Bitcoin Mining and the Future: Last year was a big year for the crypto mining industry, specifically in the United States. BeInCrytpo spoke with Gavin Qu, VP of Operations at PrimeBlock.
Crypto mining is another facet of the space which underwent a major transformation. 2021 highlighted mining’s less than eco-friendly side.
Earlier this year concerns over energy consumption of the global Bitcoin mining industry skyrocketed. Reports surfaced, which claimed if Bitcoin was a country, its energy usage would surpass that of Venezuela and Sweden. Moreover Bitcoin’s e-waste generation climbed upward until China’s stringent ban on crypto mining turned the industry upside down.
Despite the initial market crash, the crypto scene saw a few eco-friendly trends as a result of China’s decisions. The ban on crypto mining in China provided other opportunities aside from being an environmental benefit. As miners and crypto-related businesses fled China, other places, such as the United States and Kazakhstan, reaped the benefits.
Top Mining Destinations
China held the reins as the world’s top Bitcoin mining country until the ban sent that figure waterfalling. Prior to the fall, a mining operation out of Dalian, China mined 750 Bitcoins each month. This equaled 3% of all Bitcoins. Other major locations were found in Iceland, Russia, and the United States.
The latter, found itself in a new position as a global leader for Bitcoin mining. It is now a safe haven for those fleeing the Chinese clampdown. Many cities in the United States specifically welcomed escaping the ban, such as Miami. Mayor Francis Suarez is known for his inviting stance on crypto currencies.
In Texas, one the States’ top destinations for Bitcoin miners, mayor John King of Rockdale recently received nearly 40 inquiries from crypto mining firms, many of which crossed the Pacific as a result of the ban. This influx caused experts to speculate on the U.S.’s new role in the global crypto mining scene.
And in the light of the mining ban PrimeBlock, a digital asset mining and infrastructure provider, played a large role in the migration of mining rigs and infrastructure from China to the U.S. BeinCrypto spoke to Gavin Qu, the VP of Operations at PrimeBlock about the future of mining in the region.
America the Stable
According to a report from the Cambridge Centre for Alternative Finance, in July of 2021, 35.4% of Bitcoin’s global hashrate derives from the United States. An official indicator of the U.S.’s new position on top, a 428% increase from September of the previous year.
Qu remarked why the States are an ideal choice for the big mining migration. “The first factor is that America has access to renewable energy, which is a critical ingredient for success in the mining industry. The second is that America offers a stable legal and political environment, even recognizing the continuing degree of ambiguity with respect to crypto regulation.”
However, Qu highlighted that mining is still a new industry susceptible to all the growing pains of a new market.
“Mining is still a new industry, and so some regulatory uncertainty is to be expected. In America, we know that changes in policy would generally proceed through transparent and considered legislative and regulatory processes.”
“In a country like Russia, or a Central Asian nation like Kazakhstan, there’s a lot of political and legal risks when it comes to mining. Corruption is also a major problem in these countries, which makes it difficult for miners to operate there. Further, a lack of sustainable energy practices means that miners in these countries are using up a lot of valuable resources, which is not sustainable in the long term.”
As miners migrate their operations overseas, places receiving this inundation of crypto fortune hunters are responding.
“We’re also seeing an increase in transparency and professionalism in the mining space as miners migrate to the US,” Qu said. “In China, there was a lot of secrecy and uncertainty surrounding mining operations. But in the US, we’re seeing a lot more openness and compliance with best practices.”
As mentioned previously, the mayor of Miami is a crypto enthusiast. Both he and the mayor of New York City now receive their paychecks in Bitcoin. Qu added that, “ Senator Ted Cruz advocates for mining as a way to help fix the electrical grid, so politicians are beginning to see the value in crypto mining.” Despite some concerning moments in regards to regulation from U.S regulators, Qu believes there isn’t as grave of a concern as presented from China.
“We don’t expect to see that kind of an impact due to U.S. regulatory changes. We are optimistic that evolving regulation of crypto activities will be driven by a productive public-private dialogue that will emphasize innovation, stability, safety and soundness of the markets, user and investor protection and predictability that is so important for capital allocation decisions made by entrepreneurs.”
More practically speaking, “we’re seeing an increase in the number of industrial-grade data centers being built specifically for mining, and a migration of miners to regions with cheaper electricity. For example, Kentucky, Georgia, and Texas are seeing a lot of growth in the mining sector due to the availability of low-cost power, alongside more friendly regulatory environments.”
A Sustainable Future
Despite some rocky moments for mining in 2021, Qu believes the future of Bitcoin mining looks “bright”.
