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Bitmain Struggling Amid Market Downturn, IPO No Longer Certain

Bitmain Struggling Amid Market Downturn

Bitmain may be the largest manufacturer of cryptocurrency mining equipment in the world but despite the size of the company and its near-total monopoly on the mining industry, it is not immune to the impacts of the 2018 cryptocurrency bear market.

Bitmain has been forced to close down its Israeli development center, amid rapidly declining revenues. Possibly over 1 million Antminers have been shut off since the beginning of November 2018.

The mining industry has entered its worst bear market in history. For years, Bitcoin’s hash rate had been exponentially increasing, but now it has declined from 60 EH/s to 35 EH/s. This represents billions of US dollars of Bitcoin mining equipment being shut off, the equivalent of 1.3 million S9 Antminers according to BitMEX Research. Total daily Bitcoin mining revenue has fallen from USD 12 million to USD 6 million per day, leaving only about a USD 1 million daily profit margin across the entire Bitcoin mining industry, even after the mass shutdown of mining rigs.

Bitcoin mining manufacturers are in a situation they have never experienced before, where the rigs they sell are rapidly becoming worthless. This is causing demand to dry up and possibly leaving Bitmain with excess inventory it cannot sell. The shutdown of Bitmain’s Israeli development center and subsequent layoff of the 23 employees that worked there are signs that Bitmain has switched from global expansion mode to contraction. The Israeli development center was a critical hub for the creation of new blockchain and AI technology.

Bitmain was trying to go public on the Hong Kong stock exchange via an IPO, which is supposed to occur by Q1 2019 at the latest. However, the company is in a particularly bad position its major budget problems may postpone the IPO. Not only is Bitmain seeing drying up sales and being forced to close their critical development centers, it is heavily invested in Bitcoin Cash, which has fallen more than 80% in a month due to the Bitcoin Cash fork. Essentially, the firm put its entire war chest into Bitcoin Cash and now that money is mostly gone. Also, Bitmain is being sued for their role in manipulating hash rate during the Bitcoin Cash fork.

A silver lining to all of this is the Bitmain monopoly may finally be breaking, which will allow other mining manufacturers to become competitive. This would be a good thing for cryptocurrency miners worldwide since increased competition generally brings better technology and lower prices.

 

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Bitcoin Mining Difficulty Sees Sharpest Decline in 7 Years

Bitcoin mining difficulty was adjusted downwards 15.13% on 3 December 2018, the sharpest percentage decrease in difficulty since November 2011, and by far the biggest downward adjustment in difficulty by magnitude. This follows a 7.39% downward adjustment on 16 November.

Overall, Bitcoin’s mining difficulty has fallen from 7.45 trillion in early October to 5.65 trillion currently. This has coincided with a decrease in Bitcoin’s hash rate from a record high of 62 EH/s to 32 EH/s as of 2 December. This implicitly suggests that 30 EH/s of Bitcoin’s mining hash rate, which represents billions of US dollars of mining equipment, has been turned off due to no longer being profitable. The driving force behind this is the fall in Bitcoin’s price from USD 6,500 to the USD 3,500-4,000 level during the latter half of November 2018.

The Bitcoin mining difficulty adjusts every 2,016 blocks, which is roughly every two weeks, in order to maintain Bitcoin’s block time at 600 seconds. This is because if Bitcoin’s hash rate rises, then block times become shorter at constant difficulty, and if Bitcoin’s hash rate decreases then block times become longer. Indeed, Bitcoin’s block time had risen to 700 seconds before the most recent difficulty adjustment took effect, so the Bitcoin network was much slower than usual this past week. Without difficulty adjustments, the total supply of 21 million Bitcoins would have been mined already, which would have led to strong downward pressure on Bitcoin’s price, as well as a quick end to the Bitcoin mining industry as we know it. Further, this would lead to the Bitcoin network being much less secure, which is unacceptable, and a primary reason as to why periodic mining difficulty adjustments are essential.

The downward difficulty adjustment is actually good news for Bitcoin miners that are still mining, since the 20% decrease in mining difficulty over the past month directly correlates to a 20% increase in Bitcoin mining revenues per unit of hash rate. Increases in mining profits will likely be short-lived, however, since a significant fraction of that 30 EH/s of rigs which have been shut off due to lack of profitably will likely be turned on again.

