Tokenized Bitcoin hashrate products were a prominent novelty during the 2020-2022 cryptocurrency bull market, but today this mining segment is in disarray.

Multiple hashrate tokens were launched over the past few years with the shared goal of providing a comparatively seamless and consistently profitable mechanism for gaining exposure to the mining industry. Despite their best efforts to push forward the financialization of Bitcoin mining, these tokens continue to prove their immaturity and leave much to be desired.

Poolin’s hashrate token

In mid-January 2021, Poolin launched its pBTC35A hashrate token. This ERC-20 asset was designed to represent 1 terahash per second (TH/s) of mining equipment that had a power efficiency of 35 Joules per TH (J/TH). In theory, this token was essentially designed to offer the same payout as one Antminer S19 for each 100 tokens over any given period of time.

Things got rocky shortly after China banned Bitcoin mining and the pool suspended all rewards for its tokenized hashrate products. The token’s value plummeted roughly 60% over the summer, but eventually those losses were pared by late 2021. Unrelated to its hashrate token, Poolin faced more operational issues in September 2022 when it was forced to also pause withdrawals from its wallet product, citing liquidity issues.

To date, the market for Poolin’s pBTC35A is still sour. Over 96% of its value has been lost in the past year, according to Uniswap market data surfaced by TradingView. Bitcoin’s hashprice is down roughly 70% in the past year. Bitcoin itself is only down 60% over the same period.

Binance’s H=hashrate token

The world’s largest cryptocurrency exchange and fourth-largest mining pool also launched a BTC-backed tokenized hashrate derivative in 2021. Supported by BTC.TOP and Genesis Mining, the token was intended to represent 0.1 TH/s at an efficiency of 60 J/TH – a tad lower than Poolin’s token. But the “Bitcoin Standard Hashrate Token” (BTCST) stayed severely disjointed from the real hashrate market over the first several months of its trading even after several significant repricing events.

Today, Binance doesn’t even maintain a market for its own hashrate token. The BTCST asset page on Binance carries a notice that says, “Note: This coin is not listed on Binance for trade and service.” Binance only supported a perpetual futures market for BTCST from March 4 to March 12, 2021, according to data from TradingView.

The token is barely trading on one exchange, Roughly 85% of its reported value has been lost in the past month, according to TradingView data. Bitcoin gained less than 1% over the same period.

Blockstream’s hashrate token

One of the most well-known Bitcoin brands, Blockstream, also launched a hashrate token in March 2021, but it was only offered to non-U.S. qualified investors. One Blockstream Mining Note (BMN) token entitles the holder to BTC mined by up to 2,000 TH/s of hashrate, according to the Blockstream website.

To date, BMN appears to be the most stable of all its competitor derivative products if only for its survivability. Multiple tranches have been sold to investors. And the asset is still traded on multiple marketplaces, from Bitfinex Securities to SideSwap, a peer-to-peer exchange platform. Although volume appears to be exceedingly low, the price is also fairly stable. Compared to other hashrate tokens, the situation could be worse.

BMN market price history on SideSwap.

More hashrate derivatives

The financialization of Bitcoin mining will continue despite the many failures and disruptions for tokenized hashrate products. Other hashrate products have failed in the past, so these tokens are not alone. For example, now-bankrupt exchange FTX listed quarterly hashrate derivatives for a few quarters but ultimately stopped launching new contracts. But other miners are attempting to improve on these failed products. For example, Luxor Technologies launched an over-the-counter hashrate derivatives marketplace in October 2022.

Ultimately, the muddled success of hashrate tokens will have very little effect on the long-term success and financialization of Bitcoin mining. Experimentation is necessary and often messy. Hashrate tokens still have a lot to prove to the mining industry.

The author does not hold investments in any assets mentioned in this article.

Photo by regularguy.eth on Unsplash