ready to take actions

At the just-concluded Bitcoin 2022, over 450 speakers dived into topics such as the core development process of Bitcoin, the difference between traditional finance and Bitcoin, etc. Many of them focused on BTC mining, and energy was also one of their concerns.

Adam Back, the co-founder of Blockstream, said during the conference that Blockstream and Block (formerly Square) are breaking ground on a solar-and battery-powered BTC mining farm in Texas using solar and storage technology from Tesla.

The “unique nature of the miners’ energy consumption profile” is so good for soaking up curtailed energy that it is hard for other industries to compete, said SAI Tech’s CEO Arthur Lee, whose company focuses on the deployment of mining farms which simultaneously provide heating to large installations such as greenhouses and shopping malls through their patented “liquid cooling and waste heat utilization technology”.

This is because clean energy stations are primarily built at remote areas, which benefits energy consumers with high mobility and a huge demand for energy. As crypto miners fit this profile perfectly, there is an inherent competitive advantage for them as clean energy consumers.

It has been reported that the SEC has declared effective TradeUP Global Corporation (Nasdaq:TUGC, TUGCW, TUGCU), a publicly traded special purpose acquisition company (SPAC company), and SAITECH Limited (“SAI.TECH”)’s registration statement relating to their previously announced proposed business combination that will lead to SAI.TECH become a public trading company on the Nasdaq stock market under “SAI”. SAI.TECH is a major partner of ViaBTC Pool (a world-leading comprehensive mining pool). The Extraordinary General Meeting to approve the business combination between TradeUP Global Corporation and SAI.TECH will be held on April 22, 2022 (EST). This represents a major milestone for crypto mining industry because it indicates that capitalists, institutional investors, and the industry itself will focus on identifying new opportunities i.e. energy efficient and ESG solutions in this field. In fact, the entire crypto mining industry is in transition towards scaled, specialized, and globalized growth.

For example, ViaBTC Pool is an all-inclusive crypto mining pool serving a global user base. It provides services that enable the mining of dozens of cryptos, including BTC, ET, LTC, etc. Moreover, ViaBTC Pool also features leading hashrates for mining mainstream cryptos like BTC and LTC. If the energy sector could strike a new balance between sustainability and cost, there will continue to be more mining-related institutions like ViaBTC and SAI.TECH.

Conclusion

The current rise in energy prices has led to an imminent “reshuffle” of the BTC mining industry, and mining companies using traditional energy sources might go out of business due to declining profits. Based on actions taken by the leading BTC mining companies such as Core Scientific and Marathon Digital Holdings, the adoption of renewable energy like solar power and wind will gradually become the mainstream trend in the field of crypto mining. However, generally speaking, the market cap of companies engaged in the clean energy business remains low compared with that of traditional energy companies, and clean energy boasts a vast potential market.

Digital Gold

Bitcoin and the Future of Global Finance – Predictions from Energy Cancelled by Arthur Hayes

In his recent article Energy Cancelled published at March 17th, writer and entrepreneur Arthur Hayes advances the argument that Bitcoin, along with gold, is about to see an explosive increase in value following the repercussions of the current crisis in Ukraine. Compiling data and information presented by other macroeconomic thinkers, Hayes argues that as Russian energy is being cut off from the global economy, a financial crisis fuelled by surging energy costs may reshape the global financial order.

The current global financial order dates back to 1971, and fundamentally relies on the US Dollar, differing from older economies in which currencies were backed by gold reserves. Hayes argues that this ended earlier this year when western countries decided to cut off Russia and their energy supplies from the global market. Not only will this cause a spike in energy costs, but Hayes further makes the argument that the seizure of Russian assets will cause foreign investors to hesitate in investing in western markets and ultimately cause countries like China to move away from US Dollar-backed assets and back onto gold.

As the current global order collapses, the price of gold will in the long-term skyrocket as it reclaims its position as the universal currency standard. While the value of Bitcoin currently is tied to big tech risk assets, Hayes argues that as gold surges, Bitcoin will start to become viewed as a digital alternative, and its value will instead be linked to that of gold. Countries in the global south may want to shift to Bitcoin as a digital “gold standard”, causing a similar surge in its value. Hayes argues that this could ultimately make the price of Bitcoin to surge past $1.000.000, making it an incredible vehicle for investment.

Read the full article at: https://cryptohayes.medium.com/energy-cancelled-e9f9e53a50cd

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Russian Government and Central Bank Agree to Treat Bitcoin as Currency

Cryptocurrency transactions of more than 600,000 rubles (roughly $8,000) will have to be declared; otherwise, it could be considered a criminal act.

Written by: Arnold Kirimi

The government and central bank in Russia have reached an agreement on how to regulate cryptocurrencies, according to a Tuesday announcement.

