-Lumerin Hashpower Marketplace
Understanding the dynamics of an open hashrate market
An overview of the supply and demand for Bitcoin mining hashrate
The Lumerin Hashpower Marketplace will allow for Bitcoin mining hashrate to be traded on the open market in a decentralized, peer-to-peer manner for the first time.
This commoditization of hashrate opens a wide spectrum of possibilities and rationales for both sides of that trade.
Let’s dive into the logic behind Bitcoin mining hashrate buyers and sellers, and what would motivate both of them to transact on the Lumerin Hashpower Marketplace.
Demand side rationale: Who will buy Bitcoin mining hashrate and why?
Demand for Bitcoin mining hashpower has consistently increased over the years. This is visible in on-chain metrics like Bitcoin’s total hashrate or mining difficulty, but also in industry trends such as the emergence of enterprise-level mining companies and the release of ever more efficient ASIC models.
However, due to a variety of reasons like geographical restrictions or supply chain issues, that demand cannot access Bitcoin mining hashrate.
In that regard, what reasons lie behind this growing demand for hashrate and how can the Lumerin Hashpower Marketplace accommodate to the buyers’ necessities?
#1: Keeping up with increasing difficulty
Bitcoin mining becomes increasingly competitive over time, requiring more efficiency to remain profitable. Large miners can take advantage of instant, remote, and on-chain hashrate acquisition to keep up with higher mining difficulty in real time, maintaining their competitive advantage until they can expand their physical operations and install new hardware.
#2: Fast operation scaling
Miners aiming for growth may find different obstacles that prevent them from doing so, such as supply chain limitations, hardware availability, lack of resources or equipment, and so on. With hashrate contracts, these same miners can sort out these obstacles and quickly expand their hashrate without having to invest in hardware or infrastructure.
#3: Inaccessibility to newer hardware
Hardware — particularly newer models of ASIC miners — can be difficult to acquire. With only a handful of manufacturers, supply is limited and shipping times can be months out from release. Not to mention that miners in specific geographic regions cannot access them at all. In contrast, miners can access the Lumerin Hashpower Marketplace and purchase Bitcoin mining hashrate from anywhere with an internet connection.
#4: Expensive local electricity costs
Electricity prices are crucial in determining the viability of a Bitcoin mining venture. Miners located in regions with particularly high prices may never be able to run a sustainable operation. In that context, it may be more convenient for them to buy hashpower from another miner in a cheaper location than mining at high costs themselves.
#5: Lack of resources or infrastructure
Physical mining operations are intensive. Machines have to be manually installed, connected, and maintained. Physical cooling systems with fans or immersion technology are a necessity to prevent overheating. Machines can break down in the middle of the night, among other unpredictable complications.
If a mining organization lacks the proper manpower or infrastructure to respond to the circumstances, they may not be able to scale or even kickstart their mining operations. Hashrate contracts allow these miners to do business as usual without having to worry about these uncertainties.
Supply side rationale: Why would miners sell their Bitcoin mining hashrate?
We have seen why seasoned and aspiring miners alike may source the hashrate they need with the Lumerin Hashpower Marketplace. Now, let’s focus on the other side of the trade: those offering their hashrate in the open market.
What interests would drive a miner to sell their Bitcoin mining hashrate, instead of pointing it to their pool to mine Bitcoin themselves?
#1: Hedging against Bitcoin volatility
Keeping the treasury solely in Bitcoin is a double-edged sword, and it can have catastrophic consequences during a strong market correction. In that regard, miners can split their revenue into two different BTC and LMR streams to mitigate Bitcoin volatility risks, meanwhile building a tokenized hashrate reserve to boost their Bitcoin mining capacity when needed.
#2: Revenue predictability on a specific period and hashrate amount
It’s virtually impossible to predict how much miners can earn from Bitcoin mining. Rewards can vary according to luck, pool payment terms and distribution schedule, and difficulty adjustments. Hashrate contracts allow miners to charge a fixed price in LMR for providing a specific amount of hashrate after a defined period of time. This offers a guaranteed return that grants greater predictability to miners.
#3: Energy arbitraging opportunities
Some miners have access to significantly cheaper electricity than other miners due to geographic locations, government subsidies, repurposing unused electricity generation sites, individually negotiated contracts with power generation companies, and many other aspects. These miners could arbitrage those below-average prices through selling hashrate contracts at market prices and keeping the difference.
#4: Streamlining operation scaling through short-term inflow of capital
The aforementioned price volatility and unpredictability of many Bitcoin mining aspects can hurt a miner’s plans to expand. Splitting their hashrate into short term contracts, miners can effectively allocate resources to make sure they source the required capital for the completion of their business development plans.
With Lumerin, hashrate becomes another commodity
By providing the necessary infrastructure and technology to transfer hashrate ownership, the Lumerin Hashpower Marketplace enables everyone with an internet connection to trade it like any other commodity.
In this short write-up, we’ve named some reasons why people would want to buy or sell commoditized Bitcoin hashrate, but that merely scratches the surface of the potential applications for it.
Our hope is that, eventually, the mining community builds its own applications for commoditized hashrate on top of the Lumerin Protocol according to their necessities and possibilities, and enriching the Bitcoin mining ecosystem even further.
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