Categories
Coindesk News

Iranian President Calls for National Crypto Mining Strategy

Iranian President Hassan Rouhani has ordered the government to draw up a renewed national approach for the emerging crypto industry.

Chairing Iran’s economic coordination headquarters – a seminar for the national economic strategy – earlier this week, Rouhani told officials from the Central Bank of Iran (CBI), energy department and information and communication technology ministries that they needed to devise a new national strategy for crypto mining, including regulation and mining revenue, Iranian news site ArzDigital reported Wednesday.

The news comes barely two days after the Iranian parliament published a bill proposing to apply the country’s strict foreign exchange and currency smuggling regulation to cryptocurrencies. The new parliamentary law would also require crypto exchanges operating in the country to first register with the CBI – possibly in a move to try and prevent too much capital leaving the country.

Penalties for smuggling in Iran can include fines and imprisonment.

Just months ago, the administration of U.S. President Donald Trump raised concerns that Iranians were using digital assets in order to circumvent sanctions.

Iran was one of the first countries to officially recognize cryptocurrency mining as a legitimate industry back in July 2019. The government now issues mining licenses, giving companies the right to mine and then sell off any digital assets produced. An industry report in January said Iran had issued over 1,000 such licenses in its first six months.

Iran currently has a 4% share in bitcoin’s total hashrate, according to the Bitcoin Mining Map, more than double what it was at the beginning of September 2019.

It’s unclear why Rouhani wants Iranian officials to revisit bitcoin mining regulation. With the clampdown on value leaving the country, in the form of cryptocurrencies, it’s possible the President wants to ensure miners, too, aren’t taking their money away from the government’s clutches.

Disclosure Read More

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Source link

Categories
Coindesk News

Bitcoin Mining Difficulty Drops by 6% In First Adjustment After Halving

The Bitcoin network just fine-tuned a key parameter to coax back miners who quit after last week’s halving hammered their profits.

More than 20 exahashes per second (EH/s) of computing power – the equivalent of around 1.5 million older-generation mining machines – has been switched off from Bitcoin since the network’s halving.

The 7-day rolling average of Bitcoin’s hash rate has dropped over 20% from around 122 EH/s just prior to the halving on May 11 to now 97 EH/s. The once-in-four-years event reduced miners’ block rewards from 12.5 to 6.25 bitcoin (BTC) per block.

The hash rate drop after the halving has significantly outrun the hashing sprint prior to it. As such, Bitcoin’s mining difficulty, which measures how hard it is to compete for block rewards, decreased 6% to 15.14 Trillion at 2:00 UTC on Wednesday in the network’s first biweekly difficulty adjustment since the halving.

The amount of computing power connected to Bitcoin has been on a roller-coaster ride over the past two weeks.

Bitcoin’s mining difficulty adjusts itself every 2,016 blocks, roughly 14 days, to ensure the average interval between blocks remains at 10 minutes. If a large number of miners are switched off from the network, resulting in a longer-than-10-minute average block interval, the difficulty will decrease to encourage participation.

And Bitcoin’s third halving on May 11 happened exactly at the halfway mark of the previous 2,016-block difficulty cycle.

Read more: Bitcoin Mining Difficulty Nears All-Time High in Final Adjustment Before Halving

“We believe that, as the halving drew closer, miners in China did a sprint run of mining, even with older generation machines, to make most of the last days of the higher block rewards,” said Kevin Zhang, director of blockchain strategies at Greenidge Generation, a New York-based natural gas power plant that mines bitcoin.

Alejandro De La Torre, vice president of the mining pool PoolIn, agreed that miners were switching on to mine as much as possible before the halving.

“That’s why we saw those sky-high hash rate figures,” he said. But as the halving kicked in midway, he said, miners that were marginally profitable had to switch off.

According to miner profitability data tracked by PoolIn and F2Pool, at bitcoin’s current price and difficulty, old generations of miners won’t be profitable with an electricity rate that’s above $0.05 per kilowatt-hour.

Read more: Bitcoin Halving Arrives: Mining Rewards Drop for Third Time in History

Mitigating factors

That said, the drop in mining competition is helpful to those still in the game that have more efficient equipment and cheaper electricity since they can earn a bigger share of the 900 BTC minted every day.

With the difficulty adjustment, De La Torre expects some, but not all, of these miners to switch back on.

“Consider also, the wet season in China is bringing the cost of electricity even lower,” he said.

In a report released May 1, PoolIn estimated that the computing power contributed by miners at the “lower quartile” – older models that compute 0-25 terahashes per second – accounted for 15% to 30% of the network’s total at the time.

“While we expect most of these miners will shut down after the halving, it is likely that some of them have cheap enough electricity to survive in the near future,” the firm said in the report.

Read more: New York Power Plant Sells 30% of Its Bitcoin Mining Hashrate to Institutional Buyers

As the summer rainy season approaches in China, mining farms in the country’s southwestern provinces have been trying to attract customers with electricity rates as low as $0.03 per kilowatt-hour.

