Four key takeaways about mining from Bitcoin 2022

The mining stage at the Bitcoin 2022 conference in Miami this past week hosted business leaders from across the mining industry.

Here is a look at some of the ideas discussed during the three days of panels.

No middle ground for miners

Many of the largest mining companies are scaling up at an increasingly fast pace. At one of the panels, speakers pointed out that miners will have a very hard time keeping up if they aren’t extremely cost-competitive and using the latest and most efficient machines.

“All of us are moving full speed ahead, guns blazing,” said Marathon CEO Fred Thiel.

Mike Levitt, chairman and CEO of Core Scientific, said that capital markets have tightened up in the past few months, making it harder for anyone in between a very small or large scale miner. He said that at this point you can either be “scaled and efficient” or make a little bit of money by being “very small [and] nimble.”

“I wouldn’t want to be trying to start to build a scale business today. It’s just not easy to do that,” he said.

According to Levitt, getting the cost of goods (including power and equipment) and the productivity level balanced by building a well-designed operation are crucial factors.

Jason Les, CEO of Riot, added that the biggest barrier to entry to the industry is know-how.

Decentralization at geographical vs. ownership level

What does decentralized mining look like? Is it all about the geography or the ownership of the machines? This topic came up a few times during the conference, with a few speakers pointing towards the latter as the most crucial aspect.

“Historically, we’ve looked at decentralization as just purely physical locations,” said Ben Gagnon, chief mining officer at Bitfarms. “But if you’re looking at that vulnerability on a 51% attack, it’s not the physical distribution of mining equipment that matters. It’s the ownership of that mining equipment that matters. I can control 51% of hashrate all throughout the world. I don’t need to control it all in one location.”

Stephen Barbour, the owner of Upstream Data, also pointed to ownership of hashrate as the most important factor.

“[Hashrate] can be jurisdictionally spread out. If it’s the same owner it’s not a huge difference if it’s distributed geographically,” he said.

CEO Barefoot Mining Bob Burnett said that decentralization should be looked at from other perspectives, such as power sources and ASIC technology.

“There’s all kinds of different places in which centralization can occur and I honestly think we’re becoming more centralized. I don’t think we are dangerously centralized right now, but I think there are some vectors that worry me,” Burnett said, pointing at the move from China to the US.

“I am concerned that most of the mega-site development is also public companies. I think that’s a really, really dangerous place,” he said. “That is a cultural change for a company and I frankly think it can be a very fiat move, that it takes a Bitcoin-centric company and forces a fiat mindset into it.”

A consumer-product approach future to home mining?

There was no shortage of praise and encouragement for home mining during the conference. At one point, many hands in the audience shot up as one speaker asked how many attendees had done any sort of mining at home.

Some of the speakers shared their perspectives on how future products could make it easier for people who are not as tech-savvy to have miners at home, combining that main function with heat applications.

On a different scale, Jonathan Yuan, owner of Coin Heated, is already using the wasted heat from bitcoin miners as a product, partnering with other companies.

“I’m working with a whiskey Distillery and they want to preheat all their water. (…) So you’re cooling your ASICs, you’re getting your warm water. It’s a win-win,” Yuan said. “Everywhere I’m looking now for industrial applications, anywhere there’s heat I’m like ‘ooh, I can heat that.’”

Yun also shared that he has heated a whole pool in the cold weather using only heat from miners.

Miners are looking for stability

China’s crackdown on mining and, more recently, the exodus of miners from Kazakhstan, has deeply changed the landscape of the industry.

Marathon’s CEO Fred Thiel indicated during a panel that stability was a major factor in finding new mining locations.

“You’re putting a lot of capital to work in a place and it takes you a few years to get that money back. And the last thing you want is a bunch of people with AK-47s pulling up in the Jeep saying ‘thank you for building such a wonderful facility, you’re no longer needed, goodbye.’”

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