Logically, the 20% increase in Bitcoin mining profits per unit of hash rate is a good environment for new miners to enter the game, but the abundance of mining rigs in the world that are sitting idle will probably beat new miners to the punch.

 

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Crypto Reading Catch Up? Now Could Be the Perfect Time

Crypto Reading Catch Up? Now Could Be the Perfect Time

With cryptocurrencies currently languishing ahead their next step major step forward as international interest continues to grow, now might be the time to grab something to read, do some research, fill a few educational gaps, and prepare for the future as the industry gathers new momentum.

Whether it be a fiction or a non-fiction read, there is plenty out there on bookshelves for the discerning reader looking to expand their crypto knowledge. Even screenplays are becoming more frequent, often attracting familiar names from stage and screen. So where to begin then?

If it’s blockchain that holds a fascination, there are two books which have undeniable popularity: “The Internet of Money” by Andreas Antonopoulos and Nathaniel Popper‘s “Digital Gold”. These two promise an insightful read examining blockchain and Bitcoin from two entirely different angles and two very different writing styles.

Antonopoulos takes the reader into the world of blockchain, examining every detail and every aspect of what the technology can offer and how it functions, including advice that an enthusiastic reader might soon find themselves passing on to others. His quote, “First they ignore us, then they laugh at us, then they fight us, then we win”, has already become an industry catchall quote among enthusiasts for explaining how blockchain technology has forged new ground, often against the predictions of detractors and the actions of legislators, to become one of this century’s more notable and significant new technologies.

Popper’s “Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money” is simply a good read. Described by many as a “page-turner” and certainly written like a novel, the book examines the origins of Bitcoin and the mysteries surrounding its anonymous founder and its adherents, through the eyes of some of its central characters such as the Winklevoss twins, with the enigmatic Satoshi Nakamoto taking on the book’s pivotal role.

Another book, this time promising an all-you-need-to-know guide to crypto trading and investment, is Chris Burniske and Jack Tatar’s “Cryptoassets: The Innovative Investor’s Guide to Bitcoin and Beyond”. Although it a may lack the flair of Digital Gold, Cryptoassets is classed as a masterpiece in crypto writing and an all-encompassing guide for the serious investor. The book covers a framework for investigating and valuing crypto assets, practical guides to exchanges, wallets, capital market vehicles, and ICOs, and portfolio management techniques, complete with comprehensive references, charts, and tables.

“Blockchain Basics”, Saifedean Ammous‘s “The Bitcoin Standard”, “The Truth Machine”, “Mastering Bitcoin”, Sam and Alex Tapscott’s “Blockchain Revolution” and “The Age of Cryptocurrency” by Paul Vinya and Michael J Casey are others worthy of note as Christmas approaches or even possibly for revitalizing those new year’s plans for launching an ICO or simply that long-delayed cryptocurrency portfolio.

Whatever the project, these reads will move you further down the road to a greater understanding of the world’s fastest-growing financial technology.

 

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Recent Calculations Show Global Mining Energy Supply to Be Mostly Renewables Based

The UK based CoinShares has released a report detailing the origins of global energy resources used in Bitcoin mining.

The crypto assets research and investment firm, listed on Stockholm’s NASDAQ/OMX exchange, conducted the survey in answer to critics’ continued arguments that Bitcoin mining is essentially an environmentally harmful activity due to its extreme use of electricity. It was also conducted in response to an article published by University of Hawaii’s Department of Geography and Environment which called on its own research to determine that Bitcoin mining could cause the pollution limits to exceed those stipulated by the 2015 Paris Agreement.

The article, written by Camila Mora, asserted that this carbon footprint calculation was achieved by multiplying Bitcoin’s 2017 estimated energy consumption and CO2 emission rates associated with countries from which mined blocks were thought to have been mined. According to Mora:

“By multiplying the electricity consumption of every block in 2017 by the electricity emissions in the country where the proof-of-work was likely to be resolved, we were able to estimate the total CO2 emissions for computing every block in 2017.”