Following the halving, the total transaction fees paid to Bitcoin miners have also been on the rise, data shows. Apart from block rewards, miners earn fees that are attached to each transaction on the Bitcoin network.

Total daily network transaction fees have jumped from around 30 BTC at the end of April to over 160 BTC, and now account for roughly 17% of miners’ daily revenue.

“Another interesting observation we made is the significant rise of the transaction fees as a percentage of the block rewards. Yesterday, transaction fees comprised nearly a quarter of Greenidge’s pool payouts,” said Zhang. “With this percentage currently in the range of 15-20%, it remains to be seen how this percentage may change and affect the incentive of miners.”

Read more: BitMEX Is Making Bitcoin Network More Expensive for Everyone, Researcher Finds

Disclosure Read More

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Source link

Categories
Coindesk News

Nvidia Disguised $1B in ‘Fickle’ Crypto Mining Sales as Gaming Revenue: Lawsuit

Nvidia, the multinational chip-making giant, is still being sued by disgruntled investors for allegedly under-reporting its sales of hardware used to mine cryptocurrency.

According to The Register, the computer processing giant stands accused by a group of shareholders for attempting to pass off the sales of as much as $1 billion in graphics processing units (GPUs) used for cryptocurrency mining as gaming hardware.

The shareholder class suit accuses CEO Jensen Huang, CFO Collette Kress and senior vice president and head of gaming Jeff Fisher, claiming they knew that the spike in GeForce GPU sales was related to the crypto mining boom and was unsustainable in the longer term.

The lawsuit dates back to the height of the crypto fervor in 2017, but an amended suit was filed in California last week (see below).

The joint plaintiffs claim the “defendants opted for a strategy that would capitalize on miners’ fervent demand for GeForce GPUs while falsely telling investors that the spike in GeForce sales came from gamers, not miners.” They then allege the company made it appear that its revenue was sheltered from the ups and downs of the cryptocurrency markets.

“Defendants refused to publicly acknowledge that NVIDIA’s proliferating sales were the result of fickle cryptocurrency miners, lest investors discount the Company’s stock to reflect the volatility of crypto-related demand,” the filing states.

In 2018, Nvidia’s share price plummeted 20 percent after demand tapered from the mining craze the year before. As cryptocurrency prices dropped significantly, so too did miner profits, forcing many operations to close down.

Via a trial by jury, the shareholders now seek damages from the company and its executives for what they claim is a violation of U.S. Exchange Act for misrepresenting where Nvidia’s revenues were coming from.

See the full amended complaint below:

Disclosure Read More

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Source link

Categories
Coindesk News

Crypto Long & Short: Mining Derivatives Point to Growing Sophistication

Well, it happened. Block 630,000 was processed on the Bitcoin blockchain (while we were on the air with our Crypto Long & Short show on Monday, how cool is that!), and the bitcoin subsidy paid to miners was cut from 12.5 bitcoins to 6.25. It felt momentous, as we all witnessed a pre-programmed economic system immutably do its thing. (Allen Farrington’s essay beautifully describes what it meant to those of us watching.)

Many of you are probably breathing a sigh of relief now that you don’t have to hear about the halving again for a few years. Understandable – it has dominated the crypto conversation over the past few months. But one feature will not disappear: the focus on bitcoin mining. This conversation is worth continuing, as it births new business models and new financial products that in turn open up new investment opportunities and risks. 

Last week I wrote about how bitcoin mining was “growing up,” becoming more structured, scaled and financialized. The trend is continuing in leaps and bounds.

This week, derivatives exchange FTX launched what they are calling “hashrate futures.” Technically, they are not hashrate futures, they are difficulty futures. What’s the difference? Hashrate represents the computational power at work processing bitcoin transaction blocks. Since we don’t know at any given time how many miners are active and with which machines, the figure is an estimation derived from the difficulty level and the time between blocks. 

The difficulty level refers to the requirements for successfully processing a transaction block. Miners have to find a random number that, when added to the block and run through the hash algorithm, produces a string with a certain number of zeroes at the beginning. The more zeroes, the harder the challenge. If blocks are being successfully processed too quickly, the difficulty rate adjusts upward, and the opposite if blocks are taking too long. 

Both variables affect the amount of electricity a miner will have to consume. Being able to hedge either will remove some of the uncertainty around the mining business model, much like an airline hedges its fuel cost. Admittedly, airline revenues aren’t as volatile as bitcoin miner revenues, but the market is not short of instruments that let miners hedge their income. Hedging mining costs, on the other hand, is a relatively new concept that could, when more extended, have a fundamental impact on the sector’s profitability and resilience. Less uncertainty around costs could encourage more investment in bitcoin mining, which in turn could bring more security to the network. 

This particular instrument may or may not take off. Its significance is more that it could trigger a new wave of financial innovation that supports the growth and increasing sophistication of the bitcoin mining industry, which is struggling to adjust to reduced revenue and tougher competition. All this, just as the world is paying more attention to its output.

