Digital shovels: Exploring the state of US mining — 07/15 (Part 1)
Last week, we had the pleasure to join some of the brightest minds of the crypto industry to discuss the current state of Bitcoin mining in the United States. If you didn’t have the opportunity to tune in, you could read this summary of the topics discussed or watch the whole thing here. Due to the extent of the event, we will split the recap into two parts. This first one addresses the China mining ban and its repercussions on the Bitcoin network, including the hashrate drop and migration, the subsequent difficulty adjustment, and the opportunity that it brings to retail miners.
A brief introduction
The “Digital shovels: Exploring the State of US mining’’ discussion was part of a larger event named “Bitcoin mining: Fact, fiction, and a look into the future,” organized by the Chamber of Digital Commerce. The aim was to dissect the narratives currently surrounding Bitcoin mining, analyzing their arguments and their motivations, and charting a path forward regarding the topics they address.
Our CEO, Ryan Condron, joined a panel of brilliant professionals like Dan Held, Whit Gibbs, Dave Perrill, and Russell Cann, all leaders in the Bitcoin mining industry.
Without further ado, let’s dive into the subjects discussed.
Tackling the FUD: China mining ban
Undoubtedly, the most recurrent arguments against Bitcoin these last few weeks are all about either China banning mining (and the possible outcomes that may have on the network) and the environmental impact Bitcoin may have given its high energy consumption.
Russell Cann, the Chief Customer Success Officer at Core Scientific with over 20 years of designing infrastructure for computing systems, filled everybody in: “China has more renewable energy than anybody else. They have excess renewable energy that can power most of the countries of the world.”
The problem the country has, according to Russell, is transporting that power from the generation sites to the population centers. With that in mind, they started building out infrastructure for that renewable energy to reach the population centers. Before that, they tackled the issue by building small coal plants to provide power around the country, which carries a considerable environmental impact, but an economic one.
Russell believes that, now that China’s developing their energy distribution network, they need the power Bitcoin miners are using to get to the population centers and to see “what the grid will support without the Bitcoin mining that’s going on there.”
Nevertheless, our CEO is confident that the exodus this crackdown has sparked is positive for the network: “A lot of the price and hashrate fluctuations comes from China, so I think this is going to provide a ton of stability, insight, and transparency in the mining market. This is a huge win for Bitcoin.” Ryan also believes that the migrating hashrate will provide more oversight into the environmental side of the discussion too. So mostly positive news for the network once the miners have relocated.
United States: Miners’ favorite destination?
We’ve established that miners’ migration is a good thing. Now, the question that arises is where will all this hashpower settle down. Dave Perrill, CEO of Compute North, is seeing much of it choosing the US as its new home, and that that number grows with each passing day.
However, it’s not going to be easy to accommodate that amount of hashpower as, according to Dave, miners can relocate much faster than the country can build infrastructure for it. However, he’s still optimistic: “I think it’s going to be a bit of a long crawl back, but the operators that you have on your panel today and the ones that are influential in the space care about the narrative. They care about ESG. They care about some of those components and, long term, I think this is all really good for our industry.”
It’s clear that North America is the most chosen destination so far. However, Whit Gibbs, CEO of Compass Mining, doesn’t rule out the chance that China backs down on its mining crackdown: “Whether or not China has ultimately left the picture at this point, I think it’s still up in the air.” That said, Whit believes that we may have to wait a couple of months to see how the situation develops: “I think we will get a clear picture of what’s going on in China at the end of the rainy season in October, although all signs would indicate that the hardware is all moving out.”
Nonetheless, Compass CEO already sees changes narrative-wise: “Now that the hashrate is shifting out of China, what we are opening ourselves up to is more oversight into how Bitcoin is being mined. If that hashrate finds itself within North America, I think that we are going to see more regulations come down just in how Bitcoin is actually mined.” Regulations are not a bad thing, though. Whit believes that regulatory clarity is essential as big companies scale within the Bitcoin mining space.
The opportunity for new miners to join the network
Miners disconnecting from China led to a massive drop in hashrate. If you’ve done your homework and studied Bitcoin mining, you’ll know that that, in turn, leads to a proportionally huge difficulty adjustment. This makes mining a more profitable activity, providing a unique opportunity for retail miners to take up new endeavors.
According to Whit, this is already happening: “With retail coming back into this space, I think that now more than ever, especially after the last difficulty adjustment, mining is hitting this golden era of profitability.” But there are other factors to consider besides difficulty, says Whit: “We are seeing retail get more and more involved, and I think that that’s a byproduct of Bitcoin’s expansion overall.”
Indeed, Bitcoin’s growth over the last year is undeniable. People worldwide have taken interest not only in the “money to be made” but also in the value of a secure, global payment network. And now that timing is on their side, they are taking the next step. “So you have these Bitcoiners who also now have the opportunity to participate, and they’re jumping on it,” says Compass CEO.