The CoinShares news report has responded to this calculation by calling on industry insider knowledge and data available to the general public in order to put together an estimate of exactly where the energy used by the miners originate. The proposal is that 77.6% of worldwide Bitcoin mining is conducted through the use of renewable energy resources.

CoinShares accuses the University of Hawaii’s report of being inaccurate and oversimplified which lacked the regional economic and political considerations of the CoinShares analysis. The reality, according to the new report is that most of the world’s crypto mining has been conducted in China up until now, which is calculated to be about 60% of global mining, despite many countries being driven overseas due to climbing costs and the search for cooler climates.

China now has a major campaign which is aimed at drawing the country to supplying renewable energy such as solar. The Chinese program, entitled “curtailment” is largely conducted in regions where most Bitcoin mining takes place. Last year China became the world’s highest producer of solar energy. This has resulted in a glut of power which regional grids in these newly labeled areas are simply unable to deal with.

The outcome is that companies mining Bitcoin are moving to the “curtailment “ areas to lower their production costs resulting in extremely high renewable powered mining statistics: 95% of Chinese mining through renewable energy and 80% of total Chinese mining (or 48% of global mining) occurring in Sichuan.

Outside of China, Russia is at the other end of the scale with only 17% of its cryptocurrency mining conducted using renewable energy recourses. Iceland, Georgia, and the Northwestern US, on the other hand, are strong adherents to the use of renewable energy for Bitcoin mining.

Projects are currently underway in the Sahara using a 900-megawatt wind farm south of Marrakesh, and in Japan using solar power through the Kumamoto Electric Power Company

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Gamers Could Earn Crypto with ASUS Partnership with Quantumcloud

Gamers Could Earn Crypto with ASUS Partnership with Quantumcloud

Gamers have been presented with an opportunity to earn cryptocurrencies through their GPUs based on the newfound partnership between Taiwan-based leading tech company AsusTek Computer Inc and startup cloud-based mining solution platform Quantumcloud.

The partnership announcement yesterday disclosed how the Taiwan tech manufacturer will leverage on its market distribution of its branded graphics card to promote cryptocurrency mining on the cloud mining app developed by the Quantumcloud project.

Gamers will be able to co-earn through the mining process carried out by the platform using their idle GPU power. The cryptocurrencies earned can be cashed out through payment gateways such as PayPal or WeChat.

The earnings will be based on the percentage of GPU processing power allocated by the user, which is often the unused GPU resource – that is, portions of the graphics card not engaged in any other processing.

One essential takeaway is that the privacy of users including their financial data on the app will be protected under the General Data Protection Regulation (GDPR), making it GDPR compliant. As per the announcement:

“As part of its pledge to protect user data, Quantumcloud launched with GDPR compliance in place and does not require customers to create a unique login. Instead, customers use their existing PayPal or WeChat account to log in and collect their earnings.”

On the other side of the partnership, Quantumcloud has made it known that it does not guarantee that users of its software will earn profits and that earnings will be based on the performance of the cryptocurrency market. More so, the earnings are relative to the amount of processing power allocated.

Unlike Bitcoin mining where sophisticated processors called ASICs are required due to computational difficulty, the most commonly threaded path is to use GPUs to mine cryptocurrencies.

Miners have had to either mine alone or join a pool of miners to earn reasonably. However, the downtrend in the cryptocurrency market has made it extremely difficult for miners to cope. This grim picture is accentuated by the growing numbers of mining firms shutting down due to high operational costs and miners going the length of selling their mining rigs at second-hand values.

To top it all, hardware provider Nvidia reported in its Q3 financial data that there has been a “substantial decline” in patronage for GPU chips.

 

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Ads for Used Rigs Up 25% as Russian Mining Takes a Hit

As Bitcoin tumbled to new lows on cryptocurrency exchanges last week, Russia saw a significant rise in the number of second-hand mining rigs available for sale.

Online Russian marketplace Youla reported a 24% increase of used rig sales in that week, indicating that many of the country’s amateur cryptocurrency miners where ceasing their mining activities and liquidating hardware to recoup losses.

Another disturbing fact for Russian investors looking for indications of a future lift in market fortunes is the number of searches online for video cards which Youla suggests have dropped by 25% on its own platform.