Trust in Crypto Tells a Tale

Earlier this week, PR firm Edelman published a special edition of its famed Trust Barometer report, focused on cryptocurrency. 

While the sample size is relatively large for a survey (+34,000 people over 18 years old, across 28 countries), it is still limited and so these findings are no more than an unverifiable indication of global sentiment. They are, however, revealing, and have some intriguing messages hidden between the lines.

First, some background: Edelman started these surveys in 2001, to gauge the public’s most pressing concerns and its level of comfort with established institutions. Its 2020 annual survey, published in January, before the Covid-19 crisis reached its peak, revealed a world already stressed about the role of technology in the economy. According to the results, over two-thirds of the population feel that the pace of change is too fast. Over 80% are worried they will lose their job to automation. And more than half believe that capitalism causes more harm than good. The survey is worth checking out, if only for a reminder that the current crisis we are living through is not just because of the pandemic.

Now, on to some of the data points from the cryptocurrency edition:

  • Almost 50% of the multi-market survey sample trust cryptocurrencies, up 11 points from last year and only 10 points less than the percentage of those that trust banks. That sounds encouraging, until you notice that only 34% of U.S. respondents answered in the affirmative, down slightly on 2019. Over 80% of Chinese respondents, however, trust crypto, up 10 points on 2019. Western media often treats the U.S. as cryptocurrency’s largest potential market – this shows that perhaps we’re wrong. 

blockchain-trust-by-country
Source: Edelman
  • Other countries with a strong jump in the trust factor are Argentina (+25 points!), Mexico, Colombia and Brazil. These are, perhaps not coincidentally, the countries whose currencies have most depreciated against the dollar over the past 12 months. 

currency-depreciation-wide
  • One outlier is South Africa, whose currency has depreciated by 30%, while its apparent trust of crypto has jumped only nine points to reach a relatively lackluster 49%. This may be a geography to watch, especially since, as Delphi Digital pointed out in its latest State of Bitcoin report, the price of bitcoin denominated in South African rand has increased a whopping 60% so far this year.

delphi-btc-in-currencies
Source: Delphi Digital
  • Moving on, only 35% of respondents believe that cryptocurrencies and blockchain technology will have a net positive impact. In the U.S., this figure is an unenthusiastic 26%. Look at the figure for China, though: a substantial 62%. Yes, proportionally, China has more than double the conviction of the U.S. in blockchain’s potential. Combine this with the strong push from all levels of government for blockchain application research, and the imminent launch of the Chinese digital currency, and you get even more of a sense of a blockchain powerhouse emerging. 

edelman-positive-impact
  • Finally, the report reveals a strong push for more centralized control over crypto markets. More than 60% of respondents believe that cryptocurrency needs more regulation. Unsurprisingly, the call for regulation is greater in those countries with low trust levels (Italy, Spain, Hong Kong), but even in areas with high trust levels, over 50% of respondents think that the sector is not regulated enough. 
  • This hints at widespread mainstream support for licensing and FATF rules. As regulations are rolled out, we could see mainstream comfort and adoption levels grow.

All in all, this report indicates a notable increase in global understanding and support of crypto currencies. Of the 28 markets surveyed, only three had lower trust in cryptoassets than last year, and the declines were negligible. One of these was the U.S., however, which will be a narrative to watch.

As currency turmoil starts to crowd out other worrying headlines, as fractures in traditional institutions continue to emerge, and as the never-ending crypto education process continues, trust in crypto assets and blockchain technology is likely to continue to spread across emerging markets. This in turn will impact the value proposition and trust from investors and builders in more developed economies. 

And, there’s bitcoin’s resilience. As hedge fund manager Paul Tudor Jones said on CNBC earlier this week: “Every day that goes by and bitcoin survives, the trust in it will go up.” 

Anyone know what’s going on yet?

In spite of the hype around the halving and the crypto-laden virtual air around our massive Consensus: Distributed event, bitcoin had a lackluster week, falling 1%. Gold and long-term bonds did better, edging slightly up on persistent concerns about inflation, deflation or perhaps both.

performance-chart-15-mar-wide

It’s interesting to note that the more tech-heavy Nasdaq Composite has consistently outperformed its much larger sibling, and is almost flat on the year, while the S&P 500 is down more than 11%. Bitcoin is up over 35%, outperforming even gold.

The economic hits keep on coming: The UK and Germany, Europe’s two largest economies, are now officially in recession, and Brexit has reared its contentious head again. The pound joined a host of other currencies in their continued depreciation against the dollar. The question on many analysts’ worry lists is how long this currency tension can continue before something snaps. 

(Note: Nothing in this newsletter is investment advice. The author owns small amounts of bitcoin and ether.)

