September 22, 2023

Cryptocurrency mining industry in 2019 - events and trends

Cryptocurrency mining industry in 2019 - events and trends

Incredible growth in bitcoin hash, concentration of mining power in China, the first in the IPO industry a large company and entering the public sphere of conflict between the co-founders of Bitmain. These and other events of the year influenced the industry, changing its appearance. Let's remember how this happened.

Historical Bitcoin Hash Maximum

Sustainable Bitcoin network hash growthlasted for almost the entire year. In October, the figure hit a historic high of 114.3 TH / s. Then, the hashrate decreased slightly, but overall over the year it more than doubled from 40 TH / s to 90 TH / s.

Cryptocurrency mining industry in 2019 - events and trends

This growth was facilitated by the launch of an increasing number of ASIC devices for bitcoin mining and the replacement of older models with more efficient ones.

But, according to research expertsBinance divisions, not all miners rationally used the growing power. For example, analysts could not find a reasonable explanation why during the year some of them mined Bitcoin SV (BSV) instead of the more profitable bitcoin, having lost $ 13 million on this.

Over-the-top Bitcoins

It seems that it was precisely the rapid increase in the speed of calculations that led to an interesting phenomenon - the mining of “super-planned bitcoins” by miners.

According to the first cryptocurrency algorithm, 52 560 blocks can be mined in 365 days, however, they were mined by almost two thousand more or more than $ 100 million per year.

The concentration of mining power in China

According to a study by CoinShares, the proportionhashrate of Chinese miners in 2019 rose to 65% - the highest level in two years, during which it has been observing. At the same time, 54% of computing power is located in Sichuan.

31% of the remaining hashrate falls on:

  • US states of Washington and New York;
  • Canadian provinces of British Columbia, Alberta, Quebec, Newfoundland and Labrador;
  • Iceland
  • Russian Siberia;
  • Norway
  • Sweden
  • Georgia
  • Iran.

Another 4% generate capacity located in other jurisdictions.

Cryptocurrency mining industry in 2019 - events and trends

However, the trend of the year was the development of large mining projects outside of China, primarily in the United States.

An alternative to mining in China

Bitmain has built a 50 MW mining center in Rockdale, Texas with the prospect of increasing to 300 MW.

In the same area, a much more ambitious project is being implemented by the German company Northern Bitcoin - a mining farm with a capacity of 1 GW and an area of ​​57 football fields.

Worth mentioning is Crusoe Energy Systems,which developed mobile units for the production of bitcoin using associated gas energy from shale oil fields in the United States. Crusoe already operates eight such units with a capacity of 1 MW each. Investors, including the notorious Winklevoss twins, believed in the company's technology - it attracted $ 70 million in funding to deploy 70 plants.

Rearrangements in the market shares of producers of ASIC miners

In the first half of 2019, Canaan Creativeincreased its market share to 22% while unchanged Bitmain leader reduced it to 65%. For comparison, two years ago, these figures were 6% and 75%, respectively. The third Chinese mining giant, Ebang, also increased its “market pie” during this period - from 5% to 8%.

But the results of the year that will become knownlater, they can make serious adjustments to this picture. According to Chinese media reports, in October, with the traditional end of the rainy season in Sichuan, miners began to upgrade equipment to more efficient ones.

According to sources among sellers of ASIC miners, up to 50% of purchased devices come from MicroBT's flagship models, while Bitmain's Antminer installations account for about 16.7%.

It’s easy to believe, looking at the ratingprofitability of miners for mining bitcoin from F2Pool. The list is led by Whatsminer M30S from MicroBT, and in the top ten four models of the company - the same as Bitmain.

Cryptocurrency mining industry in 2019 - events and trends

As again, local media created byMicroBT problems in the market led to the resumption of prosecution by Bitmain, the company's founder and its former lead developer, Yang Josin.

The first IPO of a major industry representative

After unsuccessful attempts by Chinese mining giants to go public for an IPO in Hong Kong this year, messages began to appear about their plans to conduct an initial public offering outside of China.

The intention of Canaan Creative to conduct an IPO in the United States became known at the beginning of the year, in the summer - about a similar goal of Bitmain.

In October, Canaan filed an application with the Securities and Exchange Commission (SEC). The company planned to raise $ 400 million, but in the repeated application it reduced requests to $ 90-110 million.

In November, Canaan became a “pioneer” among the largest miners, posting 10 million US depositary receipts at a price of $ 9 apiece on NASDAQ.

The set lower bar of $ 90 million was taken, but less than a month after the start of trading, the company's shares fell by 40%.

Nevertheless, Canaan believes that the status of a public company will allow the company to gain trust in business circles and attract investors. Her goal is already next year to remove Bitmain from the throne.

But the leader does not intend to lose ground: after Cihan Wu returned to leadership at Bitmain, they announced initiatives that should facilitate sales of ASIC miners and reduce entry barriers to the Bitcoin mining market. The company also filed for an IPO in the United States with the support of the German financial conglomerate Deutsche Bank.

Conflict of Bitmain founders and other problems of mining companies

About the confrontation between the co-founders of BitmainIt became known last year. At the end of October this year, Cihan Wu returned to the position of CEO of the company, having relocated Mikri Zhang with the support of shareholders. According to Wu, the conflict has been going on for several years, and under the leadership of Zhang, the company almost came to a disaster.

But the latter did not abandon the idea of ​​returncontrol of the company and promised a “war”. It is unlikely that his unsuccessful attempt to return the management of the company through a meeting of shareholders in November was his last action in this direction.

At the same time, in the fall, it became known that Chinese courts blocked more than $ 1 million of the company's assets in claims by suppliers.

Not only Bitmain is facing litigationprosecution for unfulfilled obligations - a similar lawsuit was filed against Ebang. Phantoms of financial problems in the second half of 2018 continue to haunt industry leaders.

With them they will enter into 2020, where the mainthe expected event will be bitcoin halving. The effect of halving the block reward on cryptocurrency quotes and its extraction causes heated debate. Some experts are sure that this will lead to an increase in the price of bitcoin, while others - that halving is already taken into account in it.

In any case, miners will need more efficient and powerful equipment, which opens up opportunities for manufacturers and will inevitably lead to a redistribution of the market.

How to mine bitcoins for an ordinary user / investor in 2020?

For ordinary investors (conditionally with investments up to $ 100,000), the most profitable and affordable option for bitcoin mining is still cloud mining service contracts.

Cloud mining is a cryptocurrency mining modelbased on the fact that mining equipment is rented from a contractor. It happens like this: a company buys mining equipment, pays for maintenance, electricity, Internet, and investors buy a power contract (hashrate) and get cryptocurrency mined by this equipment.

A detailed overview of cloud services with a current rating at the end of 2019 can be found here.