“There’s a limited total supply of Bitcoin, and as more people start using it, the demand for mining will continue to grow. That’s why I think we’ll see a lot of innovation in the mining industry in the years to come.
I also think we’ll see a lot of consolidation in the industry. Mining is incredibly competitive, and so you need to have a lot of scale and flexibility to be successful. In the race for greater computational power, those who come up with creative solutions will win.”
The trends for the near future appear greener. In the height of the initial chaos brought on by the Chinese ban last summer, professionals in the industry already saw this moments as an opportunity to shift towards cleaner energy sources.
“Bitcoin miners seek out the cheapest sources of electricity as it is one of the most significant factors to profitability. Regional sources of renewable energy are also becoming attractive, from solar to hydroelectric power. With renewables on the rise, the US crypto mining scene is becoming constantly more sustainable.
Miners are also turning to sources like retired power plants and other idle facilities to reduce overall costs, which is often more sustainable than new power plants.”
A Global Leader
For decades the United States’ has played a vital role in international markets. In the tech world the U.S. holds dominance in global centralized-cloud services like Amazon, Google, and Microsoft. Experts like Qu believe this dominance will now show in Bitcoin mining.
“The centralizing effects of mature supply chains and large economies of scale continue to drive down the price of mining in the United States.
With its accessible renewable energy, ample real estate, and improving regulatory environment, it seems unlikely that the US will lose its dominance.”
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Fed report finds most Americans who own crypto tend to be high income hodlers
Only 12% of American adults used crypto in 2021, and the demographic gap between those who invested in it and those who used it in transactions was enormous.
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The United States Federal Reserve Board has included data on cryptocurrency in its new Economic Well-Being of U.S. Households in the 2021 report. The Fed’s ninth annual report looked at survey results from 11,000 people questioned in October and November 2021.
The report indicated financial wellbeing is the highest it has been since reporting began, with 78% of U.S. adults “doing okay or living comfortably financially.” That is an increase of 3% over the last three years. As a diagnostic of financial fitness, the report cites the 68% of Americans who say they could cover a $400 emergency expense using cash or its equivalent alone.
The report looked at cryptocurrency usage for the first time. It found that 12% of U.S. adults held or used crypto in 2020, with 11% holding it as an investment, 2% using it for a purchase or payment and 1% sending it to friends or family. Investors holding crypto “were disproportionately high-income, almost always had a traditional banking relationship, and typically had other retirement savings.” Forty-six percent had annual incomes of $100,000 or more and 89% of those who were not retired had retirement savings. Twenty-nine percent had incomes under $50,000.
The profile of the typical user making transactions with crypto differs starkly from investors. The report claimed that almost 60% of these users had incomes below $50,000, with 20% having incomes under $25,000. Only 24% had incomes above $100,000. Thirteen percent did not have a bank account. That compares with the 6% of adult Americans who lack bank accounts. Twenty-seven percent of those who used crypto for transactions did not have credit cards, compared to 17% of the total population.
Those who used crypto for transactions faced other disadvantages as well. Almost a quarter did not have a high school diploma, according to the results of the report.
WEF 2022: Bankers at WEF see the need for caution and speed on central bank digital currencies
Experts point out sticking points as well as greatest needs in the creation of central bank digital currencies for domestic and cross-border, wholesale and retail, uses.
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The process of introducing a central bank digital currency (CBDC) is fraught with unknowns, some of which were elucidated in a panel of experts gathered Monday at the World Economic Forum in Davos, Switzerland. The panel concluded that good design is key to a successful CBDC, and there are fewer challenges for wholesale CBDC introduction.
Bank of Thailand governor Sethaput Suthiwartnarueput said that although many central banks are considering a CBDC, there is little practical experience with them. The Thai National Bank began proof-of-concept programs in 2018. Its mBridge project began as an experiment in establishing a cross-border wholesale payment corridor with the Hong Kong Monetary Authority and has grown to include the Bank of China, the United Arab Emirates and the Bank for International Settlements. Cross-border transactions using traditional banking technology can take days to complete, while CBDC transactions are much faster.
Suthiwartnarueput said the use of blockchain technology can have unintended consequences. It is good for transparency, he said, but anonymity affects scalability. There is risk in a CBDC’s design because smart contracts require that the handling of every situation be specified ahead of time. He cited the current sanctions on Russia as an example of a potential challenge to CBDC design. The Thai central bank is looking at a “limited pilot” for a retail CBDC in the fourth quarter of this year.