CHAIN LINKS

Well-known hedge fund manager Paul Tudor Jones II has confirmed he has invested somewhere between 1% and 2% of his assets in bitcoin. TAKEWAY: This detail comes on top of the revelation last week that his fund was looking at investing in bitcoin futures on the CME, and underlines his conviction which appears to go beyond that of short-term trading gains. Tudor Jones’ comments show that he is not a bitcoin bull – he recognizes that it is a nascent type of asset, and may not succeed – but he’s evaluated the risk profile and believe there is greater upside than downside, especially given the current macroeconomic environment. 

Crytpo research team Delphi Digital published a comprehensive report on bitcoin, covering network metrics, market performance, software upgrades and underlying narratives. TAKEAWAY: There’s a lot to unpack here, and something for everyone, but I found sections on wallet balances and on emerging markets particularly interesting. So far this year, the number of small holders (less than 1 BTC) has gone up over 6%, which indicates a growth in retail interest. The number of large holders (more than 10,000 BTC) has declined by 2%, which indicates either profit taking, or traders exiting, spooked by the volatility. 

wallet-distribution-by-balance-delphi-and-glassnode-wide
Source: Delphi Digital

Coin Metrics analyzed the timestamp of stablecoin transfers to glean more information as to their use. It turns out that most tether, USDC and PAX transactions occur during Asian and European hours. DAI transfers, on the other hand, are concentrated in U.S. hours. TAKEAWAY: Interesting that programmatic stablecoins such as DAI are less appealing to Asian and European investors than those in the U.S. Another takeaway is that tether and USDC usage is more concentrated than PAX, which implies a higher degree of institutional use.

coinmetrics-usdt-usage-wide
Source: Coin Metrics

The Wall Street Journal reported that JP Morgan was now offering banking services to crypto exchanges Coinbase and Gemini. TAKEAWAY: This strong sign of increasing legitimacy of crypto businesses in the eyes of legacy finance, and should assuage investors’ concerns as to the reliability of crypto market infrastructure.

PwC released its annual Crypto Funds report, compiled in collaboration with fund manager Elwood, which revealed some interesting trends:

– A quantitative strategy is the most common by far, accounting for almost 50% of the crypto fund universe (which, for purposes of this report, does not include crypto index or venture capital funds).
– Almost 90% of crypto fund investors are either family offices or high-net worth individuals.
– The total AUM more than doubled over 2019, in spite of the bear market.
– The percentage of funds with more than $20 million AUM doubled over 2019.
– Bitcoin-only funds easily outperformed all other types in 2019.
– Approximately 40% of crypto funds are also involved in staking, lending or both, which indicates a deepening familiarity with sector developments.
– 56% actively use derivatives.
– Over 80% use an independent custodian, vs just over 50% in 2018.
– Over 40% are domiciled in the Cayman Islands, which, as well as a favorable tax regime, also gives them a wide range of exchanges from which to choose.

pwc-funds-performance-wide
Source: PwC/Elwood

As further evidence that bitcoin-only funds have been outperforming, performance figures for Pantera Capital – one of the oldest and largest crypto fund managers in the sector – show that its flagship bitcoin fund lost 75.6% in 2018 and gained 87.7% in 2019, according to internal materials seen by CoinDesk. This brings the fund’s historical returns to 10,162%. TAKEAWAY: The relative outperformance of bitcoin funds could be interpreted as a sign that the sector is still young – new institutional money is likely to gravitate towards the oldest and largest cryptocurrency, for its liquidity and robustness. However, as the sector matures, more diversified funds are likely to rise in prominence, especially as bitcoin so far this year is underperforming equally weighted indices representing a broader range of tokens.

btc-vs-indices

From the PwC/Elwood report mentioned above, we can infer a growing institutional interest in staking, in which investors earn rewards for locking up their holdings in order to participate in network governance. This past week, the Proof of Stake Alliance published a series of standards around marketing language, designed after conversations with regulators. TAKEAWAY: In last year’s PwC report, staking was barely mentioned. This year the report specifies that almost 40% of crypto funds are involved in crypto lending, staking or both. This points to growing sophistication amongst funds and investors. Staking is still a marginal crypto investment opportunity, but is likely to continue to grow as proof of stake networks evolve and as ethereum edges towards its protocol shift.

A blog post from crypto exchange Coinbase points out that bitcoin’s dominance wanes in bull markets. TAKEAWAY: The post’s author hypothesizes that this could be because investors become confident enough on their bitcoin bets to other possible category winners. It could also be because a bear market sees a flight to “relative” safety, away from smaller tokens and toward the more established bitcoin. Retail investors, however, show a propensity to trade other tokens in times of volatility, at higher levels than their market caps would suggest. 75% of Coinbase customers, who are mostly retail, have purchased crypto assets other than bitcoin. 

Speaking at Consensus: Distributed, Brian Brooks, chief operating officer of the U.S. Office of the Comptroller of the Currency (OCC), said that he believes crypto companies could fall under a federal licensing regime rather than state-level money transmitter licenses. TAKEAWAY: This would lead to a more regulated and robust market infrastructure, which would boost both entrepreneurial and investor interest in crypto assets. It could also be enough to tempt some legacy financial institutions to set up crypto arms, injecting a further dose of legitimacy. 

