1. What Is Solo Mining Bitcoin & How Does It Work?
Solo mining bitcoin is the process by which a single miner carries out the Bitcoin mining process alone without being part of any mining pool. Contrary to how miners in a pool come together to contribute their hash rate to mine Bitcoin, solo mining isn’t dependent on any third party.
It’s a tad bit difficult to talk about solo mining Bitcoin without first understanding Bitcoin mining. So, let’s quickly summarize what Bitcoin mining is, plus how it works.
Bitcoin mining is the process through which the Bitcoin network processes transactions and how new coins enter circulation. It involves the use of specialized mining hardware coupled with the utilization of computational power or hash power to solve complex calculations.
The first miner to solve the complex computational process wins the Bitcoin block reward, which is currently 6.25 BTC. The block reward was designed to reduce nearly every four years, in a process called Bitcoin halving, with the next being sometime in 2024.
You can start mining Bitcoin as a solo miner or join a mining pool. A mining pool allows several miners to pool their computational power and increase the chances of winning block rewards. Although most Bitcoin mining has been through pools, some miners have ventured alone as solo miners.
How Does Solo Mining Bitcoin Work?
For solo Bitcoin mining to work, miners must first link their mining devices to their native Bitcoin wallet and then start contributing hash power to the Bitcoin network.
If the solo miner fulfills the entire mining process on the Bitcoin network and finds a block, they will earn the whole block reward. Solving for a new block while solo mining depends on the amount of hash power you have. Solo miners, therefore, need to invest significantly in their at-home mining setup to generate enough computational power to compete with pool miners.
At the onset of crypto mining, solo miners were able the generate mining profits because the hashing difficulty wasn’t too high, enabling early miners to mine using laptops and PCs. Today, however, that’s not the case. As the mining community professionalized and turned into an industry, the increasing hashing difficulty has de facto pushed small miners out of the market due to a lack of consistent profitability (despite the massive increase in price since the early days of bitcoin).
Solo miners also need to exercise a lot of patience. You can either solve a complex block calculation within a short time and get your reward or have it extend to years of you trying. Besides, the Bitcoin mining difficulty adjusts after every 2016 blocks to keep the rate at which new blocks are added to the network at about ten minutes.
Still, solo mining Bitcoin has its benefits, like winning the whole block reward to yourself without having to split it with other miners.
Can You Really Make Money Solo Mining?
There have been stories of solo miners who went at it alone, successfully found new blocks, and won the entire block reward. For example, in June 2023, a solo Bitcoin miner was able to add a new block to the network, earning the 6.25 BTC reward, which was worth over $250K at the time.
While there have been a few lucky solo miners, it’s important to mention that solo mining isn’t as easy as you’d want to imagine it to be. The initial capital investment required is quite costly, and you’d also incur operating costs. You also have to factor in cooling technology, downtime, electricity costs, and possible repair costs.
Solo Bitcoin mining is a gamble. If you don’t have the patience and capital investment required, consider joining a pool instead if you want to increase the chances of your mining operations becoming profitable.
2. Bitcoin miners are pivoting to new markets and making bank
Avi Felman says he’s bullish on bitcoin miners, but not strictly because of bitcoin’s potential.
With a pivot to providing high-performance computing, or HPC, companies are finding new ways to broaden their revenue stream beyond ASIC mining.
Hut 8, best known as a bitcoin mining company with facilities in Alberta, Canada and Texas, is a great example, he says. Thanks to its high-capacity computing infrastructure, Hut 8 recently signed a contract to provide HPC for clients in Canada’s health sector.
On a recent 1000X podcast (Spotify/Apple), the head of digital asset trading at GoldenTree talks to Cumberland’s Global Head of Trading Jonah Van Bourg about the broadening revenue strategy.
It’s not about the hardware
With the growing potential for more cash flow, one might expect mining companies to pack up their ASICs for greener pastures, leaving the precarious business of crypto mining and its knife-edge profit margins behind.
But it’s not about the chips, Felman says, “it’s a completely different business.”
It’s more about access to the facilities and the people who know the business, Felman says. Cooling, for example, is important in any high-capacity computing environment, he says. “In both bitcoin mining and HPC, they have all of that set up.”
