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For some highly leveraged domestic miners, the upcoming halving of Bitcoin block rewards may be extremely detrimental to them, but many industry analysts believe that the booming cryptocurrency mining industry in North America has the opportunity to make up for the possible market vacancies.

From the perspective of historical experience, the halving of Bitcoin block rewards usually eliminates a group of inefficient miners, and the share of global miners' computing power will also be readjusted. With the third "halving" in Bitcoin history With the arrival of the market, some people in the industry believe that some domestic miners will be eliminated. At the same time, they have also raised a new problem:

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High leverage exacerbates risks for Chinese miners

According to CoinShares data, as of the end of 2019, the computing power owned by mining pools in China has accounted for 65% of the computing power of the entire Bitcoin network, while the computing power of mining pools in North America has only accounted for 15% of the computing power of the entire Bitcoin network.

However, some industry experts believe that some domestic miners are engaged in a "tug of war", and the Bitcoin block reward halving event that will come next week may exacerbate the problem-in this case, in order to balance power, there will be Part of the computing power was transferred to North America.

In fact, some domestic miners currently need to face two problems:

1. May be in a state of excessive financial leverage;

2. The next generation of ASIC mining machines will be affected by supply chain shortages.

At the same time, North American miners can still enjoy cheap renewable electricity resources, and the appetite of North American investors seems to be growing.

It is undeniable that the halving of Bitcoin block rewards will indeed affect the operation of over-leveraged domestic miners (because some domestic Bitcoin miners have used loans to pay for operating costs instead of choosing to use cash to pay), which means that some excessive use of leverage Most miners are likely to be "driven out" of the market or forced to restructure their business, otherwise it will be difficult to compete with competitors.

If the price does not increase as much as expected after the Bitcoin block reward is halved, these miners will face the risk of bankruptcy, even miners using the next generation of mining machines may face the same problem, because they will have to spend most of their mining resources. Mine proceeds are used to repay debt. Since the price cannot meet expectations, these miners must sell more bitcoins, and if their income is reduced by two times, they will likely become the first batch of bankrupt miners.

Ethan Vera is one of the operators of the Luxor Mining Pool in North America. He revealed that when the price of Bitcoin plummeted in March this year, almost all miners were required to call for deposits. Therefore, some miners are now in a highly leveraged state. Ethan Vera further stated: "Compared to North American miners, Chinese miners are more vulnerable to leverage."

Ethan Vera confirmed that MatrixPort, an encrypted financial services company owned by Bitmain co-founder Jihan Wu, provided loans to many large Chinese miners when the cryptocurrency market plummeted in March this year, and these miners may have access to the cheapest electricity in the world. But most of their income may be used to repay the loan.

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Can North American miners really benefit from the "halving"?

Denis Rusinovich, director of DDH Digital Data Centers and co-founder of Berlin-based cryptocurrency mining group Denis Rusinovich, who currently operates an 80-megawatt mining operation in Kazakhstan, expects that once there are more new-generation ASIC mining machines The launch will have a major impact on the redistribution of Bitcoin's computing power across the network in the next 12 months.

Denis Rusinovich added that if the bitcoin price can remain at a high level (say at $8,000 or more) after the block reward halving, then inefficient miners can “survive for a while longer” , but if the price of bitcoin falls to $4,000, a "price war" is likely to start in the market, and larger bitcoin mining farms will squeeze small miners, which in turn will lead to the risk of centralized mining.

In Ethan Vera's view, if the price of Bitcoin can be maintained at $9,000, it may harm the interests of North American miners in the short term, but it is still relatively beneficial in the medium term.

In this regard, Blockstream Chief Strategy Officer Samson Mow agreed, adding: "We have seen a large part of Bitcoin miners begin to move their operations to the North American market, including Blockstream, we have Quebec and Georgia. 300MW mining facilities. And Data AG (formerly Northern Bitcoin AG), headquartered in Munich, Germany, has built a 300MW mine in Rockdale, Texas, which is likely to become the world's largest One of the Bitcoin mining facilities.”

