North American mining pools didn't exist a few years ago. Now they're some of the world's largest. What changed? Two executives from leading North American pools explain the change in mining dynamics that gave the US an edge to become leaders in mining.

This livestream is essential watching material for miners who are choosing which pool to mine through, investors observing the rapidly changing mining industry, and all other types of mining companies and individuals.

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Show Notes

Introductions (timestamp)

  • Ethan Vera, COO Luxor Technology: He has been in the mining space since August 2017. Luxor serves institutional and retail clients with a goal to add transparency to the industry.
  • Mike Colyer, CEO Foundry: He started mining 4 years ago by building small facilities. In 2019, he got a call from Barry Silbert of DCG and was asked to lead Foundry. Foundry is currently the 7th largest mining pool.
  • The variation with luck and the investment required makes it hard to be successful in the pool business but Foundry wants to be a trusted pool for the North American eco system
  • Luxor is focused on adding more mining software and services

A few years ago, there were zero North American mining pools. What changed? (timestamp)

  • The economics for mining in North America is favorable vs a few years ago
  • Large scale mining pools require deep pockets, Foundry lost millions of dollars while growing the pool but investment in NA is now growing
  • The crackdown on Chinese miners lowered the market’s confidence in them and encouraged them to seek alternative mining pools to join
  • Capacity had to be built, equipment had to be bought, NA miners bought up a significant portion of hashrate at the end of 2020 and the beginning of 2021 which is starting to come online
  • Miners want the security offerings that come with NA mining pools
  • North American miners now prefer to partner with NA pools
  • Between 2018-2020, Chinese pools were the best partners for miners.
  • They had close relationships with manufacturers and mining farms. Now Luxor and Foundry are more attractive bc they offer more services on top of the hashrate liquidation offered by Chinese pools

Competition from new North American pools (timestamp)

  • Prediction (Ethan): by the end of the year NA pools will have 25 exahash, 5 pools in the top 15 and by next year, 5 in the top 10 representing about 50% of the network hashrate
  • Mike: Competition is a non-issue, we are here to defend the bitcoin network, decentralization of the hashrate makes bitcoin more robust
  • Pool fees are too low for a stand-alone business, mining pools will have to provide additional services

Comments on ESG mining (timestamp)

  • Publicity traded miners who try to launch their own pools will struggle due to their lack of understanding with respect to the variation that comes with luck (the bitcoin algo cannot be gamed)
  • No one is willing to pay extra for newly minted bitcoin or “green” bitcoin
  • Ethan: Green bitcoin can’t exist
  • Terapool is a green miner backed by a lot of institutions, investment in green mining is growing
  • Mining pools may offer green tokens to incentivize miners to join their pool

The primary advantages and concerns for operating in the USA (timestamp)

  • One challenge in North America is how fast companies can move on product launches, hashrate tokens may be labeled as securities and require excess paperwork and processing time
  • Short term regs are a challenge but can benefit the business in the long term by offering clarity
  • Con: the infrastructure bill stated that pools must KYC/AML check every single participant of their pools. In this case, NA pools would be institutional focused, and retail would move to overseas pools like slushpool
  • Pro: mining can’t get banned overnight which makes due to procedure requirement.
  • Pro: USA has a robust energy grid
  • Pro: there is competition among states to attract bitcoin miners
  • Mining will become part of the USA’s core infrastructure (Mike)

Luxor recently launched an Ethereum pool (timestamp)

  • The move to Proof of Stake (POS) is further out than the media makes it look like
  • ETH mining is economic, ex. Hive trades at a premium due to its Ethereum mining pools
  • Luxor is advocating for proof of work in the Ethereum network by starting this pool
  • Luxor is trying to reduce friction between the Ethereum community and Ethereum miners

Do you expect North American pools to reach 50%+ of bitcoin’s hashrate? (timestamp)

  • Mike: If this were to happen, it would be a negative for decentralization and create the same issue we had when China dominated the hashrate
  • As NA share of the hashrate grows, more Chinese pools will be kicked out of the top 10
  • Expect to see a South American and European pool in the top 20 (Ethan)

How long until bitcoin’s full hashrate recovery? (timestamp)

  • Ethan: Surprised at how quick the hashrate came back, expect all-time highs by January
  • Mike: 220 exahash by first quarter of 2022, Chinese miners will start plugging back into the network

Hosted by Zack Voell and Will Foxley