Russia’s government and central bank are now working on a draft law that will define crypto as an “analogue of currencies” rather than digital financial assets set to be launched on Feb. 18. Cryptocurrencies would function in the legal industry only if they have complete identification through the banking system or licensed intermediaries.

Kommersant noted that Bitcoin (BTC) transactions and possession of cryptocurrency in the Russian Federation are not prohibited; however, they must be done through a “digital currency exchange organizer” (a bank) or a peer-to-peer exchange licensed in the country.

The report also highlights that cryptocurrency transactions of more than 600,000 rubles (roughly $8,000) would have to be declared; otherwise, it could be considered a criminal act. Those who illegally accept cryptocurrencies as payment will incur fines.

This news comes after months of speculation about how the Russian government will handle digital currencies. While it is still unclear what this decision will mean for businesses and citizens in Russia, it seems that the country is slowly warming up to the idea of cryptocurrencies.

Related: Russian central bank registers nation’s first digital asset manager

In January, the Bank of Russia called for a nationwide crypto ban in a report that warned about the speculative nature of the industry. The bank also stated that financial firms should not facilitate crypto transactions as part of that proposal to ban digital assets.

However, the proposal generated opposition from the Russian Ministry of Finance. A few days after the central bank’s call for a ban, Ivan Chebeskov, a ministry official, said that the government should regulate crypto rather than prohibiting it entirely. He warned that a total ban might result in Russia falling behind in technology.

Reports have also emerged that President Vladimir Putin supports efforts to regulate the country’s crypto mining sector.

Source: https://cointelegraph.com/news/russian-gov-t-and-central-bank-agree-to-treat-bitcoin-as-currency

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How Intel’s Entrance Can Change the Bitcoin Mining Landscape

With Intel set to present an ASIC geared for bitcoin mining later this month, how will the computing giant reshape the industry’s landscape?

Written by: Namcios

10th Feb 2022

When news surfaced that one of the largest computer chip makers in the world, Intel, would give a presentation about an application-specific integrated circuit (ASIC) geared for bitcoin mining at the International Solid-State Circuits Conference (ISSCC), a global forum for presentation of advances in solid-state circuits and systems-on-a-chip to be held online later this month, the first logical conclusion was that the company would be presenting a new chip it had developed specifically for the activity.

On the very next day, publicly-listed bitcoin miner GRIID disclosed that it had signed a purchase agreement with Intel for acquiring fixed-price bitcoin mining ASIC hardware from the chipmaker for orders placed before May 2023, in what appeared to be a move to secure access to Intel’s new chip to be presented at the upcoming conference.

However, an Intel representative indicated that the company has done design work around SHA-256 optimized ASICs “for several years,” and will not unveil a new ASIC at ISSCC in a statement shared with Bitcoin Magazine.

“The SHA-256 ASIC referred to in the paper being presented at ISSCC … was our first generation product exploration from 2018,” the Intel statement said.

In 2018, Intel released a patent for a “bitcoin mining hardware accelerator with optimized message digest and message scheduler datapath,” which outlined a more efficient way to find a valid block hash. It claimed to be able to decrease energy use by up to 35% while lowering financial requirements and mining more bitcoin in the process.

Intel will present the advances in its solid-state circuit designs for bitcoin mining that have been made since that patent was filed, but will not unveil a completely new ASIC. However, GRIID’s purchase is indeed for a new chip that is yet to be announced.

“The supply agreement released as part of required [U.S. Securities and Exchange Commission] SEC disclosures from our customer concerns the second-generation ASIC for which we will provide more details soon,” the Intel representative added.

THE BITCOIN MINING INDUSTRY’S BIGGEST PAIN POINTS

Bitcoin Magazine talked with Fred Thiel, CEO of Marathon Digital Holdings, one of the largest publicly-traded bitcoin mining companies in the world, to gather some insights into the current shortcomings of the industry and what may help solve them in the near future.

“The market has been characterized over the last two years by constraints in availability of quality miners,” Thiel told Bitcoin Magazine, referring to the worldwide chip shortage since the onset of the COVID-19 pandemic in early 2020. Bitmain — which has been the quality and performance leader in the bitcoin miner manufacturing space since the introduction of its S19 mining rig — has solidified itself as the main ASIC maker in the world, Thiel added, helped by how the chip shortage has more dramatically impacted some of the tier-two suppliers.

“The only reason Bitmain has the position they have today is because of the availability of miners,” Thiel added. “If there were no constraints on a basic way for starts at the foundries, you would see many more people in this industry and Bitmain would be one of many brands, and the competition would be around performance and cost of ownership, not around availability.”

Additionally, Bitmain has, for the most part, been able to provide the most energy-efficient miners in the world, catering to a need demonstrated by bitcoin mining companies that continually chase down the energy curve.