“They have the people that know how to build out those services. They have the warehouses and the facilities. They have the power contracts.”
The actual product that is provided to clients, Felman explains, “is radically different and requires a decent amount of upfront investment. But the overall operations are very similar,” he says.
Large-scale mining companies like Hut 8, Iris Energy, Hive and Cipher can repurpose facilities to provide HPC, diversifying the business and generating more revenue, Felman says. “It seems like there’s a tremendous amount of demand.”
A healthier bitcoin market, to boot
Felman clarifies that current ASIC hardware — highly specialized computers designed strictly for bitcoin mining — cannot be diverted for the purpose of providing HPC to clients. But the diversification of services provided through their infrastructure and know-how could enable mining companies to be financially “healthier,” he says.
The move could also benefit the market price of bitcoin (BTC), he argues, because miners may be less pressured to sell in fearful markets. The need for mining companies to sell their fresh bitcoin on a regular basis just to survive acts as a constant damper on prices.
“Miners will get liquidated less often as they become better and more robust businesses.”
Van Bourg adds, “it would make the market healthier, for sure.”
“It would also tell the world,” he says, “crypto has provided a series of infrastructure plays that are relevant outside of just crypto.”
The move indicates the presence of a growing market for “purpose-specific computation facilities,” Van Bourg says. Bitcoin mining technology, he says, “laid the rails for other applications” that can now harness the technology in new ways.
3. Account abstraction will drive a billion users from Asia to Web3: ConsenSys exec
Account abstraction, also known as “smart accounts,” could eventually onboard a billion users from Asia to Web3, according to an executive at Ethereum software solutions provider ConsenSys.
Laura Shi, the director of strategic initiatives at ConsenSys, told Cointelegraph that the Ethereum and Web3 ecosystem had seen a strong expansion in Asia this year.
“More DApps are improving [user experience] UX for the Asian market, including introducing Asian language support,” she said.
Shi added this expansion is primarily being driven by the introduction of zero knowledge Ethereum Virtual Machine (zkEVM) rollups and the mass adoption of Optimistic rollups.
The two rollups are layer-2 scaling solutions with zkEVM offering developers security, scaling and direct compatibility with Ethereum smart contracts.
Shi believes the development of account abstraction, which offers greater programmable functionality and more “bank-like” features than a regular crypto wallet, would increase adoption in the region.
“The development of account abstraction will facilitate the onboarding of thebillion-level users in APAC to Web3.”
Account abstraction was proposed by Vitalik Buterin and other developers in EIP-4337 to “completely avoid consensus-layer protocol changes, instead relying on higher-layer infrastructure,” in September 2021. However, the concept goes much further back in Ethereum’s timeline.
According to the 2022 Chainalysis Global Crypto Adoption Index, the top two crypto-adopting countries in the world were in Asia — Vietnam and the Philippines. Thailand, China and India were in the top 10 despite anti-crypto sentiments from their respective governments.
Shi believes mass adoption in Asia is also being driven by social gaming and Web3 gaming, citing South Korea and China as examples.
“South Korea’s gaming publishers are continuously focusing on Web3 RPG game publishing, attempting to optimize the sustainability of the on-chain economic model,” said Shi.
“Meanwhile, the Chinese-speaking developer ecosystem is focusing on onboarding Web2 users to Web3 gaming through adopting account abstraction solutions.”
Both use cases will rely heavily on zkEVM roll ups and account abstraction development, she added.
“From the use-case perspective, we see Web3 social and gaming content has the largest potential in the coming years. It is powered by [a] zkEVM rollup solution and [an] account abstraction solution that enables gas fee subsidy and social recovery.”
Asked whether the current U.S. industry crackdown could be driving Ethereum and Web3 ecosystem growth in Asia, Shi said she didn’t see any correlation.
“So far we have not observed any direct correlation between these and the regulatory dynamics in the United States.”
The pivot to Asia has been a hot topic recently as U.S. crypto and Web3 companies seek friendlier jurisdictions in the Far East.
However, the Ethereum ecosystem in Asia appears to be doing fine on its own without the catalyst of Uncle Sam’s war on crypto.