Binance.US has launched an OTC desk to enable trades of over $10,000. TAKEAWAY: U.S.-based institutions are still at this stage more likely to accumulate positions through the CME or the “blue chip” OTC desks such as B2C2 – but the potential market for Binance OTC amongst large traders and high-net-worth individuals could still be considerable, and the service could act as an additional on-ramp for large investors. It remains to be seen whether the OTC option will increase the overall volumes for Binance.US, or siphon off some of the exchange data as existing clients choose the more bespoke trading.

Crypto platform ErisX has become the first regulated U.S.-based exchange to offer ether futures contracts. These will be physically delivered with monthly and quarterly expirations. TAKEAWAY: This could change the attractiveness of ether as an investment asset from an institutional point of view – professional investors rarely take long-only or short-only bets, and the existence of regulated futures makes positions easier to hedge. But there is virtually no demand for physically settled bitcoin futures on ErisX, and relatively little demand elsewhere: Bakkt’s physically settled volume is miniscule compared to the CME’s cash-settled volume. So, will there be demand for ether futures? Another factor in demand is leverage, or in this case the lack of. On the other hand, the CME does not yet trade ether futures, so interested investors don’t have much to choose from. 

skew_btc_futures__aggregated_daily_volumes-4
Source: skew.com

Hut 8 Mining, one of Canada’s largest mining operations, reported falling revenue, decreased adjusted EBITDA margin and increased collateral requirements on debt in Q1. TAKEAWAY: This makes the third consecutive quarter revenue has declined, with the price increase failing to offset a decrease in the number of bitcoin mined – figures to watch as the subsidy per block going forward will be half what it was in Q1. (For more detail on Hut 8, see our in-depth report.

Brooklyn Nets guard Spencer Dinwiddie spoke at Consensus: Distributed about his push to offer a piece of his future cash flows to investors via a crypto token. TAKEAWAY: Early days yet, and it remains to be seen what legal kinks have yet to emerge – but this offers a peek into a potential future in which sports contracts could be traded like securities, and fantasy football becomes a new type of portfolio management.

Podcasts from the week worth listening to:

  • Macro Voices – Dr. Ben Hunt: Charting the post COVID-19 economic recovery
  • Unconfirmed –  Bitcoin at the 3rd Halving: What We See From On-Chain Data, with Yan Lieberman of Delphi Digital
  • Unqualified Opinions – Layer 1 CEO Alex Liegl on the Institutionalization of Bitcoin Mining in America
  • The Pomp Podcast – Cullen Roche Explains the Ultimate Breakdown of the Federal Reserve
Disclosure Read More

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Source link

Categories
Coindesk News

Hut 8 Mining Revenue Continues Decline in Q1

Hut 8 Mining, one of Canada’s largest mining operations, reported less-than-stellar first-quarter 2020 earnings Monday, the same day as the bitcoin halving.

Earnings lowlights included falling revenue, decreased adjusted EBITDA margin and increased collateral requirements on debt.

For the third consecutive quarter, revenues declined; this time by 14% sequentially to C$12.7 million (US$9.1 million). This was caused by a 32% decrease in the number of bitcoin mined during the quarter as the network hashrate continued to rise. This was partially offset by a 27% increase in the average price per bitcoin mined.

Site operating costs came in slightly elevated compared to the previous quarter (C$11.1 million in 4Q19 vs. C$12.6 million in 1Q20), possibly caused by a seasonal increase in electricity prices during cold weather.

Read more: The Rise of ASICs: A Step-by-Step History of Bitcoin Mining

With revenue down and site operating costs up, reported adjusted EBITDA slid in the red. Adjusted EBITDA margin came in at negative 4%, down from the positive 19% margin reported in 4Q19.

Management noted that bitcoin’s price plunge on March 12 caused adjusted EBTIDA to come in at negative C$822,000 for the month of March, more than offsetting the C$264,000 worth of gains recognized in the first two months of the quarter.

Liquid assets almost entirely locked behind collateralized debt

The amount of bitcoin retained on the balance sheet remained relatively flat sequentially as the vast majority (94%) of the bitcoin mined during the quarter were sold off to pay operating expenses. As of the end of March, Hut 8 held just shy of 3,000 bitcoin worth approximately C$35 million (US$25 million) using current market prices.

During the quarter, an unsecured loan from Bitfury was refinanced with a C$7 million extension loan from Genesis Capital. According to company filings, the terms of the extension loan were similar to that of its existing C$21 million loan with Genesis. However, the new extension loan came with a shorter payment period and a higher collateral requirement.

hut-8-loans

As a result of the refinancing, the amount of bitcoin locked in collateralized loans increased from 58% of Hut 8’s total bitcoin holdings (1,700 bitcoin) in 4Q19 to 94% (2,823 bitcoin) in 1Q20.

Plan to upgrade equipment still in the works

With Hut 8’s existing mining equipment quickly aging, management continues to consider upgrading to more efficient ASICs from Chinese manufacturers. Few new details were disclosed on the earnings call. However, the company did mention that it would likely finance any purchases primarily from a combination of self-financing debt and equity.