“We’re all very focused on being the most energy-efficient miners,” Thiel said. “We will typically always chase the most energy-efficient miner because the less electricity we use, the less burden we put on the electrical infrastructure and the less it costs us to operate.”

COULD INTEL PROVIDE A SOLUTION?

New entrants in the industry like Intel could shake Bitmain’s comfortable position as the global leader in ASIC manufacturing by prompting more competition and likely leading to greater machine availability. The onset of new developments often push old-timers to pursue greater projects as it casts doubt on their ability to remain competitive without innovating.

“It’s about removing the constraints in the industry that existed and the kind of monopoly, or quasi-monopoly, that Bitmain has,” Thiel told Bitcoin Magazine, adding that Intel’s introduction as a new merchant silicon vendor “is good” as “it is a new foundry capacity.”

“So, it means more overall capacity in the marketplace,” Thiel said. “Now that Intel has come out and started talking about it, you’re going to see other people wanting to protect their potential for market share by saying that they’re going to be in the market too.”

Thiel said that he expects a slew of vendors to start competing in the ASIC-producing industry in the coming year as new entrants try to obtain market share and pose competition to Bitmain.

Thiel didn’t provide more details, but hinted that there are three U.S.-based companies that have done ground-up designs and two more working on ground-up designs. There are also teams from major universities looking at ASIC manufacturing and design, he said.

If the entrance of these new companies in the industry materialize and the supply chain issues at the foundries start to resolve, hardware could commoditize, ensuing a race to low-cost hardware.

“And as hosting becomes more available because everybody is building out hosting capacity, I think what you’re going to find is there will be very little constraint around the growth rate of the global hash rate,” Thiel said. “Hardware will be readily available, hosting will be available and then it’s just a question of where is the price of bitcoin that is economically feasible to mine, and what price are you willing to pay to be in business today versus tomorrow versus next year?”

A STEEP RISE IN GLOBAL HASH RATE

If some constraints are removed from the industry, Bitcoin’s hash rate could grow immensely. As a result, profitability would diminish for new entrants seeking to mine BTC as the bitcoin-producing market gets more competitive, requiring players to have a greater share of the global hash rate to remain in business.

“It’s an arms race; there are only 900 bitcoin made per day currently, and there are a lot of people with a lot of capital chasing that,” Thiel told Bitcoin Magazine.

An even more competitive mining market could lead to alternative products being offered as barriers of entry increase the required amount of capital to be deployed for mining profitably.

“I think you are going to see growth in some of these hash rate derivatives,” Thiel said. “And as more demand for hash rate futures grows, then you’re going to see industrial miners selling portions of their hash rate for a few months to finance miners or other equipment, and that will be a way that people can play in this industry without even having to buy miners, they can just buy hash rate.”

Purchasing hash rate directly enables miners to compete in getting block rewards without needing to rent a huge physical space, secure 24/7 efficient hosting or acquire a lot of equipment upfront.

“At the end of the day, are you mining because you want to heat up your garage or are you mining because you want to earn bitcoin? And how do you want to go about paying potential for passive income relative to bitcoin mining? Do you want to do it as an investor by just buying hash rate futures, or investing in a public miner, or do you want to buy miners yourself and mine?” Thiel asked. “I think everybody is going to have to make that decision on their own and figure it out.”

Source: https://bitcoinmagazine.com/business/how-intel-will-change-bitcoin-mining-industry

8 trends

CoinDesk: 8 Trends That Will Shape Bitcoin Mining in 2022

https://www.coindesk.com/business/2021/12/15/8-trends-that-will-shape-bitcoin-mining-in-2022/

Author: Aoyon Ashraf, Eliza Gkritsi

CoinDesk’s first ever year-end survey of crypto miners reveals a competitive but mature business with potential for merger activity to accelerate.

If you thought 2021 was a wild ride for crypto mining, you’d better strap yourself in for 2022.

The past year saw one of the biggest shake ups in mining history. Swathes of Chinese miners had to look for new homes due to the most intense regulatory crackdown in the country to date, while an ongoing global chip shortage capped the capacity of new mining machines globally.

But thanks to these developments, North American miners had a stellar year. With China out of the game, and their machine orders already in place, the U.S. and Canada have quickly risen to be the uncontested hashrate capitals of the world.

Read more: How Bitcoin Mining Works

As the price of bitcoin hit historic heights, mining profit margins were as high as 90%. The industry entered a “gold rush” period, said Amanda Fabiano, the head of mining at New York based Galaxy Digital, citing the high profitability of the miners.

At the same time, a subtler change took place. “Mining seems to have crossed the line where it was very risky and uncertain,” said Didar Bekbau, co-founder and CEO of Kazakhstan-based miner Xive. The global industry is now becoming more like traditional business, where risk is lower and investors are throwing money in and are ready to wait two or three years to get their return, he added.

