BTC Halving Has Miners Prepping as Marathon Aims to Beef Up Rigs

12/20/2023 0 Comments

1. Bitcoin Halving Has Miners Prepping as Marathon Aims to Beef Up Rigs

Bitcoin miner Marathon Digital Holdings is preparing for the halving. In a Tuesday statement, the publicly traded company announced the acquisition of two Bitcoin mining sites for $178.6 million. The datacenter sites are based in Texas and Nebraska.

The move will add 390 megawatts of capacity, the company said, and it is expected it will reduce the cost per coin mined by around 30%.

The Bitcoin halving is an event which occurs roughly every four years. The event is baked into the Bitcoin protocol and ensures that miners—those who keep the network secure and process transactions—have their rewards cut in half. Instead of 6.25 BTC for each block they process, miners will be rewarded with 3.125 BTC.

The halving of rewards is meant to keep Bitcoin inflation in check. There will only ever been 21 million Bitcoin minted, but the halving makes it so the available supply entering the market is slowed down periodically.

“We have spent the past year strengthening our balance sheet by increasing our cash position, adding to our bitcoin holdings, and reducing our debt to prepare for the halving and to ensure we can capitalize on accretive opportunities as they present themselves,” Salman Khan, Marathon’s chief financial officer, said in a press release.

Fred Thiel, Marathon’s chairman and CEO, added that the acquisition will give the firm the “opportunity to reduce our bitcoin production costs at these sites, to capitalize on energy hedging opportunities, and to expand our operational capacity.”

The upcoming halving, which will be the fourth of its kind since the cryptocurrency network launched in 2008, is expected to happen in April.

As with previous halvings, the lingering question on the minds of investors is once again: Is the halving priced in? Some believe the halving will be a bullish indicator for the market because the asset will become scarcer; others are saying the price of Bitcoin will largely remain unchanged because would-be buyers know it’s coming and can prepare accordingly months in advance.

Experts previously told Decrypt that miners have already started buying more efficient machines to prepare for the event.

Marathon Digital is the second-biggest holder of Bitcoin out of all public companies which have invested in the asset. The company has 13,396 BTC on its balance sheet—today worth $567 million.

2. OCEAN Aims To Further Bitcoin Mining Decentralisation In 2024

On Tuesday, Nov 28, legendary Bitcoin Core developer Luke Dashjr announced the launch of OCEAN mining, which closed a $6.2M round led by Block Head Jack Dorsey as a new type of mining pool that aims to decentralize bitcoin mining.

As Luke put it in a communique on Oct 31, OCEAN is “a new type of pool that enables miners to be truly miners again.”

Decentralising Bitcoin Mining

Bitcoin mining today is primarily done via pooled mining, which requires miners to point their hashrate to a mining pool that aggregates this towards mining blocks and subsequently makes payouts to these miners. Nearly all mining pools communicate using a now outdated protocol introduced in 2012 called Stratum V1, which only lets the pool have the final say on which transactions ultimately make it into a block.

In the aforementioned communique from Oct 31, Luke highlights that “the centralization and overreach of other pool operators has changed Bitcoin to the point where the security model of Bitcoin is at high risk.” Adding, “Pools operate like custodial bank accounts and have the ability to decide who can and who can’t use Bitcoin.”

It is for these reasons that increasing efforts are underway to decentralize bitcoin mining to address the issues with the existing Stratum V1 protocol, the consequences of having dominant mining pools in certain regions, and having mining done by a handful of pools.

OCEAN

OCEAN, a Wyoming-based company, co-founded by Bitcoin Core developer Luke Dashjr, is a non-custodial pool that requires only a bitcoin address to join, and is the successor of the Eligius bitcoin mining pool (a popular zero-fee mining pool that had mined over 11,631 blocks), which Luke founded and was operated from 2010-2017.

Since its launch, OCEAN has successfully found two blocks and operates at a hash rate of around 422.8 Ph/s. Additionally, as part of its commitment to transparency, the company displays its node policy and block templates on its website.