Clearly, the profitability of mining due to the direction of the market, again a reflection of Bitcoin’s current low value, is impacting on the sales mining equipment and GPUs. However, Youla has noticed an increase in searches for specialized equipment such as ASICs-based rigs which are suited to mining cryptocurrencies that require more hashing power.

The fall in the value of cryptocurrencies has consequently affected hardware pricing, with rigs that might have sold for USD 3,500 in January now achieving prices some 37.5% less as demand falls. Although small-scale mining by amateur miners is clearly being hit hard, companies are developing more financially viable ways of operating.

Crypto mining in Russia is becoming a big industry on an individual level but more importantly for the government, at an industrial scale also. This is now driving operators towards locally run Russian mining pools. A majority of these larger facilities currently work with Western and Asian mining pools, increasing the need for Russian firms to work within the restriction imposed by overseas pools often including prohibitive tax regulations.

Russia has become popular with overseas companies due to its low energy costs, with another recent drop in electricity rates recently from RUB 5-7 rubles (USD 0.075-0.125) to 4-5 rubles (USD 0.06-0.075) per kW in the last year. Prices are half that amount in some areas, making the country one of the cheapest in the world for energy.

 

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Sweden Hopes to Benefit from Norwegian Mining Exodus

Swedish media have reported that the country is expecting a wave of interest from crypto mining companies currently conducting business in Norway, due to the Norwegian government cutting tax subsidies from January 2019.

Norway’s government is putting more pressure on cryptocurrency mining by following through with the threat that it was considering removing electricity tax subsidies on Bitcoin mining. Currently, Norwegian Bitcoin data centers are discounted in the same ways as other industries with high energy costs paying NOK 0.48 (USD 0.056) per kilowatt. This will now rise to NOK 16.58 (USD 1.94) per kilowatt from January 2019.

The effect of this could be a shift to the nearest Scandinavian location with a similar climate and Sweden would be the obvious choice. With Swedish data centers paying significantly less in power costs than the new tariffs being imposed next year in Norway, Sweden is preparing for an exodus of crypto mining outfits.

The Swedish municipality of Boden in Norrbotten County, the northernmost county or län, has a mining community of about ten companies at present. Erik Svenson, director of the Boden Business Agency, maintains that these numbers are now sure to swell, and suggested that companies in Norway were already contacting his agency regarding mining in the area. He said:

“It is clear we’re becoming more attractive… This about big money… and its definitely going to make it cheaper here.”

Svenson said that they had already started building a business park in Boden in anticipation of the growing interest in cryptocurrency mining and other business and hundreds of jobs were likely to be created. Currently, there are a few hundred people employed in crypto mining.

The Norwegian government has lost one of its biggest players in the market due to its punitive tariffs. Bitmain has announced that it will be moving to Sweden or Denmark as a result of the 2019 change in electricity tariffs. Julie Hvideburg, head of Bitmain’s Norwegian operations, commented:

“Government policy is pushing the industry in pushing the industry out of Norway. We are a global company and can move to Sweden or Denmark, but our Norwegian partner loses a big contract.”

 

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Bitmain Faces $5 Million Lawsuit for Unfair Pre-Configuration of Mining Rigs

Bitmain, the largest manufacturer of cryptocurrency mining equipment in the world, is being sued for USD 5 million in a class action lawsuit filed in the United States District Court of the Northern District of California. Plaintiffs allege that the manufacturer pre-configured rigs to run at full power, directing cryptocurrency mining revenue to itself before users could set up the rigs to point at their own pool.

Reportedly, Bitmain mining rigs in the past would start up in low power mode, giving users a chance to set up their mining pool information and point revenues to their own cryptocurrency address. No default address was included and not much power was used, which was optimal since set up can be a lengthy process.

Plaintiffs allege that Bitmain changed its startup process recently so that rigs now boot up in full power mode and begin mining cryptocurrency immediately. The lawsuit claims that all mined cryptocurrency is sent to an address belonging to Antpool, which is controlled by Bitmain. Because it can take hours or days to initialize and configure a Bitmain device, miners claim that they lose out on a significant amount of mining revenue that is rightfully theirs, in addition to electricity costs. The Antminer S9 uses 1,375W of electricity, the equivalent of using 23 60W light bulbs.