However, the landscape for the digital asset mining industry in 2022 is shaping up to change significantly once again, as the delay in supply of new mining rigs starts to normalize and competition becomes more intense.

“As more miners enter the sector, margins will likely shrink, particularly for new entrants, as long as the bitcoin price stays stagnant,” Fabiano added.

With competition ramping up next year, some miners will start to feel the margin squeeze, leading to potential for increased mergers and acquisitions. “I think there’s going to come a time, in the not too distant future, where there are companies that have raised money, have machines on order and have not deployed them yet that are in a cash crunch,” said Fred Thiel, CEO of Marathon Digital, one of the largest publicly traded bitcoin miners.

“When that happens, you get some very interesting opportunities, because now you don’t have to integrate a company; you’re just acquiring their assets,” he added.

To be sure, this is not bad news for the industry in the long term. More consolidation and competition will not only make the industry more mature but will also help usher in the age of more efficient mining operations and incentivize use of more renewable sources of power.

“With the overall expansion of market boundaries, such a positive feedback mechanism will elevate the bitcoin mining industry to a more competitive and dynamic stage,” said Edward Lu, senior vice president of Canaan, one of the industry’s largest manufacturers of bitcoin mining machines.

Hashrate doubling

It’s unanimous; the hashrate for the Bitcoin network will increase significantly next year. Some estimates project it will double as more miners join the network. The hashrate is a measure of computational resources used to conduct mining activities and secure the Bitcoin blockchain, and it is an important metric of competition.

Read more: What Does Hashrate Mean and Why Does It Matter?

Along with new entrants, Chinese miners who exited the region have been coming back online outside of China and will continue to do so next year. This will add to the hashrate and consequently the difficulty of the network, according to April Luo, an institutional sales representative for Asia at BlockFi, a company that provides structured financial products to miners and also started mining colocation with Blockstream.

Echoing the sentiment, Juri Bulovic, vice president of strategy at Foundry, the Digital Currency Group (DCG) subsidiary focused on mining and crypto staking, said that “mining difficulty will continue to increase and will exceed the previous all-time high next year, as miners continue to expand their operations, but also due to the increased efficiency of the latest generation of mining machines.” (CoinDesk is also a subsidiary of DCG.)

In fact, some industry participants are calling for hashrate reaching within the range of 300-350 exahash/second (EH/s) by the end of next year, which will be 70%-100% higher compared to around 179 EH/s as of Dec. 14, according to data from analytics firm Glassnode.

One such observer is Rob Chang, CEO of bitcoin miner Gryphon Mining, who thinks it’s possible for the hashrate to reach 300 EH/s by the end of 2022. Meanwhile, Ben Gagnon, chief mining officer of Bitfarms, expects the hashrate to be between 300 and 350 EH/s by the end of next year. Bekbau of Xive also anticipates the hashrate doubling in 2022.

However, Bitmain-backed mining platform BitFuFu’s CEO Leo Lu doesn’t expect the uptick to kick in until March, because miners in Kazakhstan will likely continue to face power rationing while the build-out of new operations in the U.S. and Russia will slow down over winter. Meanwhile, Chinese authorities are intensifying their crackdown in the country and are actively blocking mining pools.

Read more: Kazakhstan’s Crypto Miners Face New Regulations After Contributing to Power Shortages

Margin compression

As the hashrate and difficulty increases, miners will have to try harder to remain profitable, as long as there are no dramatic fluctuations in the price of bitcoin.

“If our top end scenario of 300 EH/s comes to pass, the effective doubling of the global hashrates would mean that mining rewards will be cut in half,” Gryphon’s Chang said.

As competition eats away at the high margins of the miners, companies that can keep their costs low and are able to operate with efficient machines will be the one that will survive and have a chance at thriving.

“Miners with low costs and efficient machines will be best positioned while those operating older machines will feel the pinch more than others,” Chang added.

New miners will be especially affected by smaller margins – and there are a lot of them. Power and infrastructure are among the key cost considerations for miners. New entrants have a harder time securing cheap access to these, due to a lack of connections and increased competition over resources.

“We anticipate that the inexperienced players will be the ones to experience lower margins,” said Danni Zheng, vice president of crypto miner BIT Mining, citing costs like electricity and data center construction and maintenance.

Miners like Argo Blockchain will strive for ultra-efficiency while growing their operations. Given increased competition, “we have to be smarter about how we grow,” said Argo Blockchain’s CEO Peter Wall.

“I do think that we’re in this kind of super cycle that is different from previous cycles but we still have to keep our eye on the prize, which is being very efficient and having access to low-cost power,’’ Wall added.

Rise in M&A

As winners and losers emerge from the hashrate wars, larger, more capitalized companies will likely gobble up smaller miners who struggle to keep pace.

Marathon’s Thiel expects such consolidation to pick up in the middle of 2022 and beyond. He also expects his company Marathon, which is well capitalized after raising nearly $700 million, to grow aggressively next year. This could mean acquiring smaller players or continuing to invest in its own hashrate.

