Lumerin Hashpower Marketplace
When Hashrate Becomes Tradable, Permissionless: New Opportunities for Bitcoin Miners
Analyzing the use cases of the Lumerin Protocol and commoditized hashpower
With the Lumerin Hashpower Marketplace, miners and users will be able to exchange Bitcoin mining hashrate just like any commodity, but in a decentralized environment.
In this article, we’ll explore the potential of on-chain commoditized hashpower and the advantages it brings for buyers and sellers.
Gain exposure to Bitcoin mining
Mining Bitcoin has two fundamental entry barriers: a technical knowledge required to properly manage and maintain mining hardware, and a considerable budget to acquire that hardware and related equipment, as well as covering the electricity bills.
These two factors discourage many people from entering the mining world. However, the Lumerin Hashpower Marketplace enables retail crypto users to acquire and control hashrate and point it to their own account.
This allows anyone to mine Bitcoin without having to acquire or maintain any hardware. It’s completely permissionless, hardwareless mining!
Boost existing mining operations
If you are already running a mining operation, regardless of its size, you can also leverage Lumerin technology to boost your hashrate with ease.
Let’s assume for a minute that you are a domestic miner running a few ASIC miners in your garage. You want to acquire a third, but it’s proving to be challenging for any of the following reasons:
- You are only able to acquire an older model, which you don’t want to buy since it would be unprofitable given your electricity prices.
- You don’t have a place at home where you could set up another miner.
- Your house lacks the necessary infrastructure (e.g., power circuits or cooling systems).
However, you must acquire hashrate at that moment, since difficulty is low and you believe that the BTC price will rise.
You can use the Lumerin Hashpower Marketplace, acquire some hashrate for the budget you have, and point it to your mining pool account. This will allow you to take advantage of the favorable mining conditions without having to spend any money on soon-to-be obsolete hardware or complex infrastructure.
Variance and difficulty hedge for miners
There are two risk factors that are inherent to Bitcoin itself: payment variance and mining difficulty. Simply put, it’s difficult for miners to predict how much BTC they’ll earn from mining in a month’s time or more.
This often gives miners challenges when it comes to designing a long-term strategy and managing a budget. But what if they could determine how many tokens they would earn for a specific amount of hashrate after a given period of time? This is what the Lumerin Hashpower Marketplace enables them to do.
Hashpower contracts let miners set the price, duration, and hashrate offered in the deal. For example, a home miner can offer 300 TH/s for 30 days for the appropriate amount of LMR.
Although LMR is still subject to volatility, this allows miners to mitigate bitcoin payment variance and difficulty-adjustment impacts on profitability, providing them with additional resources for medium and long-term planning.
Peer-to-peer ASIC miner rentals
Cloud mining first appeared as a way to satisfy retail demand for mining. But this is not without its flaws and challenges.
In a nutshell, cloud mining refers to renting Bitcoin mining computing power of a specialized miner from a third party, which can be based anywhere in the world.
Nevertheless, many bitcoiners don’t like this method for one simple reason: it requires trust in a third party. When you use cloud mining services, you are relying on someone else to mine Bitcoin without ever actually checking if they own the hardware they claim to be renting to you. Also, the cloud service can pull the plug mid-engagement or flat-out refuse it — for any reason.
The key difference between cloud mining and Lumerin’s decentralized, peer-to-peer mining lies in transparency.
All trades are powered by smart contracts and validated by the Lumerin nodes. Buyer’s funds are released from the contract and sent to the seller’s wallet only after the hashrate has been properly verified in real time and delivered to the buyer’s mining pool account.
Most importantly, this technology can not only be leveraged by users, but also businesses in the cloud mining sector to increase transparency and provide more clarity to their customers.
Resource management and allocation
Throughout Q2 2022, bitcoin’s price fell ~70%, catching many miners off-guard. Many of them had to go into debt to expand their operations and, after the crash, they were forced to sell their whole monthly proceeds to fulfill their obligations.
Miners’ will always try to sell as little BTC as possible to cover their operating costs. However, keeping the entirety of their treasury in BTC could place miners in a tough spot should the price drop abruptly. This is exactly what we’ve seen in Q3 2022.
Lumerin provides an alternative for treasury management for miners, as it enables them to commoditize their main product, which is not bitcoin, but hashrate. As a result, they can enjoy a variety of options when it comes to revenue streams.
For example, miners can allocate 10% of their resources to hashpower contracts, which would diversify their revenue and provide them with a less variable income that can provide a softer landing during market crashes.
Another strategy is to dollar-cost average into LMR, which is equivalent to building a hashpower reserve that miners could use at any given time through the purchase of hashpower contracts. That way, miners can build a “hashpower reserve” to keep as “dry powder” they can deploy during high profitability epochs for maximum returns.
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These — and other — possibilities are meant to give miners more options when it comes to treasury and resource management in order to prepare for unexpected setbacks.
As it stands today, mining is inaccessible, unsustainable, and inefficient. Achieving effective hashrate commoditization would unlock the true potential of Bitcoin mining, not only as a business, but as maintaining core infrastructure for a global financial system.
This is the vision behind Lumerin, and we’re committed to building more solutions to make providing security to the most decentralized, open network in the world as easy and optimized as possible.
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