Looking ahead

The halving continues to be a major headwind for the miners like Hut 8 as the block rewards gets reduced. On the earnings call, Interim CEO Jimmy Vaiopoulos said the halving could cause the company to shut off part of its operations. However, Hut 8 remains hopeful that bitcoin prices will rise in the near future, boosting the company’s profitability and the value of its assets.

See also: Bitcoin Halving Arrives: Mining Rewards Drop for Third Time in History

The company’s plan to upgrade its equipment will surely increase operating efficiency. However, the financing needed to secure any significant purchases is still pending. Given the material risks and uncertainties of the business, Hut 8’s company filings state there is “significant doubt about the Company’s ability to continue as a going concern.” Since the earnings release, Hut 8’s stock price has pulled back 21%.

For additional insights, check out CoinDesk Research’s deep dive into Hut 8.

Disclosure Read More

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Source link

Categories
Coindesk News

Bitcoin Halving Arrives: Mining Rewards Drop for Third Time in History

Bitcoin’s third halving, the network’s quadrennial landmark and the most anticipated event this year in the cryptocurrency industry, has finally happened.

Miners racing on the network to compete for freshly minted bitcoin produced the 630,000th block at 19:23 UTC on May 11, which triggered the programmed halving event, marking another milestone in the currency’s 11-year history.

The first block in the new 6.25-bitcoin-per-block mining cycle was mined and relayed by China-based Antpool, the fourth-largest mining pool by total computing power.

In an homage to Satoshi Nakamoto’s iconic “brink of a second bailout” message in the 2009 genesis block, f2pool, which mined the 629,999th block (the last before the halving), embedded a reference to the current financial crisis: “NYTimes 09/Apr/2020 With $2.3T Injection, Fed’s Plan Far Exceeds 2008 Rescue.”

Bitcoin, the world’s first and largest blockchain network by market capitalization, was designed by its pseudonymous creator Nakamoto to reduce the rewards for mining each block by half every 210,000 blocks in order to slow down the injection of new supply to the network as time goes by.

The mining reward is an economic incentive for those who contribute computing power to securing the network, as well as processing transactions on the network since no single entity functions as a central bookkeeper.

The 2020 halving, the third in the network’s history, means the mining reward has now been reduced from 12.5 bitcoin per block to 6.25 units. It went down to 25 from 50 bitcoin per block in November 2012 and further decreased to 12.5 units in July 2016.

The immediate implication after halving is that the newly minted bitcoin in a day will fall from 1,800 to 900 units. That would also mean mining operators will see their daily total revenue – at bitcoin’s current price of $8600 – reduced from $15 million to $8 million.

As such, it has been expected the computing power connected to the Bitcoin network will fall significantly after the halving as the revenue decrease will squeeze out those miner operators who lack efficient resources to cut their electricity costs.

However, it remains to be seen how that will play out after the halving. Currently, the average Bitcoin total computing power over the last seven days since the previous mining difficulty adjustment has hit a new all-time high of 121 exahashes per second (EH/s), beating the previous record of 118 EH/s, according to data from Chinese mining pool PoolIn.

As such, Bitcoin’s mining difficulty – a measure of how hard it is to compete for mining rewards – is expected to increase by 4.9% in about seven days to an all-time high above 16.55 trillion, based on PoolIn’s data estimate.

Bitcoin’s mining difficulty is programmed to adjust every 2,016 blocks – about every two weeks – based on the amount of computing power participating in mining activity during the period.

Disclosure Read More

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Source link

Categories
Coindesk News

The CoinDesk 50: Bitmain, the Behemoth of Bitcoin Mining

Founded in 2013, the Beijing-based Bitmain Technology remains at the center of the crypto economy. With its flagship AntMiner bitcoin mining equipment still dominating the hardware market and its mining pools accounting for about a quarter of the bitcoin network’s computing power, it retains a uniquely powerful place in the ecosystem of by far the largest cryptocurrency and blockchain project. 

That’s not to say it isn’t also controversial. Its vocal support for a Bitcoin hard fork (Bitcoin Cash) in 2017, following contentious community disagreement, won the company, and its masterminds, many enemies. 

This post is part of the CoinDesk 50, an annual selection of the most innovative and consequential projects in the blockchain industry. See the full list here.

Over the years, Bitmain has been involved in many controversial developments to the point that the Chinese crypto community refers to its foes as the “mining avengers.” In 2017, Bitmain filed a lawsuit against Yang Zuoxing, the former design chief behind Bitmain’s AntMiner S9 who started a rival miner manufacturer MicroBT, over patent infringement. But Bitmain lost the case eventually. 

Then in 2018, it brought another lawsuit over non-compete violation against the former creators of Bitman’s mining pool BTC.com, who left the company to start a rival service PoolIn, which has become the world’s top two bitcoin mining pool by total hash rate.