Hut 8 Mining, which recently closed a $173 million public offering of common shares, is ready to follow the same playbook. “We’re cashed up and we’re ready to go, regardless of which way the market turns next year,” said Sue Ennis, head of investor relations for the Canadian miner.

Other than large miners, it’s also possible that big entities, such as power companies and data centers, may want to join the buying spree, if the industry becomes more competitive, and miners face the margin crunch, according to Argo’s Wall.

Several such traditional companies have already entered the mining game in Asia, including Singapore-based real estate developer Hatten Land and Thai data center operator Jasmine Telekom Systems. Malaysian miner Hashtrex’s Gobi Nathan told CoinDesk that “corporations around Southeast Asia are looking to set up large-scale facilities in Malaysia next year.”

Similarly, Europe-based Denis Rusinovich, co-founder of Cryptocurrency Mining Group and Maverick Group, sees a trend for cross-sector investments in mining in Europe and Russia. Companies are seeing that bitcoin mining can subsidize other parts of their business and improve their overall bottom line, Rusinovich said.

In Russia, the trend is apparent with energy producers, whereas in continental Europe, there tend to be small mines that integrate waste management with mining or take advantage of small bits of stranded energy, he added.

Cheap power and ESG

Access to cheap power has always been one of the main pillars of a profitable mining business. But as the criticism around mining’s impact on the environment has grown, it is all the more important to secure renewable sources of energy to stay competitive.

“We think more mining businesses will follow the trend of carbon-neutral or renewable-powered mining next year as ESG [environmental, social and governance] compliance continues to be a must for most tech companies,” said Igor Runets, CEO of BitRiver, a hosting provider for green cryptocurrency mining.

Read more: Crypto’s Carbon Footprint Could Hinder Adoption: Deutsche Bank

Miners are already leaning toward securing sustainable power sources, including solar, wind, hydro and nuclear, for their operations to reduce their carbon footprint.

A recent survey by the Bitcoin Mining Council, an industry forum, found that 58% of the total energy used in crypto mining globally during the third quarter of this year was sustainable, up 3% from the second quarter. The increase is partly due to the rapid expansion of North American mining amid the exodus from China, and miners rotating toward more sustainable energy and modern mining techniques.

Read more: China Crypto Bans: A Complete History

As mining becomes more competitive, “energy-saving solutions would be a game-determining factor,” said Arthur Lee, founder and CEO of Saitech, an Eurasia-based, clean-energy driven digital asset mining operator.

“The future of crypto mining would be empowered and sustained by clean energy, which is the shortcut towards carbon neutrality and a key to alleviating worldwide electricity shortage whilst improving miners’ return on investment,” Lee added.

In addition, there are likely going to be more energy efficient miners, such as Bitmain’s latest Antminer S19 XP, that will also come into play, which will make the businesses run more efficiently and have less impact on the environment.

However, efforts toward a more sustainable business model for the mining sector shouldn’t just be limited to more environmentally friendly mining but should also include the “social” part of ESG. With more new miners entering states such as Georgia, Texas and New York, community engagement in these regions will be even more important heading into the next year, according to Zach Bradford, CEO of bitcoin miner CleanSpark.

Read more: Why Shouldn’t the Navajo Mine Bitcoin?

“I think that community involvement is going to be incredibly important [in 2022]. You’re either going to be in with the community that you’re in or you’re going to be on outs,” he said. “Especially with some of the non-U.S. groups that are coming in, I think they’re going to have a harder time than U.S. domiciled companies,” he added.

Fast money versus value investors

One of the main reasons many new players are flocking to the crypto mining sector is due to its high margins as well as support from the capital markets. The mining sector saw a slew of IPOs and new funding from institutional investors this year. As the industry becomes more mature, the trend is expected to continue in 2022.

“Capital markets will continue looking to deploy capital in bitcoin and miners,” Bitfarms’ Gagnon said. He noted that so far it seems that initial fundraising (pre-IPO) is significantly easier for investors in the sector, as many are looking for a quick flip. However, the outlook for long-term value investors is still unknown, as it remains a largely untapped market, he added.

Currently investors are using miners as a proxy investment for bitcoin. But as institutions are becoming more experienced, they will change how they invest in mining, according to Gryphon’s Chang. “We are noticing that they are focusing more on the things institutional investors traditionally place a lot of emphasis on, which are namely: quality management, experienced execution and companies that act like blue chip organizations [established companies] as opposed to stock promoters,” he said.

But as more traditional finance looks to dabble in crypto mining, the higher the scrutiny of the sector. “It’s not so rosy. It’s a positive development in the sector, but we should pay attention to these other developments,” such as short-seller interest, Rusinovich said.