In fact, there are many other examples of the rise of the mining industry in North America, such as:

1. Upstream Data is a company that sells mining machines to oil drilling companies. Their mining machines support the use of flare gas as power mining;

2. VBit Mining Company is currently building a mine with 200 megawatts of power in Alberta, Canada.

It is worth mentioning that Miao Yongquan hopes that wealth will also flow into the manufacture of ASIC mining machine chips. He said that "in the next few years, it is inevitable that major ASIC mining machine manufacturers will establish manufacturing plants in North America." However, Miao Yongquan does not hope that the upcoming halving of Bitcoin block rewards will have an impact on the distribution of computing power in the market. On the contrary, he hopes that this process can be gradual. But in any case, North American miners will eventually become the main competitors of Chinese miners, and this competition will also develop from mining itself to broader areas such as hardware manufacturing.

Miao Yongquan explained: "The miners with the lowest mining efficiency and the least capital reserves will be in trouble, and may even be forced to shut down operations. In March this year, when the price of Bitcoin plummeted, the computing power of the entire network decreased and the difficulty of mining decreased. , but those miners who were more efficient mined more bitcoins during this period. When the price recovered, the computing power of the entire network began to recover, and the bitcoin system worked as expected, and only the most efficient miners survived.”

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Mining industry in remote towns in North America

In fact, due to the cheap electricity costs and land prices in North America, Bitmain, a mining giant from China, also tried to enter the game.

Rockdale is a small town in Texas, USA. It was once prosperous in the 1950s because of the development of coal mines. However, the closure of the coal mine and the connected thermal power plant made the town gradually lose its vitality. The mayor and government officials are eager to restore the town to its former glory. Until early 2018, Bitmain’s head of North America appeared in Rockdale.

According to a previous report by "Wired" magazine, Bitmain has received a half-price electricity price discount in Rockdale and a land tax discount of up to 80%. Correspondingly, the person in charge said that Bitmain will not only mine in Rockdale, but also build a world-class data service center here. And provide hundreds of jobs for this small town with a population of just over 5,000. However, this plan was temporarily shelved due to the decline in currency prices and internal struggles in Bitmain.

Until October 2019, Bitmain announced in Rockdale, Texas that it would build a 50-megawatt cryptocurrency mining farm together with the Rockdale City Development District (MDD) and DMG. But in January of this year, DMG announced the termination of the cooperation because costs and operational efficiencies did not meet expectations.

In contrast, Whinstone has successfully operated a bitcoin mine in Rockdale. According to Bloomberg News, it also won two new customers from Japan's SBI Holdings and Internet service provider GMO in January this year.

In North America, there are many small towns with similar "genes" to Rockdale. Canada's "ghost town" Ocean Fall. The sawmills on which the latter once relied fell into decline in the 1980s. The resident population dropped sharply from 5,000 to less than 100, hence the name "ghost town". Today the hum of mining machines has replaced chainsaws, and a large lake is nearby to provide the water needed for cooling. The other claims to have the world's largest mine, the small town of MedicineHat located in Alberta, Canada, supported by sufficient wind power and abundant natural gas resources.

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face to the future

For the nascent Bitcoin mining industry, the biggest challenge is how to scale properly and hedge against volatility.

Dennis Rusinovich believes that the current Bitcoin mining market lacks a "hedging strategy" (PANews Note: Hedging is an option contract investment strategy that involves limiting losses. In fact, domestic encrypted financial institutions have provided service), and there is no insurance service related to Bitcoin mining in the market—of course, some people in the market have already begun to explore mining insurance brokerage business.

However, until various support services emerge, miners will have to stick to the script written by "Satoshi Nakamoto": inefficient miners may fail, so you need to plan effectively in advance before the halving.

Reference article:

Reference article:https://decrypt.co/

Can cryptocurrencies save a small town in decline?