Bitmain’s story started with Wu Jihan, one of the earliest bitcoin evangelists in China, translating Satoshi Nakamoto’s white paper to Chinese in 2011. 

https://www.flickr.com/photos/94861732@N04/14518798056/in/photolist-nSwKBj-o7YCQq-oa1ZFr-obNb7P-obN7Lv-obN7UX-o9ThVG-o7YBhL
The AntMiner S3, released in 2014, was used by a number of crypto notables when Bitcoin mining was still a hobbyist pursuit.

He invested in probably the world’s first known bitcoin-denominated initial public offering in 2012. It was a project started by Jiang Xinyu, a.k.a Friedcat., who was crowdfunding bitcoin to roll out an application-specific integrated circuit just for bitcoin mining.

The hardware sold well initially and sensational success followed. In 2013, Wu, with a finance and psychology degree from China’s prestigious Peking University, decided to start his own company to manufacture mining hardware. He was joined by Zhan Ketuan, his partner on the technology side, who, in six years, would find himself ousted from the company in a coup started by Wu.

Bitcoin’s last halving event in the summer 2016 marked the beginning of two years of extraordinary growth at Bitmain. 

In 2017 alone, still only four years old, it made $1 billion in profits. It made another $1 billion for the first six months in 2018 and then went on a high-profile fundraise in the summer, netting $700 million from external shareholders with a bet. The deal is this: if Bitmain can’t go public within five years since the fundraise at an agreed term, external investors could require the company to redeem all of their investment with an interest. 

At that time, Bitmain was boasting a hardware market share of nearly 80 percent. So the agreed term for the IPO was nothing but ambitious: raising at least $500 million at a valuation of no less than $18 billion.

So much has changed in 2019, since its first IPO attempt failed in March in Hong Kong. 

Its rising rival, MicroBT, whose founder won over Bitmain’s patent infringement lawsuit, is seriously undermining Bitmain’s market dominance.

In 2019, Bitmain’s mining pools BTC.com and Antpool lost the top two spots to F2Pool and Poolin, the latter of which still has an ongoing case with Bitmain over alleged non-compete violation.

When Wu Jihan returned in a coup in November 2019 to kick out his founding partner Zhan, he told his people he’s back to save the sinking ship. Whether his tough comeback will work as he expected is yet to be proven, although it appears prepared to roll out more powerful equipment to weather the upcoming halving.

It remains to be seen if Bitmain can replicate the sensational success it once had following the 2016 bitcoin halving. 

Disclosure Read More

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Source link

Categories
Coindesk News

Internal Struggle at Bitcoin Mining Giant Bitmain Escalates to Physical Confrontation

After Micree Ketuan Zhan, the exiled co-founder of Bitmain, moved to reinstate his position after another partial legal victory over his former employer, tensions reportedly escalated into a physical brawl.

According to a source close to Zhan, who was ousted by his rival co-founder Wu Jihan last October, the former executive was recently granted the right to recover his status as the legal representative of Beijing Bitmain Technology by the Beijing Haidian District Justice Bureau.

On Friday morning local time, as Zhan attended the bureau to collect his new registration license as part of the recovery process, he was surrounded by dozens of men including Bitmain’s chief executive officer Liu Luyao, according to the source, who was at the scene at the time.

According to a report by Chinese news source Caixin on Friday, as officials from the Justice Bureau attempted to hand over the updated license to Zhan as the firm’s new legal representative, Liu abruptly took possession of the license, saying, “the business license is company property, how can it fall in to the hands of an individual?”

According to a video circulating on WeChat seen and verified by CoinDesk, the tensions between the two sides later escalated into a physical confrontation. After the Justice Bureau reported the incident to the police, both parties were taken to the local police station.

The confrontation marks the latest development in Bitmain’s internal struggle following last year’s sudden coup, and deepens the uncertainties surrounding the firm’s senior management ahead of a planned initial public offering in the U.S.

Zhan’s latest partial legal victory returning his legal representative status followed an another win last month. A legal representative for a Chinese company usually holds broad powers to act on a company’s behalf.

In a statement issued by Bitmain on Friday, the company takes its aim at the Justice Bureau, saying the decision to reverse the registration is a “mistake” made by the government agency that “has severely violated the Company Law [of China].”

“We recognize Liu Luyao as the currently effective legal representative of Beijing Bitmain,” the firm said. “During this period, we will not acknowledge any action taken by Zhan Ketuan as a legal representative of Beijing Bitmain and reserve the rights to file legal claims against Zhan and related parties.”

However, the internal fight to control the world’s largest bitcoin miner make is far from over.

Beijing Bitmain is an operating entity fully owned by Hong Kong Bitmain Technologies, which is ultimately controlled by Cayman-registered Bitmain Technologies Holding.

Also read: How was it possible for Bitmain to oust its Largest Shareholder Overnight?

Following Wu’s coup last year, BitMain Technologies Holding summoned an extraordinary general meeting that allegedly reduced the voting power of the holding company’s Class B shares from 10 votes per share to just one.