Although the impact on individual miners may appear insignificant, across the 100,000 miners involved in this class action lawsuit, the financial losses are claimed to amount to the millions of US dollars. The lawsuit states, in reference to Bitmain, that “their conduct is substantially injurious to customers, offends public policy, and is immoral, unethical, oppressive, and unscrupulous, as the gravity of the conduct outweighs any alleged benefits”.

The plaintiffs request that Bitmain ceases pre-configuring mining rigs, pay full restitution, pay interest on the cryptocurrency they have collected from this unscrupulous business practice, and pay all attorney fees.

 

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The Golden Goose’s Bitcoin Egg: World’s Largest Mining Farm in Paraguay

The makeshift mining industry which has grown around Paraguay’s Itapúa Hydroelectric Dam near the borders of Argentina and Brazil is to become official with a new plan to build the world’s largest mining farm in the region.

Bitcoin News recently reported that a growing group of crypto miners had created their own business in the region with an estimated 20,000 units generating Bitcoin and Ether. Many of the miners setting up business in the region have become millionaires, providing a much-needed boost to the local economy.

The potential for the dam to change lives for the better through providing power for cryptocurrency mining hasn’t gone unnoticed by the Paraguayan government, with the potential for mining to fund the countries hospitals, schools, and railways as well as to revive the local economy.

It appears Itapúa is finally going to create the regeneration many have been calling for as the government has revealed plans to put into action “Golden Goose”, a project which will see the construction of five mining centers on 50 square kilometers near the tourist town of Ciudad del Este.

The Golden Goose project is part of a massive regeneration plan by Paraguay’s government bring about technological advancement through the growth of new technology and possible revision of cryptocurrency tax laws to enable the enterprise to make an impact on the country’s economy,

It was noted by Choi Yong-Kwan, Chairman of the Commons Foundation, that 10% of Itaipu’s power was used in Paraguay whereas a huge 80% was currently being exported. Thus, the dam had more than adequate power to be redirected towards the mining project.

Paraguay’s Blockchain Technology Foundation plans to raise funds for the project with a pre-sale and Initial Exchange Offering through Bitcoin, MicroBitcoin, and Ethereum. Token holders are promised 30% of the mining profits generated by the new mining center.

 

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US Defense Agency to Examine Permissionless Blockchains to Bypass Bitcoin

The US agency responsible for the development of emerging technologies for use by the military wants to get a better understanding of permissionless blockchains

A “permissionless blockchain” means that anyone can join the network, participate in the process of block verification to create consensus and also create smart contracts. A good example of permissionless blockchain is the Bitcoin and Ethereum blockchains, where any user can join the network and start mining.

A permissioned blockchain restricts the actors who can contribute to the consensus of the system state. In a permissioned blockchain, only a restricted set of users have the rights to validate the block transactions. A permissioned blockchain may also restrict access to approved actors who can create smart contracts.

Clearly, Bitcoin has not found favor with the military, as DARPA is looking for alternative methods where monetary incentives, those normally acquired through mining, are bypassed. Permissionless distributed protocols such as Bitcoin, compensate miners with coins as they add blocks and shore up the network.

The Defence Advanced Research Projects Agency (DARPA) has sent out a request for information (RFI) on those aspects of permissionless distributed consensus protocols which as yet have not been adequately explored, such as how these blockchains function without monetary incentives. DARPA has stated future programmes rely on responses to the RFI:

“For the purpose of this RFI, DARPA is solely interested in permissionless distributed consensus protocols … While there is a substantial amount of publically and privately supported research and development in distributed consensus protocols, DARPA seeks information alongside several, less-explored avenues of permissionless distributed consensus protocols. Such information could help inform a future DARPA program.”

DARPA is clearly keen to utilize blockchain in a defence strategy; this renewed interest in blockchain technology marks a return to new communications tech, as two years ago DARPA was reported as working on a blockchain based communications platform resilient to cyber-attacks, with self-destruct messaging.

Earlier this year, the US overseas military personnel announced a voting system via a blockchain mobile app so that servicemen could vote in midterm elections. 144 military personnel stationed overseas from 24 counties cast their ballots on a mobile, blockchain-based platform called Voatz.

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