Mining industry retrospective 2019
The incredible growth of hashrate, the concentration of mining capacity in China, the first in the industry IPO of a large company and the release into the public sphere of the conflict between the co-founders of Bitmain. These and other events of the year affected the industry, changing its appearance. Let’s remember how it happened.
Historical maximum of bitcoin hashrate
The steady growth of the bitcoin network hashrate continued throughout almost the entire year. In October, the index reached a historic high of 104.3 TH/s. then the hashrate fell slightly, but in general, the year has more than doubled from 40 TH/s to 90 TH / s.
This growth was facilitated by the launch of an increasing number of mining installations and the replacement of old models with more efficient ones.
But, according to experts of the research division of Binance, not all miners rationally used the growing capacity. For example, analysts could not find a reasonable explanation for why during the year some of them mined Bitcoin SV (BSV) instead of the more profitable bitcoin, losing $13 million.
Superplanned bitcoins
It seems that the rapid increase in the speed of calculations has led to interesting phenomenon-the mining of “super-planned bitcoins” by miners. According to the algorithm of the first cryptocurrency, 52,560 blocks can be mined in 365 days, but there were mined almost two thousand more or more than $100 million in a year.
The concentration of mining capacity in China
According to a study by CoinShares, the share of Chinese miners in hashrate in 2019 rose to 65% — the highest level in the two years during which it has been monitoring. At the same time, 54% of the computing capacity is located in Sichuan province.
31% of the rest of the hashrate falls on:
- the American States of Washington and New-York;
- the Canadian provinces of British Columbia, Alberta, Quebec, Newfoundland, and Labrador;
- Iceland;
- Russian Siberia;
- Norwegian;
- Sweden;
- Georgian;
- Iran.
- Another 4% of the generating capacity located in other jurisdictions.
However, the trend of the year was the development of large mining projects outside of China, primarily in the United States.
Alternative to mining in China
Bitmain has built a 50 MW mining center in Rockdale, Texas, with the prospect of increasing to 300 MW.
In the same area, a much more ambitious project is being implemented by the German firm Northern Bitcoin-a mining farm with a capacity of 1 GW and an area of 57 football fields.
It is worth mentioning the company Crusoe Energy Systems, which has developed mobile installations for bitcoin mining on the energy of associated gas in shale oil fields in the United States. Crusoe already operates eight such units with a capacity of 1 MW each. Investors, including the notorious Winklevoss twins, believed in the company’s technology — it raised $70 million in funding for the deployment of 70 installations.
Reshuffle in market shares of ASIC miners ‘ producers
In the first half of 2019, Canaan Creative increased its market share to 22% , while the constant leader Bitmain reduced it to 65%. For comparison, two years ago, these figures were 6% and 75%, respectively. The third Chinese mining giant, Ebang, also increased its “market pie” during this period — from 5% to 8%.
But the results of the year, which will be known later, can make serious adjustments to this picture. According to Chinese media reports, in October, with the traditional end of the rainy season in Sichuan, miners began to upgrade equipment to more efficient.
According to sources among sellers of ASIC-miners, up to 50% of purchased devices fall on the flagship model of the company MicroBT, and the installation of Antminer from Bitmain takes about 16.7%.
This is easy to believe, looking at the profitability rating of miners for bitcoin mining from F2Pool. The list is headed By whatsminer M30S from MicroBT, and in the top ten four models of the company — the same number as Bitmain.
As local media again believe, the problems created by MicroBT in the market have caused the resumption of legal proceedings by Bitmain founder and its former lead developer Yang Zoxing.
The first IPO of a major industry representative
After unsuccessful attempts by Chinese mining giants to enter an IPO in Hong Kong this year, reports began to appear about their plans to conduct an initial public offering outside of China.
The intention of Canaan Creative to hold an IPO in the United States became known at the beginning of the year, in the summer — a similar goal of Bitmain.
In October, Canaan filed with the Securities and Exchange Commission (SEC). The company had planned to raise $400 million, but in a re-bid reduced requests to $90–110 million.
In November, Canaan became a “trailblazer” among the largest miners, placing 10 million American Depositary receipts at a price of $9 apiece on the NASDAQ.
The goal of $90 million was achieved, but less than a month after the start of trading, the company’s shares fell by 40%.
Nevertheless, Canaan is confident that the status of a public company will allow the company to gain trust in business circles and attract investors. Her goal is to unseat Bitmain from the throne next year.
But the leader does not intend to give up his position: after the return of Jihan Wu to the leadership, Bitmain announced initiatives that should promote the sales of ASIC miners and reduce the entry barriers to the bitcoin mining market. The firm also filed for an IPO in the US with the support of German financial conglomerate Deutsche Bank.
Bitmain founders conflict and other problems of mining companies
The confrontation between the co-founders of Bitmain became known last year. At the end of October of this year, Jihan Wu returned to the position of CEO of the company, replacing Mikri Zhang with the support of shareholders. According to Wu, the conflict has been going on for several years, and under Zhang’s leadership, the company almost came to disaster.
But the latter did not abandon the idea of returning control of the company and promised “war”. It is unlikely that his unsuccessful attempt to regain control of the firm through a meeting of shareholders in November was his last action in this direction.
At the same time, it became known in the fall that the Chinese courts have blocked more than $1 million of the company’s assets in the claims of suppliers.
With them, they will enter the year 2020, where the main expected event will be the halving of bitcoin. The effect of halving the block reward on cryptocurrency quotes and mining is hotly debated. Some experts believe that this will lead to an increase in the price of bitcoin, others — that halving has already been taken into account.
In any case, miners will need more efficient and powerful equipment, which opens up opportunities for manufacturers and will inevitably lead to a redistribution of the market.
Looking forward to 2020 and a new decade! We wish you a Happy New Year!
