Crypto Super Top 50: Fifth Edition
$10 Billion is New High for Crypto Mining Revenue
We have just released the Fifth biannual CryptoSuper list of Top 50 mining pools. As of the end of October, when we took a snapshot of the top 6 coins and top 50 pools, the crypto mining production annual run rate had reached a new high of over $9 billion. In the past two and a half weeks, the Bitcoin price has continued to rise significantly. If we were to adjust to today’s Bitcoin price, the gross annual revenue run-rate for the top 6 mined coins would exceed $10 billion.
Bitcoin has reached over $17,000 per coin. If Bitcoin were a company (it is not, no CEO can go before Congress), it would have the 19th (last minute edit: 16th!) largest market capitalization in the world. A single Bitcoin is worth more than 9 ounces of gold and more than 400 barrels of oil. There is some 18.5 million Bitcoin that has already been mined out of the ultimate 21 million.
These comparisons to gold and oil are not irrelevant. The US dollar used to be on a gold standard until 1971; that was replaced by the floating exchange rate “petrodollar” standard.
Money depends on the technology of the day. Gold and silver coins were assayed, weighed, stamped, and milled on the edge. Paper money uses many devices including microprinting, multiple colors, watermarks, and holograms to inhibit counterfeiting. Bitcoin uses cryptographic hashing for its mining and minting and to prevent double-spending (counterfeiting).
Monetary technology has moved over history from various commodities as Money 0.x to gold as Money 1.0 to fiat paper money as Money 2.0. The current monetary system is under stress due to massive growth in debt, weak demographics, and rising inequality. Extraordinary monetary policies have been adopted, including quantitative easing and zero and negative interest rate policies in the US and Europe.
Bitcoin offers the prospect of an emerging Money 3.0 technology based on information, securely stored across the Internet in a highly replicated and decentralized triple-entry ledger. Currently, fiat money is kept in centralized double-entry ledgers in commercial banks and central banks. Now that we have an electricity-based and information-based economy moving increasingly toward renewable energy, Bitcoin seems aligned for the 21st century as a monetary technology. Bitcoin is retained permanently as secure decentralized information and is based on electricity and cryptographic computation for its production.
Table 1 summarizes Bitcoin’s advantages relative to gold and fiat currencies.
Table 1. Attributes of Money. The four necessary attributes of money were enumerated by Aristotle over two millennia ago. This table adds a fifth, fungibility, which means one coin or piece of paper of a certain denomination is as good as another. Bitcoin scores favorably on all attributes. In particular, in comparison to fiat paper and digital money, it has a pre-determined monetary supply, rather than one that is continuously adjusted by a small committee of people. Bitcoin is private, non-state, decentralized money created and stored in the Internet.
Recent Developments in Digital Currencies
Since our last CrytpoSuper list in June, stable coins and DeFi (decentralized finance) have taken on even more importance. Another important development is that the OCC oversight agency has ruled US banks can take custody of Bitcoin for customers. An ETF remains on the horizon but could happen any month.
Corporations are entering the cryptocurrency market, notably Facebook, with their Libra stable coin and PayPal with Bitcoin and Ethereum exchange services. Some corporations such as Microstrategy and Square are placing part or all of their corporate reserves into Bitcoin.
Central banks are speeding up plans to issue central bank digital currencies, China’s DCEP has already trialed in Shenzen, and Bermuda has rolled its Sand Dollar out to the whole nation. It’s feeling inevitable for all the major central banks over the next two or three years and could be tied to stimulus and universal basic income programs. To be clear, these are orthogonal to mined cryptocurrencies, since they are created “effortlessly” by central bank committees and maintained in centralized ledgers.
Top Mined Coins
This Fifth Cryptosuper list is released in conjunction with SC20, the US-based supercomputer conference of global importance held each November (virtually this year). This is a supercomputer list, so it requires significant computation to occur in the mining (creation) of the cryptocurrency in question. This process of solving a cryptographic puzzle to create new cryptocurrency is called mining and the class of consensus algorithms that determine who wins the mining reward for a given block of transactions committed to a blockchain is called Proof of Work. Other consensus algorithms such as Proof of Stake are too lightweight to be considered here.
For the list, we consider only the most valuable Proof of Work coins. The six most valuable by total market cap are summarized in Table 2. Our prior list had eight coins; for this fifth release of the list, Monero and Ethereum Classic have both failed to make the cut. We list the type of hardware required (ASICs in all cases), the algorithm, the target block time, and subsidy, and thus how many coins are ‘minted’ per day on average. And we list the total hashrate as of the last week of October 2020. Because consensus algorithms vary so widely, and the value and popularity of even the top coins vary significantly, hashrates range over many orders of magnitude, from the Gigascale range up to the Exascale range.