OCEAN’s Inclusion of Inscriptions and Other Data

Over the last few weeks, discussions around handling data such as inscriptions on-chain have surfaced, with OCEAN being accused censoring these transactions, but seems to be a misunderstanding.

Due to OCEAN running a parallel implantation of the bitcoin node software, Knots, maintained by Luke, certain transactions in the above bucket go beyond the default maximum 42-byte datacarriersize limit (responsible for dictating the maximum size of data in data carrier transactions that get relayed and mined) which cause them to be excluded from the blocks it mines.

The Stratum V2 Mining Era

Currently, there are no Stratum V2 mining pools that engage in pooled mining, however, OCEAN intends to fully transition into using Stratum V2 and allow for payouts to miners over the Lightning Network.

As posted by Luke on Dec 8 on X, formerly Twitter, “OCEAN is on a path to decentralization, and very soon, we are going to be in a position where hashers will be able to fully participate as miners and perform the intelligent parts of mining such as deciding which version of node software to run and what filters or other policies to apply to block template construction.”

Additionally, OCEAN is on a mission to build on its three core principles of being non-custodial, transparent, and permissionless by focusing its efforts in 2024, amongst other things, on “leveraging and improving Stratum V2” and incorporating “Lightning payouts, which will solve the dust problem for small miners.”

The options for miners in 2024 are promising. The overall landscape of efforts focused on decentralizing bitcoin mining is also on a positive trend and, undoubtedly, a welcomed change for all miners globally.

3. A bitcoin mining behemoth makes buy to get even bigger

Marathon Digital expects to add 390 megawatts to its bitcoin mining capacity via an acquisition that could spur the doubling of its hash rate in the next couple years.

The Florida-based miner is buying two bitcoin mining facilities — in Granbury, Texas and Kearney, NE — from Generate Capital affiliates for $178.6 million in cash, the company said in a Tuesday news release.

The move is set to give Marathon Digital — whose mining capacity is now mostly hosted by third-parties — its first fully-owned sites. Just 3% of the company’s 584 megawatts of capacity are housed in sites that it owns and operates. That will change to 45% after the deal closes.

In addition to expanding operational capacity, the transaction is set to allow Marathon to reduce its bitcoin production costs at the sites by roughly 30% and “capitalize on energy hedging opportunities,” Marathon CEO Fred Thiel said in a statement.

“For the past year, Marathon has been vertically integrating as we transition into a more sophisticated and mature organization with a diversified portfolio of bitcoin mining technologies and assets, and the acquisition of these sites is the next step in that evolution,” Thiel added.

Marathon Digital is North America’s largest miner by hash rate — increasing its domestic energized hash rate by 20% in November to 23.1 exahashes per second (EH/s). Core Scientific, which intends to exit its bankruptcy by year’s end, was close behind at 21.6 EH/s as of Nov. 30.

The latest buy gives Marathon a chance to double its hash rate to roughly 50 EH/s in the next 18 to 24 months, the company said Tuesday.

The expected increase comes as competitors have also plotted major growth ahead of the next bitcoin halving, slated for April, when per-block mining rewards are reduced from 6.25 bitcoin (BTC) to 3.125 BTC.

Riot Platforms earlier this month made the largest hash rate purchase in the company’s history, acquiring 66,560 MicroBT machines for $290.5 million.

Riot’s deployed hash rate was 12.4 EH/s at the end of November. But the company said options to buy more MicroBT machines could help it add 75 EH/s to the company’s self-mining capacity in the long term.

Also in recent weeks, Bitfarms bought 36,000 Bitmain T21 miners as part of “a transformative fleet upgrade plan,” and the merger between Hut 8 and US Bitcoin Corp closed.

This isn’t Marathon’s first big move of the year. It has focused on expanding globally and diversifying mining methods in recent months — now with 2.5 EH/s and 0.2 EH/s online in Abu Dhabi and Paraguay.