How Bitcoin miners are preparing for the halving – BitcoinBlog.de – the blog for Bitcoin and other virtual currencies

The halving halves the reward of Bitcoin miners. They are preparing with various interesting strategies for the economic pressure in the ecosystem to increase.

The halving will take place in a few days. The reward that miners receive per block is halved. You don’t need a doctorate to imagine that this will put the industry under pressure: where they used to generate 900 Bitcoins a day, in a few days it will only be 450. Revenue is halved.

Of course, the mining companies have been planning for the effect for a long time. They have timed their investments so that the halving will not immediately throw them off track. However, the hard fact remains that revenue will be halved. To deal with this, most miners have developed their own strategies.

“We are ready when the opportunity presents itself”

Adam Sullivan, CEO of the mining company Core Scientific, surprisingly expects that the halving will cause demand for so-called ASICs – these are highly specialized devices for mining Bitcoins – to explode. The reason? “People need more modern equipment: Halving puts miners under relentless pressure to modernize.”

Clearly: If the market shrinks, only those who operate most efficiently will survive. So everyone who can will invest in efficient hardware.

Sullivan even looks forward to the halving with a somewhat vulture-like anticipation: the company is positioned in such a way that it will not cause it any existential fears, but is counting on others being crushed. “We are currently closely monitoring the full spectrum of assets and companies that operate with a marginal cost structure, so we are ready when the opportunity presents itself.” Core Scientific is preparing for a discount war!

Sullivan relies on a twofold strategy for deploying the miners: “We take our most efficient machines and put them where we get the most operating hours. Then we take our least efficient machines and distribute them into data centers where we can selectively use the cost of electricity.”

Mining’s survival strategy also includes balancing the fixed costs – especially the purchase of the equipment – with the variable costs – especially the electricity prices. For expensive but efficient devices, the “uptime”, i.e. the operating time, is most important in order to quickly recoup the purchase costs, while for cheap but less efficient devices it is primarily the price of electricity that is important.

Under the pressure of the halving, a long-awaited ecological application of mining could actually materialize: namely that the miners will purchase excess electricity from renewable sources when it is available and turn the miners off otherwise. This could work if old hardware is sold off at ridiculous prices because of the halving.

First the growth, then the efficiency

Marathon Digital, another listed American miner, is also anticipating the halving with a full coffers. “When others stumble, Marathon’s strong balance sheet puts it in a position to buy machines, data centers or businesses,” says Adam Swick, the company’s chief growth officer.

Marathon Digital is actually well positioned with Bitcoin holdings of $1.2 billion and almost $400 million in cash. For them, too, the halving is primarily the chance to buy hardware and “sites”, i.e. mining farms, at low prices.

This also shows a phase transition in the evolution of a mining company: As you grow, it is easiest to have the mining devices hosted in other data centers, explains Swick. This is the quickest way to get as many Asics online as possible. On the other hand, if you want to work as efficiently as possible, it is better to own the data centers yourself and thus reduce operating costs. Miners who are able to move on to this second phase will clearly have an advantage after the halving.

Marathon is even planning for the next halving in 2028. Until then, the miner wants to have access to places with almost free energy. For example, projects are planned in which landfill gas is burned. These may also have the side effect of being able to sell the heat from the combustion to nearby greenhouses.

Perhaps the third phase will be to own not only the data centers, but also the power plants themselves. Mining could move into this phase from 2028.

More creative strategies

Another strategy for some miners to deal with the halving is to diversify. It currently makes sense to enter the rapidly growing, computing-intensive AI industry.

The obvious problem, however, is that AI calculations run on GPUs, but the major Bitcoin miners run ASICs that can only mine Bitcoins. However, their experience in finding cheap electricity and implementing it in a data center could be helpful.

Other miners, such as Foundry, open a kind of logistics center. They help other miners buy or sell equipment, open data centers, optimize trade routes, and so on. Especially in view of the expected upheavals due to the halving, possible hectic buying and selling of hardware, setting up and dismantling of mining centers throughout the USA and beyond, this service could be in high demand.

Another new business model could be delivering transactions. Marathon Digital began offering customers the option of bringing even more complex transactions onto the blockchain with Slipstream in February.

Today, if you send very large or “non-standard” transactions, they are rejected by most nodes and have a difficult time finding their way through the network to a miner. With Slipstream, users can now be sure that even exotic and experimental transactions reach their destination.

Marathon not only wants to generate additional fee income, but also allow the community to experiment with more complex transactions – and thus potentially create the basis for Bitcoin mining to remain profitable for a long time.

Economic pressure forces innovation

Overall, miners are preparing for the halving with much more imagination and foresight than in the past. The professionalization of the industry is clearly evident here. It should therefore not be expected that there will be spontaneous massive upheavals – or extreme drops in the hashrate – even if one thing or another will shift behind the scenes and centralization to larger miners can probably occur.

What is obvious, however, is that the economic pressure caused by the halving is forcing miners to compete even more closely for operational efficiency, to ensure that fee income increases, and to try out new models that may also have an ecological benefit become.