MinerMovements #4

What shapes Bitcoin mining pool competition?

Hello, Miner!

We are only three weeks into 2020 and we have already observed Bitcoin hash rate and difficulty levels hitting all-time highs, upside swings in price, and huge developments from mining companies. It’s shaping up to be an exciting year for Bitcoin mining!

The MinerUpdate team will shortly have some exciting news for our readers so stay tuned for that. In the meantime, enjoy the latest release of MinerMovements and don’t miss your discount code to Bitcoin 2020 included below!

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What Makes a Mining Pool Successful?

As opposed to our usual review of Bitcoin mining pool rankings, we analyse how mining pools acquire their competitive edge. When a miner makes a decision to choose mining pool X over mining pool Y, what are the key factors driving that decision?

Some industries are particularly governed by power laws. If Miner A and Miner B are choosing which social media platforms they wish to use, there will be a high chance of crossover as both will be likely to choose the platforms with the highest number of users.

However, mining is a particularly distributed industry with different miners acting off of varying information. A high number of miners may be predominantly driven by increasing profit margins leading them to choose the pools with the lowest fees whereas others may care more about ideology or a distributed hash rate allocation. Some may require a mining pool where they can have the highest degree of confidence that it will be operating ten years down the line whereas another miner may need their hash power directed at a pool that will provide financial services.

The lowering of fees to acquire hash rate has been a method mining pools have used to compete since the origins of the industry. With fees near-zero for many Bitcoin mining pools, the competitive advantage to be gained from lowering fees has diminished.

“Compared with lower-ranked mining pools, the top tier mining pools have no obvious advantages in terms of fees and payout methods” TokenInsight 2019 Mining review

The mining pool industry has evolved to compete more intensely in areas such as services, technology, and brand awareness. Poolin co-founder Chris Zhu noted that superior mining pool technologies were a key factor in their acquisition of the largest share of Bitcoin hash rate 2019. NovaBlock Co-CEO Yuki Sun believed that a strong brand image from a Chinese Poolin tour combined with a strong mobile app played heavily into the success of Poolin in 2019.

“The top tier mining pools have strong advantages in their hashrate stability, platform security, mobile app user experience, and brand effects.” TokenInsight 2019 Mining review

After speaking to several Bitcoin mining pools throughout 2019, a recurring theme has been the move towards mining pools being a one-stop platform for all of a miners requirements. From the mining pool professionals, we have spoken to, it is widely believed that this is the most important competitive angle for mining pools and will be important in playing into future hash rate shares among major pools. We have already observed mining pools begin to compete in this way with BTC.com integrating MatrixPort financial services with its mining pool services.

“It’s a move to be a one-stop-shop. It’s a move for pools to cater not only to their customers’ pooling needs but also to their hardware needs, and their financial services needs related to mining and Bitcoin.” Edward Evenson, Braiins Director of BD

Do you hold any opinions on what shapes competition between Bitcoin mining pools? Let us know by tweeting @MinerUpdate.

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Bitcoin Difficulty Hits All-Time Highs

Bitcoin difficulty adjusted to an all-time high of 14.78 trillion on the 14th of January. It is estimated that the difficulty level will increase another 5% at the next adjustment on the 27th of January.

Raw values of Bitcoin hash rate estimated by Bitinfocharts.com reported hash rate recently recording an all-time high of ~126 EH/s.

Strong Start to 2020 for Bitcoin Price

Bitcoin price appreciated roughly 18% during the first two weeks of trading in 2020. With Bitcoin price trading increasing from ~$7,300 to ~$8,600, the vast majority of mining operations are likely profitable and we may be observing some mining rigs coming back online.

In their report published in December, CoinShares estimated the market-wide production cost per Bitcoin mined to be ~$6,100. Current estimates from Capriole Investments put the figure at ~$5,700.

It’s worth pointing out a number of levels which technical analysts may be currently monitoring:

  • 200 DMA trading ~$9,015. An increase above on the 19th of January was followed by a significant sell-off.

