Reporting in the Bitcoin mining industry remains rudimentary. Oftentimes, there are vast uncertainties regarding how much hashrate is under the control of a given mining company. Hashrate is commonly double-counted with both mining facilities and mining service companies making claims on hashrate.
By clearly defining who owns the hashrate, we can demand that mining facilities and mining service companies provide more accurate and sophisticated reporting of their mining activities. The mining equipment owned and operated by a company can be clearly reported through the metric of Hashrate Under Management (HUM). Mining equipment which is owned by clients of the company does not fall under HUM as the client has ultimate control over what to do with this hashrate.
In recent years, mining companies have evolved to have a greater presence in the public equity markets. Several exchange-listed mining companies are currently operating but not all of them are exclusively proprietary mining. Some of these publicly-listed companies are also providing hosting services which can blur the lines when company performance is being reported. As greater capital flows into the industry, it is an imperative that we demand more accurate and reliable reporting from mining companies.
Hashrate is ultimately controlled by the entity that owns the hardware. For a fee, mining pools provide a service to congregate hashrate. Miners are highly motivated to send their hashrate to mining pools as it reduces the variance in payouts and allows a Miner to plan their business accordingly.
However, if mining pools abuse this role, the hardware owners have the liberty to transition their hashrate to another pool. They also have the freedom to solo mine. While arguments have been made that mining pools purchase, and thereby “own”, the hashrate of their connected Miners, the freedom to transition leads us to conclude that hashrate is entirely controlled by the owner of the hardware which produces it.
We believe that Hashrate Under Management should be the standard measure of a Miner’s contribution to the Bitcoin network’s security, and that service providers and ancillary companies should not bogart this term to falsely inflate their importance or value. Below, we have detailed several scenarios to further elucidate the metric and the reasons why the industry needs such a metric.
Scenario 1 – Miner
BigHODL Miner LLC has been operating 1,000 Antminer S19 rigs since June 2020 and has recently secured a purchase agreement with Bitmain for another 3,000 Antminer S19 which are expected to be delivered in June 2021. BigHODL exclusively carries out proprietary mining and all of the hardware in the BigHODL facility is owned by the company. With the Antminer S19 having a hashrate of 95 TH, BigHODL currently has a HUM of 95 PH. In June, BigHODL’s HUM is expected to increase to 380 PH. BigHODL issued a press release publicizing the purchase agreement. The press release further claimed that BigHODL was the biggest Miner within their region. The share price of BigHODL surged on the news. While the market should adjust based on the new development, the lack of a clearly defined metric to assess the impact of the purchased hashrate resulted in the price rise being overextended. In the case that the press release clearly reports Hashrate Under Management, concerned parties can assess the information in relation to the wider marketplace. Moreover, claims of being the biggest Miner in a region could only be made by one entity.
Scenario 2 – Hosting Provider
BTC Hoster LLC provides colocation services to US-based Miners. BTC Hoster LLC owns both a facility and a power plant and can offer Miners an all-in hosting rate of $0.04 per kWh. BTC Hoster LLC has proven to be a popular option for small and medium scale Miners in the US. On the behalf of clients, Big Hoster LLC has 10,000 Antminer S19 mining machines in their facility. Each of these machines was resold to clients and these clients have complete control over the hardware and hashrate. They can decide what mining pools to connect to, they can remotely manage their machines, and they can also organize for the machines to be delivered to another address. BTC Hoster LLC also carries out proprietary mining activities. On their balance sheet, they personally own 1,000 Antminer S19 rigs. Their HUM is 95 PH.
Scenario 3 – Mining Pool
Cool Pool LLC is a Chinese mining pool that exclusively provides mining pool services for Bitcoin Miners. Cool Pool is a significant player in the Chinese mining industry and 10% of the Bitcoin network hashrate has chosen to use their services. Cool Pool focuses solely on providing mining pool services and does not carry out large-scale proprietary mining. They have a small test facility in their office where they test different types of hardware. At the moment, they operate five mining rigs with a combined hashrate output of 355 TH. Their HUM is 355 TH. Because the owner of the mining machines control the hashrate, the HUM attributable to Cool Pool is limited to the rigs that they operate in their test facility.
Why Hashrate Under Management is an Important Metric:
- To promote transparency regarding how much hashrate is under the control of a given entity.
- To measure historic growth of hashpower and anticipated future growth
- To map the growth of a variable that directly affects revenue generation and bitcoin production
- To eradicate the ubiquitous claim of mining companies marketing themselves as the “largest Miner” in a given region. For this claim to be validated, it needs to be supported by a mining company having the largest HUM figure among companies in the region.
- To accurately represent the size of the Bitcoin mining industry. When both Miners and mining service companies are both making claims to the same hashrate, the size of the mining industry is misrepresented.
- To promote improved reporting practices among mining service companies. Mining service companies should clearly partition the hashrate tied to their company into HUM and hashrate controlled by their clients (HCC).
Hashrate Under Management (HUM) Leaderboard
To keep you up to date with the latest Hashrate Under Management figures, our HUM Leaderboard summarises the current and future hashrate amounts of verified companies.