Another trend that is likely to grow among the miners is the shift towards structured financial products, as they increasingly try to lock in margins, generate additional income from their mined coins and hedge the rise in competitive landscape, according to BlockFi’s Luo.

Supply chain: The big uncertainty

A conversation about crypto miners’ outlook wouldn’t be complete without assessing the supply-chain issues that have been a big constraint for the industry this year and are likely to spill into 2022.

“The chip shortage is one of the defining supply chain issues of 2021,” said Philip Salter, chief technology officer of Genesis Digital Assets. (Note: Genesis Digital Assets is different from Genesis, the crypto lending firm owned by CoinDesk parent company Digital Currency Group.)

Driven by Covid-19′s impact on global trade, as well as rising geopolitical tensions between the U.S. and China, the global chip shortage has impacted 169 industries, from cars to soap manufacturing.

Bitcoin miner Blockware Mining Inc.’s CEO Michael Stoltzner explained that before 2021, mining rig orders placed directly with manufacturers would be delivered within six weeks. Now, only large orders are confirmed in the first place, and manufacturer’s order books are filled well into 2022 and even 2023.

Blockware Mining has navigated these issues by planning ahead and determining the best way to negate the supply-chain challenges for miners that are looking to ramp up production.

However, the industry is divided on whether the chip shortage issue will be resolved heading into 2022.

“My hope is that supply chains are going to get better, probably mid-year, call it June, July,” said CleanSpark’s Bradford. He thinks that, right now, the squeeze in the supply chain is more pronounced given there is higher priority for holiday-related shipping.

If the supply chain issues get resolved next year, the smaller and newer companies that are feeling the brunt of the challenges currently will be able to enter the industry swiftly and compete with the larger miners, said Jonathan Manzi, the CEO and co-founder of Beyond Protocol, a blockchain technology company.

On the flip side, Gryphon’s Chang expects the supply chain bottleneck to last until at least mid-2023, as the chip manufacturers have stated that the global semiconductor shortage will extend through to 2023. And when chip manufacturers are eventually able to resume normal supply, the larger industries, such as cell phones, medical equipment and transportation, will be first in line before bitcoin miners get their fill, he added.

But other than the availability of rigs, where to put them will increasingly be a bottleneck. Both BitFuFu and BlockFi identified rack space as a major constraint for the coming year; BlockFi’s Luo specifically highlighted this problem within the U.S.

The second life of rigs

Following the China mining shutdown and consequent migration, thousands of mining rigs were abandoned in the country. While many have already been shipped overseas, others have yet to be snatched up in second hand markets and deployed.

Some miners will find opportunity in this secondhand market in 2022, even if the rigs don’t have the latest technology. “It clearly offers a lot of opportunity for some players … to develop their hashrate,” Rusinovich said, adding that “people were already saying for a couple of years that S9s were out [of the game], but they are still around.”

In the future, the latest mining rigs will be first deployed in regions with “stable laws and regulations as well as developed infrastructures,” like the U.S. and Europe, BitFuFu said.

Meanwhile, inferior rigs from these countries will then flow to Kazakhstan, Southeast Asia and other crypto-friendly places with less-developed infrastructures. Old mining rigs will be installed in Russia and Africa, facing a certain level of policy and regional risks. All these can create new opportunities.

“It’s a matter of risk, you don’t want to send a S19j pro to a certain country where they might disappear or be turned off,” but an S9 that costs much less is an easier loss to stomach, said Alejandro de la Torre, founder of ProofofWork.Energy consulting firm.

New technologies in mining

As efficient mining becomes a more important tool in order for miners to stay ahead of the competition, companies will increase their focus on not just better mining computers but new innovative technologies to maximize their overall profit. Currently the miners are leaning toward using technology such as immersion cooling to boost the performance and lower the cost of mining without having to buy additional computers.

“Aside from reducing power consumption and noise pollution, the immersion liquid-cooled miner occupies significantly less space, with neither pressure fans, water curtains nor water-cooled fans needed to achieve a better heat dissipation effect,” Canaan’s Lu said.

Read more: Cryptocurrency Miners Turn to Exotic Cooling Systems as Competition Heats Up

Such technology will be able to increase the efficiency of the mining machines and the entire facility.

Most recently, CleanSpark bought 20-megawatt-powered immersion cooling infrastructure for its Norcross, Georgia, bitcoin mining facility and is aiming to increase its mining efficiency by over 20%.

Riot Blockchain, one of the world’s largest bitcoin miners, also said in October that it plans to increase its mining hashrate up to 50% by using 200 megawatts of immersion-cooling technology at its Whinstone facility in Texas.

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Bitcoin Energy Consumption Memorandum: Bitcoin mining reduces the total carbon emissions of human society and accelerates the realization of carbon neutrality

Disclaimer: This report is prepared based on published information that SAI believes to be reliable, but SAI does not guarantee the accuracy and completeness of the information contained. The information or opinions expressed in this report do not constitute investment advice to anyone.