International transactions between persons, especially remittances from workers located in other countries, which make up a market of $48 billion per year, are one of the most pressing use cases for CBDCs. Suthiwartnarueput said CBDCs can carry out such transactions at 50% less expensive and 68% faster than current money transfer technology. Currently, the average fee for a transfer of this type is 6.3% of the transaction sum.
Credit Suisse chairman Axel Lehmann pointed out the rapid progress being made by non-blockchain fast payment technologies and raised questions for domestic retail CBDCs, such as whether accounts with central banks would pay interest. Privacy and intermediation are other thorny issues for retail CBDCs. International Monetary Fund managing director Kristalina Georgieva said, “We feel a little behind the curve” in the creation of retail CBDCs, and Bank of France governor François Villeroy de Galhau agreed, saying a “CBDC is not the monopoly on progress,” and central banks should not waste time in introducing it.
Suthiwartnarueput and the French central banker agreed that cross-border wholesale CBDC settlements may become a reality within five years.
fUSD stablecoin launch and rumors of Cronje’s return send Fantom (FTM) price higher
After a strong 2,000% rally in early 2021, Fantom (FTM) price collapsed alongside multiple altcoins and even though the blockchain has an impressive capability, it has yet to find mass adoption due to the lack of a compelling use case. FTM price hit an all-time high at $3.46, only to collapse to its pre-bull market lows under $0.25 after the failure of the Solidly DeFi project and the departure of developer Andre Cronje.
Three reasons for the uptrend in FTM price are the launch of the first native stablecoin on the Fantom network, new protocol upgrades and partnership announcements, which bring new functionality to the network, and speculation that Andre Cronje is working with decentralized finance (DeFi) protocols on Fantom.
Fantom launches its first native stablecoin
The most notable development to occur in the Fantom ecosystem in the past few weeks was the release of fUSD, the first native stablecoin on the network.
The launch of fUSD comes on the heels of the collapse of TerraUSD and looks to capture some of the capital flight from algorithmic stablecoin by offering an over-collateralized alternative.
On May 20, the Fantom Foundation released an update outlining the maximum collateral factor and minting cap for each supported form of collateral. The foundation also set the fUSD staking reward at 11.3%
The update also included details on Fantom liquid staking, setting a global cap of 150 million staked Fantom (sFTM), removing validators for the list of those eligible to mint sFTM and setting a loan-to-value (LTV) ratio of FTM at 90% for the purposes of minting sFTM.
New partnerships improve sentiment for FTM
A handful of recent protocol updates and new partnerships have also helped to bring a boost in momentum to Fantom, including the launch of Snapsync, which allows new nodes to quickly join the network.
With the integration of Snapsync, the time it takes for new nodes to synch could be reduced from 24 to seven hours, helping to enhance network reliability, improve scalability and create a greater degree of decentralization.
Fantom has also announced that it is currently in the process of launching Gitcoin on the Fantom network to simplify the process of obtaining grants to develop in the Fantom ecosystem.
Fantom also partnered with Unmarshal and XP.Network. Unmarshal is a Web3 infrastructure provider that will integrate its indexing services with the Fantom protocol to give developers easy access to organized and granular on-chain data.
Through the partnership with XP.Network, Fantom users will be able to bridge nonfungible tokens (NFTs) between Ethereum (ETH), BNB Smart Chain (BNB), Elrond (EGLD), Aurora (AURORA), Tron (TRX), Avalanche (AVAX) and Velas (VLX).
Did Andre Cronje return?
Another factor, albeit speculative, bringing a boost FTM price is speculation that well-known DeFi developer Andre Cronje could be contributing toward DeFi development on the Fantom network.
Amid rumors about the return of lead DeFi developer Andre Cronje, the price of the native FTM token has risen by almost 40%. Cronje proposed a number of measures aimed at stabilizing the situation and increasing the sustainability of the Fantom ecosystem as a whole.
— Ashley Torres (@torresamba) May 23, 2022
The speculation started when Cronje submitted an fUSD optimization proposal that designed to solve a major depegging issue with the stablecoin on May 20 . A Fantom wallet that is believed to belong to Cronje has also added more than 100 million FTM over the past two weeks.
VORTECS™ data from Cointelegraph Markets Pro began to detect a bullish outlook for FTM on May 20, prior to the recent price rise.
The VORTECS™ Score, exclusive to Cointelegraph, is an algorithmic comparison of historical and current market conditions derived from a combination of data points including market sentiment, trading volume, recent price movements and Twitter activity.
As seen in the chart above, the VORTECS™ Score for FTM spiked to a high of 89 on May 20 at the same time as its price began to increase 62.3% over the next three days.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
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