That subsequently reduced Zhan’s voting power from over 60% to closer to 30%, even though he remains the largest shareholder of Bitmain by ownership.

Zhan, who said he was not aware of the meeting beforehand, afterwards waged a lawsuit in the Cayman Islands, asking a court to void the decisions made in the meeting. The case is still ongoing.

Disclosure Read More

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Source link

Categories
Coindesk News

Cambridge University Releases New Tool for Tracking Global Bitcoin Mining Power

A team affiliated with the University of Cambridge has released a new bitcoin data tool showing the countries with the highest concentration of mining activity.

The Cambridge Centre for Alternative Finance (CCAF), which is based at the Cambridge Judge Business School, said Wednesday the Bitcoin Mining Map would visualize countries’ monthly share of global hashrate for the very first time, as well as provide more in-depth data for comparing Chinese provinces.

On a global scale, the map shows China making up 65% of total global hashrate, with the U.S. and Russia back on 7%. While China is still way out in front, its share of the hashrate has dropped roughly 10% since September.

The data comes from APIs connected to three mining pools – BTC.com, Poolin, and ViaBTC – and took a year to develop. Blandin said it represented roughly 37% of total global hashrate and might skew too far against North America and Europe. They are hoping to plug in data from more mining pools and entities to create a more comprehensive picture.

“This data may validate some market intuitions, drive greater transparency, and help participants in the conduct of their operations,” said Apolline Blandin, CCAF’s cryptocurrency and blockchain lead, to CoinDesk in an email. “From a research perspective, whether academic or industry research, this data can help better calibrate and adjust the parameters of researchers’ models.”

Many miners use virtual private networks (VPNs) to mask IP addresses and can make locations harder to pin down. In the methodology page, CCAF said that they had noticed this was particularly prominent in Zhejiang province. “To mitigate this effect, we have divided the hashrate of Zhejiang province proportionally among other Chinese provinces listed in the pool’s dataset,” it reads.

CCAF’s mining map also shows Xinjiang as the Chinese province with the highest concentration of hashrate, conflicting with crypto asset manager CoinShares, which has placed the southern province Sichuan at the top in most of its bi-annual reports.

That may be because CCAF’s dataset began in September 2019, at the start of Sichuan’s dry season, when hydroelectric plants were running at lower capacities and aren’t producing as much power. Blandin said the map may at least confirm some Chinese miners may actually migrate from Sichuan to Xinjiang after the rainy season.

Now that the wet season has begun, the disparity between CCAF and CoinShares data could well close.

Disclosure Read More

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Source link

Categories
News RT

US to agree to PACT with ‘like-minded’ nations on space mining, ‘safety zones’ on Moon, sidelining Russia – report — RT World News

The US has been working on a draft deal that would regulate mining on the Moon as well as establish “safety zones” around would-be extraterrestrial bases, however the proposal reportedly excludes Russia, a major space power.

The Trump administration is ironing out details of a plan that would give its potential mining activities on the Moon a semblance of legality – even if not all the space-faring nations, including major ones such as Russia, are on board – a source told Reuters on Tuesday.

Citing US officials, the outlet reported that Washington would ask some of its allies, such as Canada, Japan, the United Arab Emirates and European nations, to sign an agreement that would regulate mining on the lunar surface in preparation for greater human activity on the satellite.




Also on rt.com
Boeing snubbed as NASA picks 3 lunar lander designs to compete for 2024 manned Moon mission



The agreement is set to pave the way for private companies to claim ownership over the resources they extract, some of which hope to mine the moon for water, which can be converted into rocket fuel.

The proposed pact also provides for the establishment of the so-called “safety zones” around bases that, according to Washington’s vision, could soon pop up on the Moon. The zones would vary in size depending on the “operation,” the source told Reuters.

While this provision might appear to run afoul of the 1967 Outer Space Treaty that bans all nations from staking territorial claims over any part of a celestial body beyond Earth, the Trump administration is set to argue that the agreement is aimed at boosting coordination between the countries involved, and only reinforces the 1967 treaty.

The US is set to begin negotiating the pact with its allies “in the coming weeks,” however, at least in their “early” stages, the talks would not include Moscow, the report said.

Moscow has repeatedly blasted Washington for its continuous push to make space a legal equivalent of the Wild West, including plans to militarize the outer realms and seize territory on other planets.




Also on rt.com
‘Aggressive expropriation attempt’: Russia blasts Trump’s order declaring space up for grabs by Americans



While it has yet to realize its designs to grab hold of outer space, Washington has long eyed the vast resources it has to offer. Back in 2015, for instance, Congress passed a law allowing American companies and individuals to tap into moon and asteroid resources.

Last month, Trump brought that vision one step closer to fruition, however, signing an executive order declaring that the US does not view space as “a global commons” and arguing that “Americans should have the right to engage in commercial exploration, recovery, and use of resources in outer space.”

Subscribe to RT newsletter to get stories the mainstream media won’t tell you.

Source link