 

Recently, the debate about redefining Bitcoin’s energy waste and causing huge environmental damage has once again aroused people’s attention. Tesla CEO Elon Musk said Wednesday on Twitter that Tesla has “suspended vehicle purchases using bitcoin,” out of concern over “rapidly increasing use of fossil fuels for bitcoin mining. How is the climate problem proportional to Bitcoin?

 

More than eleven years after its creation, Bitcoin is gradually gaining wider institutional and market recognition. Although constructive criticism is beneficial, we believe that some influential financial research institutions are refuting Bitcoin based on outdated information, incoherent arguments, and flawed analysis.

 

In this article, we collected publicly available data from multiple channels including investment institution research reports and academic paper. This memo is made by analyzing those data and information.

 

Bitcoin mining produces less carbon emissions while being more efficient comparing with gold mining, financial system and traditional calculations.

 

The debate about Bitcoin’s massive carbon emissions and environmental degradation has not reached its goal. According to the analysis below, the result shows that the consumption of Bitcoin mining is less than the goldmining, financial and computer industries.

 

Ark Investment Management criticized the stereotypes of common Bitcoin myths. Bitcoin’s energy footprint is easily criticized. From the perspective of electricity costs alone, Bitcoin is much more efficient than traditional banks and gold mining on a global scale.According to a recent research, traditional banking consumes 2.34 billion GJ per year, gold mining consumes 500 million GJ per year, while Bitcoin consumes 184 million GJ, which is less than 10% and 40% of traditional banking and gold mining respectively. In addition, the estimated efficiency of the dollar cost per GJ expenditure of Bitcoin mining is 40 times that of traditional banking and 10 times that of gold mining.

 

CoinShares asserts that, given the amount of energy used, Bitcoin mining is more driven by renewable energy than almost every other large industry in the world. A more useful comparison is the way the industry has developed compared to gold and traditional finance (see below).

For gold, the researchers assumed that the energy consumption per kilogram of gold mined was 175 gigajoules. Approximately 3,100 metric tons of gold are mined each year, bringing the total energy demand for gold mining to close to 150 terawatt hours each year.

 

According to this chart, it can be determined that gold mining requires more energy than Bitcoin mining.

 

 

 

 

There is an important difference between how much energy a system consumes and how much carbon it emits. Although determining energy consumption is relatively simple, you cannot infer the relevant carbon emissions without knowing the exact energy mix, that is, the composition of the different energy sources used by the computers that mine Bitcoin. For example, a unit of hydropower will have a much smaller impact on the environment than the same unit of coal-fired energy.

 

As a result, estimates of the percentage of renewable energy used in Bitcoin mining vary widely. According to a CoinShare report, published in December 2019, it showed that 73% of Bitcoin’s energy consumption was carbon neutral, mainly due to the abundance of hydropower in major mining centers such as Southwest China and Scandinavia.

According to the International Energy Association (IEA), in stark contrast to all other fuels, the renewable energy used for power generation will grow by nearly 7% by 2020. Global energy demand will fall by 5%, but priority access to the power grid and continuous installation of new power plants have laid the foundation for the strong growth of renewable energy.

 

 

IEA also stated that it is expected that the decline in economic activity due to the pandemic will harm the heat consumption of renewable energy sources. Quote from Bill Gates, electricity and heating produce big amount of carbon emission, It is difficult for clean energy to solve the peak shaving and consumption problems. SAI(www.sai.tech) team innovatively reuse the heat from computing and provide heating services, which can solve the energy consumption and carbon emission problems at the same time.  We could use bitcoin mining as a “profitable battery” to consume the idle electricity.

 

Bitcoin uses the highest proportion of clean energy in both financial and technology industry

 

Another key factor that makes Bitcoin’s energy consumption different from most other industries is that Bitcoin can be mined anywhere. Almost all energy used in the world must be relatively close to its end-user production, but Bitcoin does not have this restriction, which allows miners to utilize power that is not available to most other applications.

 

Hydro is the most well-known example of this. In the wet season in Sichuan and Yunnan in China, enormous quantities of renewable hydro energy are wasted every year. In these areas, production capacity greatly exceeds local demand, and battery technology is far from advanced, so there is no way to store and transport energy from these rural areas to urban centers that need it. These regions are likely to represent the largest single stranded energy resources on the planet. Therefore, it is no coincidence that these provinces are the heartland of China’s mining industry, responsible for almost 10% of global Bitcoin mining in the dry season and 50% in the rainy season.

 

As mentioned earlier, bitcoin miners, on the other hand, are an ideal complementary technology for renewables and storage. Combining generation with both storage and miners presents a better overall value proposition than building generation and storage alone. In BCEI White Paper, by combining miners with renewables + storage projects, we believe it could provide the grid with readily available “excess” energy for increasingly common black swan events like excessively hot or cold days when demand spikes (e.g. the early 2021 outages in Texas).

