As a hitchhiker taking to America’s highways for the first time, anyone hoping to get a clear picture of the bitcoin mining universe today may be amazed at the apparent opacity, yet sheer size of the North American mining ecosystem.
As a miner recently advised newcomers to the space on Twitter:
The North American mining environment, which is distinct from China, which is the world leader in mining hash, with an estimated 65 percent of the total coming from pools located there, is developing its own culture.
As the North American bitcoin mining scene heats up with a higher hash rate and an increase in mining revenues, more investors and interested mining companies are looking for a guide to the new mining Wild West that is the US and Canada.
The North American bitcoin mining ecosystem consists of four basic parts: mining pools, mining companies (collocation and self-hosting), financial services providers, and firmware (software) providers.
However, sometimes a financial services provider can also be a mining company (as with Galaxy Digital), and sometimes an energy supplier can also be a mining company (Greenridge generation). It’s complicated.
The rise of (demand for) machines
The shortage of mining equipment not only in North America but all over the world including China is a major problem in the industry right now.
As the price of bitcoin continues to hit its all-time high, there is pressure on ASIC foundries and equipment manufacturers to try to meet the demand from both newly interested customers and older mining companies who need to upgrade to remain competitive.
Estimated wait times for new mining equipment are a minimum of six months, with leading manufacturers such as Bitmain sold out until September 2021. There is also a significant price hike in the secondary market for used ASICs.
We asked Samson Mow, CSO for Blockstream and Blockstream mining, how things look for bitcoin miners in the future in 2021. Mow said Bitcoin Magazine that the defining problem moving into 2021 is the lack of ASIC-based mining equipment:
“The growth in bitcoin hash rate for the coming year is likely to be limited by the production of ASIC chips,” he said. “This could lead to some very interesting new financial products related to mining … With equipment shortages and a soaring bitcoin price, many older mining platforms are now profitable to use again for miners who have access to cheap power. . “
Mow confirmed what most experts say about mining equipment – at this point, there is nowhere new technology in sight that can beat the mining power of an ASIC chip.
This is positive news for some established miners who have access to cheap power as the difficulty is more favorable without intense competition. There are some of these in North America, even though the region is also attracting newcomers.
“Mining profitability has increased this year as the pace of new hardware deployment has lagged significantly behind Bitcoin’s price increase, meaning there has been no increase in hashpower competition to coincide with the price increase,” said Ryan Porter, head of business development for financial services company BitOoda told Bitcoin Magazine.
Time for your own pool, children
Most miners, including North American miners, use mining pools in China. But this is changing as new mining pools are being set up in the US and Canada to offer miners more regulatory options.
There are at least seven North American mining pools today, up from just three a year ago.
In the past six months, Luxor, Blockstream and Novablock have joined Titan, Blockware, DMG Blockseer and a Marathon / DMG co-op pool.
Luxor Pool is listed on the stock exchange and DMG Blockseer is in the process of going public, as is the Marathon / DMG co-op pool (more on this later).
Large institutions and energy companies are getting involved
As with investing in bitcoin, it is asset – which has enjoyed a price surge widely attributed to the involvement of major institutions such as Square, MicroStrategy and Grayscale – mining is coming into the crosshairs of institutions looking to expand their wallets with some financial hash power.
According to Research conducted by Fidelity Digital Assets and Greenwich Associates, nearly 80 percent of institutional investors find digital assets appealing, and more than six in ten institutions believe digital assets have a place in their investment portfolios.
BitOoda, like other financial services firms in North America, works with investment companies to help them set up mining businesses. Some prefer to be directly involved in a specific mining operation, while others are only looking for an investment interest for their portfolios.
There are also power providers in the region who use the extra power they have during off-peak hours to mine bitcoin. Greenridge generation in New York State is using its extra power to work all night and mine bitcoin during other off-peak hours. Crusoe energy, a Denver-based energy company captures waste gas from flaring to create power – much of which is used for mining bitcoin.
North American mining companies want to go public
Like bitcoin miners worldwide, North American miners have preferred to remain relatively anonymous, but there is a new breed of mining companies and mining pools trying to come out ahead of any government attempts to regulate the industry .
One of the reasons for getting ahead of the regulators is to qualify for public listing on a stock exchange, an effective means of raising capital.
“The interest of mining companies in going public has never been greater as publicly traded mining companies Riot Blockchain, Marathon Patent Group and HIVE Blockchain have all passed a valuation of $ 1 billion, ”said Porter.
And a few regional players have already been publicly listed. Canadian mining company Hut8 was one of the first mining companies to be listed on the Toronto Stock Exchange. Meanwhile, NASDAQ lists Riot Blockchain (NASDAQ: RIOT), Marathon Patent Group (NASDAQ: MARA) and HIVE Blockchain Technologies (OTC: HVBTF).
Regulators are entering the room
Until recently, bitcoin mining was not a problem for government regulators, but the growing focus on regulating cryptocurrencies from government agencies such as the US Securities and Exchange Commission, Financial Crimes Enforcement Network and Commodity Futures Trading Commission may soon change that.
It seems inevitable that a regulatory eye will be cast on mining at some point.
“We believe companies will be willing to pay standard mining pool fees (i.e. 2 percent) for full transparency and to ensure that their servers / miners are not involved in adding North Korean or Iranian or other to the black list of OFAC’s placed wallets when moving Bitcoin, ”Sheldon Bennett, DMG Blockchain Solutions COO, told Bitcoin Magazine recently.
When DMG partnered with Marathon to form DCMNA, it was promised to only process transactions that comply with United States law.
In its announcement, DCMNA said it will be audited by a third-party financial firm and will use clean block mining that meets the Office of Foreign Asset Control (OFAC) compliance standards and reduces the risk of mining blocks with transactions . linked to questionable activities.
Profits from the DCMNA pool will go towards pro-miner lobbying activities in Washington, DC, and all miners participating in DCMNA must submit KYC information, including smaller companies renting space in DMG’s warehouses.