  • 50 WMA trading ~$7,920

  • 20 WMA trading ~$8,260

Miner Insights -

How will the Bitcoin ASIC Manufacturer Market Evolve in 2020? - Our analysts review the Bitcoin ASIC manufacturer market with a focus on the competitive positions of Bitmain and Canaan while also analysing the prospects of a North American-based Bitcoin ASIC manufacturer emerging. Some MinerUpdate readers were somewhat outraged that MicroBT was not much attention. Given the arrest of MicroBT CEO Zuoxing Yang, TokenInsight noted in their annual mining review that they believe “the market will not stand with the side of Whatsminers [MicroBT]”. Tweet @MinerUpdate if you have any opinions on how MicroBT or other manufacturers will shape up over the coming year.

Is the Antminer S9 Era Over? - Released in 2016, the Antminer S9 is a venerable mining rig, significantly better than any Bitcoin ASIC hardware released in previous generations. At current prices, it is forecasted that most Bitcoin miners with S9-generation hardware will be forced to shut down after the halving. The disappearance of an unusual pattern in the Bitcoin nonce distribution that was believed by some to be attributable to the presence of Antminer S9 hardware has recently disappeared. Does this recent disappearance indicate that Antminer S9 hardware has already come offline?

New York Crypto Mining Farm Coinmint Set to Dissolve? - A dispute between the two owners of Coinmint has resulted in one of the partners filing to dissolve the company. Coinmint mine several cryptocurrencies and operate in the former Alcoa aluminium smelter plant in Massena, New York.

Dominant Theories as Bitcoin 2020 Halving Approaches - Don’t miss our review of dominant theories exploring how Bitcoin will respond to the upcoming halving. MinerUpdate reviews the leading ideas relating to how Bitcoin fees and price will respond to the block subsidy issuance halving.

Quick Miner Movements

Best of the Rest

Hashr8 Podcast - Why China dominates Bitcoin Mining - MinerUpdate Head of Research John Lee Quigley joins the Hashr8 team to talk about his experience in China meeting Bitcoin mining companies. This episode details some of the disconnect between the Eastern and Western mining industries and how MinerUpdate bridges this gap.

How was it possible for Bitmain to oust its largest shareholder overnight? - Wolfie Zhao analyses Bitmain corporate filings to highlight how the removal of the largest shareholder Micree Zhan was possible. The analysis pinpoints a November meeting which reduced the voting power of Zhan’s shares from ten votes per share to one vote per share.

Why is Bitcoin hash rate a lagging indicator on the way up? - Mostly, miners are profit-driven entities. Price goes up, mining profit margins increase, and miners are driven to acquire hardware. But acquiring such hardware is a lengthy process meaning that there can be a considerable lag between price increasing, and hash rate following. But the same can’t be said about the opposite scenario. When Bitcoin price declines and those profit margins are squeezed, it is simply a matter of switching off the hardware.

An Introduction to the Efficient Market Hypothesis for Bitcoiners - Nic Carter explains an extremely important market concept in this 29-minute blog post. The efficient markets hypothesis (EMH) is a theory which has sparked intense debate for decades. It is highly relevant to the cryptocurrency markets, especially in the case of upcoming protocol changes such as the halving. Carter does a great job of explaining EMH in the context of the cryptocurrency markets while also addressing common objections to the theory.

Upcoming Mining Events

Bitcoin 2020 - Bitcoin 2020 takes place from the 27th to the 28th of March in San Francisco. MinerUpdate is an official media partner for the event and will be in attendance along with several other leading Bitcoin mining companies. For mining-related media enquiries at Bitcoin 2020, email hi@minerupdate.com. MinerUpdate readers can get a 20% discount on tickets by using the promotion code MINER20.

Baltic Cryptocurrency Mining Meetup - Hashr8 CEO Whit Gibbs and Poolin VP Alejandro De La Torre will co-host a crypto mining meetup in Riga, Latvia on the 30th of January.

About MinerUpdate.com

MinerUpdate.com is the leading crypto-mining publication. Our aim is to bridge the gap between the East to the West in mining while delivering to our readers the latest insights and developments in the industry. Our publication is ad-free, bias-free, with no conflict of interest when it comes to delivering high-quality content. In October 2019, MinerUpdate hosted MinerSummit, the first English crypto mining event in China.

Connect With Us

Did we miss any important mining movements? Let us know by tweeting @MinerUpdate or emailing hi@minerupdate.com.