Table 2. All the top proof of work coins now require ASICs for competitive mining, across a range of algorithms. Bitcoin Cash and Bitcoin SV are hard forks of Bitcoin core. The table shows block times and the number of coins created per day and the global aggregate hash rate as of the end of October; note the wide variation from Gigascale to Exascale.
Solving the cryptographic puzzle requires fast cryptographic hashing calculations. Hashes are for this domain what flops are to scientific supercomputing. There are millions of ASIC-based mining rigs around the world engaged in the cryptocurrency mining business. The more hashrate one throws at solving the cryptographic puzzle embedded in Proof of Work, the more chances an individual mining rig has of winning the award. Several years’ history for the global aggregate hashrate for Bitcoin, now over 100 Exahashes per second, is shown in Table 3. Hashrate has been climbing extremely steeply, approximately as the 10th power of the number of blocks in the blockchain, despite Halvings in block reward every four years.
Table 3. Bitcoin hashrate history at one-half block year intervals, starting from when Bitcoin was six block years of age. Each block year is 52,500 blocks of approximately 10 minutes’ duration, and block years are running slightly shorter than regular calendar years, recently by about two weeks. Since the May 11 Halving, we are now in the 13th Block year since Bitcoin’s blockchain launched in January 2009. The hash rate can be well fit by a power law relation to the number of block years elapsed, with an index of about 10.
Top 10 Mining Pool Operators
Table 4 shows the latest Top 10 pool operators, combining multiple coins mined by a given operator. Some operators are mining three or four of the top coins. If the entry is in the top 50 for pools of a given coin, it is aggregated in this list. F2Pool has retained first place, followed by SparkPool and Poolin. Poolin fell one position and Sparkpool moved up ahead of both it and AntPool. Half of the top 10 pools are in China, two are global, one is in Hong Kong, one is in the US, and one is located in both the US and China.
Details for all the Top 50 pools can be found in a slide presentation here: https://www2.slideshare.net/perrenod/top-cryptosupers-nov2020v2-239250824.
The production from the top 10 operators is almost $6 billion out of a total of $7.9 billion AEV produced by the top 50 pools and $9.1 billion for all cryptomining (at the end of October) for these top 6 Proof of Work coins.
With the latest price rise as of the date of this blog, the Top 10 pool operators are producing over $6 billion of AEV, the top 50 over $8 billion of AEV and all crypto mining for the top 6 coins exceeds $10 billion annual run rate.
Table 4. China has five of the top 10 pools by cryptocurrency production value. Two are global, and the U.S. and Hong Kong have one each, while one other is located both in the U.S. and China.
Halving, What Halving?
Clearly, the mining industry has recovered since May 2020 Halving, at least in terms of revenue production. The expected rise in Bitcoin’s and Ethereum’s price pushed the AEV back above the former high during this new Block era, despite the substantial decrease in Bitcoin block rewards. The crypto mining community knew that the Halving for Bitcoin and its two hard forks was coming for a long time in advance, and took proactive measures to prepare for it, including deploying the most efficient mining rigs available and continuing to look for the lowest cost electricity available.
Models for Bitcoin’s price and market cap, such as PlanB’s stock-to-flow model and our own future supply model, and a Lindy model (price as a power law vs. block count) all suggest prices for Bitcoin should continue to rise at a good pace. Ethereum is on a path to move toward Proof of Stake, we will have to see how that develops between now and the next list in June 2021.
Top 50 Cryptocurrency Supercomputers, Fifth Edition, (slide presentation link with full set of tables) https://www.slideshare.net/perrenod/top-cryptosupers-nov2020v2-239250824
CryptoSuper 500 Fourth Edition, https://orionx.net/wp-content/uploads/2020/06/CryptoSuper500-4th-Evolution-OrionX-Constellation-20200622a.pdf (white paper)
Top 50 Cryptocurrency Supercomputers June 2020, (slide presentation link) https://www.slideshare.net/perrenod/top-50-cryptocurrency-supercomputers-june-2020
The Brutal Efficiency of Crypto Mining, https://medium.com/the-capital/the-brutal-efficiency-of-crypto-mining-far-beyond-moores-law-92fa90e617e0
Cryptocurrency topics: orionx.net/blog and medium.com (search: perrenod)