 

In other terms, the electricity consumed by Bitcoin mining is some energy that is “destined to be wasted”, and to some extent it has increased the income of clean energy power generation.

 

Only by increasing the benefits of using renewable energy and reducing its costs, the market will spontaneously choose to use clean energy, and the transformation of energy use will be truly accelerated. At this point, Bitcoin mining has played a certain “facilitation” role.

 

Bitcoin mining is more in line with ESG and is conducive to carbon neutrality

 

Many journalists and academics talk about Bitcoin’s high “per-transaction energy cost,” but this metric is misleading. Most of Bitcoin’s energy consumption occurs during the mining process. After the coin is issued, the energy required to verify the transaction is very small. Therefore, it doesn’t make sense to just look at the total energy consumption of Bitcoin to date, and then divide it by the number of transactions. Most of the energy is used to mine Bitcoin, not to support transactions. This led to our final serious misunderstanding: the energy costs associated with mining Bitcoin will continue to increase exponentially.

 

Bitcoin mining is an energy intensive industry. Correspondingly, miners exude large quantities of heat as a by-product of the hashing process, which conventionally has been vented into the atmosphere. Represented by SAI (www.sai.tech), companies are exploring different ways to recover and reuse waste heat in order to create additional sources of income and offset electricity costs.

 

SAI was founded in 2019, and is a horizontally integrated clean energy technology company. As the vice chairman unit of the Clean Heating Industry Committee (CHIC), SAI has four core technology sectors: SAIHEAT (chip waste heat utilization), SAIWATT(clean power consumption), SAIBYTE (computing cloud network system), and SAICHIP (new computing chip).

 

The SAIHEAT Energy & Computing Center, which has obtained AAA-level certification for clean heating services, uses the “chip water cooling + chip waste heat utilization” technical system to realize waste heat recovery and energy secondary utilization, and open up the computing power, electricity, and heating links to reduce costs and improve Energy efficiency. The traditional heating system can be applied in civil and commercial buildings after adding a SAIHEAT series chip waste heat heating cabinet. In an ecological park of SAI in central Asia, the greenhouse can be maintained at a suitable temperature of more than 40 degrees by recycling the waste heat generated by computing when the outdoor temperature is minus 7 degrees. SAI can reduce the computing power cost of about 35% for customers, together with the heating cost of the heat demand side and the corresponding power investment.

 

For example, in a project of SAI Heat Technology located in Central Asia, the SAIHEAT Energy & Computing Center can use technical means to recover the waste heat generated by computing, and then use the heat for greenhouse heating. The greenhouse can be maintained at 43.4 degrees (the outdoor environment is minus 7 degrees). The average heat recovery rate of the whole process exceeds 80%. This allows customers to reduce the cost of computing power and heating power by about 35% while effectively reducing the power supporting investment, realizing a clean computing power solution.

 

Use the renewable energies to power the mining chips, reuse the heat the chips self-produced, it is a carbon neutral closed loop.

Prospects for the future

 

Arthur Lee, founder of SAI, said that SAI ’s mission is to enable everyone to use more clean and affordable computing power, electricity and heating resources. In the future, the company will adhere to “energy empower computing, computing empower future” corporate vision, continue to explore in the direction of providing high-performance computing based on clean energy, accumulate experience for the industry to achieve a comprehensive clean computing power. At the same time, SAI has also made a good circle of leadership and demonstration effect “carbon neutral” goal.

 

In conclusion, Bitcoin has been dealing with scepticism since its inception. Some theories are wilder than others, but arguably one of the most latched-onto debates has been around Bitcoin’s energy consumption and its alleged harmful level of emissions. The traditional banking system, according to a recent research, total consumption for banks during a year only on three metrics, is around 26 TWh on servers, 87 TWh on branches and 26TWh on ATMs for a total of close to a 140 TWh a year. Bitcoin consumes 1/4 the power of banks. But, this is just the start for bitcoins. As we move towards making every transaction using cryptocurrency, the power consumption decreases.

 

As the clean computing industry develops more mature, Bitcoin mining is more conducive to reducing the total carbon emissions of human society, and then achieving the goal of carbon neutrality.

 

References

 

https://ark-invest.com/

https://digiconomist.net/bitcoin-energy-consumption

https://coinshares.com/research/bitcoin-mining-network-december-2019

https://coinshares.com/research/bitcoin-mining-network-december-2019

https://www.iea.org/reports/renewables-2020?mode=overview

https://ourworldindata.org/grapher/renewable-energy-consumption?country=~OWID_WRL

https://ourworldindata.org/grapher/modern-renewable-energy-consumption?country=~OWID_WRL