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Drop in Bitcoin (BTC) Mining Increasing Network Risk

Bitcoin (BTC), Cryptocurrency, Mining–As previously reported by EWN, the drop in Bitcoin hash rate which has accompanied the most recent price fall throughout the month of November has raised a debate over the cause of decreased mining, and the potential ramifications.

Some Twitter users pointed to an outright abandonment of cryptocurrency mining, with drop in valuation from $6500 to the recent lof of $3500 (including nearly $100 billion wiped in market cap from all coins) as being the catalyze to spark a mass exodus in miners. Given the state of the cryptocurrency industry just one year ago, where mining rigs were in high demand and even established companies were jumping ship to join the mining craze, the end of 2018 has seen a compelling shift in attitude.

A video published last week, which shows hundreds of expensive mining rigs sitting unused in a warehouse, sparked an uproar in the crypto community, with some believing the footage to be doctored in an attempt to publish more FUD at an already low point for the market.

However, other outlets have vouched their support for the incidence, giving some credence that the industry of crypto mining is in decline with the falling prices. In some respect, it’s not surprise. The cost of equipment in conjunction with the amount of electricity required to mine at a profitable rate had inevitably led some once enterprising individuals to cut their losses and exit the industry. But, as many have pointed out, there could also be a general shift away from BTC at present, with the mainstay of miners seeking out more profitable coins in the interim until Bitcoin prices show a more promising outlook.

For the remaining miners, the decreased competition means an increased chance of coin rewards. However, for the industry of cryptocurrency and the integrity of Bitcoin transactions, the decreased rate of mining and hash rate for the top currency by market cap also increases the network risk for attack. While the direction of the industry was, to the regret of many fans of decentralization, trending towards consolidation prior to the recent dropping hash rate, the most recent exodus has led to a worsening effect.

According to data published by Bloomberg,

At least 100,000 individual miners have shut down, according to Autonomous Research LLP. Fundstrat Global Advisors LLC estimates that about 1.4 million servers have been unplugged since early September.

Malachi Salcido, head of Salcido Enterprises–one of the largest mining groups in North America–says that the falling profitability of crypto mining is shaking out the weak hands, but also causing a concentration of power for the remaining few,

“We are entering in the phase when there’s a flushing out of the market. There will be relatively few operations that come out the other side.”

Bitcoin’s network relies upon the decentralization of mining services. With hash rates falling 36 percent since their peak in August, and problem-solving difficulty down 10 percent, the conglomerate mining networks are raking in newly minted coins, but also posing an increased risk of a 51 percent attack. With less variable rigs contributing to the network’s hash rate, the opportunity for one mining group, or a coalition of miners to gain control of the service also greatly increases.

Not only would controlling miners hold the lion’s share of new coins being produced, but they would also be able to influence the transaction landscape–with the ability to inflate fees, reverse specific transactions, or halt them all together.

Many within the industry have pointed to the mutualism of the Bitcoin ecosystem as being sufficient to prevent such an attack. If miners put a stranglehold on transaction services, the overall usability of the platform plummets which in turn leads to fewer transactions (and fees) in addition to a falling valuation for BTC. According to this logic, miners benefit as much as users for maintaining a fair ecosystem.

However, only time will tell the effects of such consolidation of power. Without true decentralization in its pocket, the appeal of Bitcoin and similar cryptocurrencies begins to fall to that of traditional fiat.

The post Drop in Bitcoin (BTC) Mining Increasing Network Risk appeared first on Ethereum World News.

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German Private Equity Fund Targets Bitcoin Mining аs Clients Demand ‘Regulated Product’

Xolaris Service KVAG, a German alternative investment fund manager, has launched a private equity fund dedicated to Bitcoin mining.

German alternative investment fund manager Xolaris Service KVAG has launched a private equity fund dedicated to Bitcoin mining, the company confirmed in a press release Nov. 29.

Xolaris, which has undertaken various expansion measures including the opening of a Hong Kong office in July, says client demand to access the sector continues despite the downturn in Bitcoin (BTC) prices.

The fund will feature a minimum investment entry of €250,000 ($285,000), with a planned issue volume of between €30 million and €50 million ($34 million – $57 million).

“We’ve constantly received requests from professional investors to release a regulated product for the cryptocurrency sphere,” head of portfolio management Stefan Klaile said in the release.

The fund will come as a joint project with Marc Stehr, owner of an extant mining farm in Sweden, with the fund’s capital first going towards the farm’s expansion.

The decision was made due to Stehr “already having access to operational mining infrastructure,” which “demonstrably successfully produces Bitcoin.”

“This eliminates a number of risks,” Klaile added.

As Cointelegraph reported, the drop in Bitcoin prices to around $3,500 had appeared to put pay to many miners’ profitability, with China seeing mass dumping of hardware due to the crisis. Last week, U.S.-based operation Giga Watt filed for bankruptcy.

The picture remains far from one-sided meanwhile, with the government of Paraguay at the same time announcing it would endorse and support “Golden Goose,” a project to build the world’s largest Bitcoin mining farm.

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Report Alleges North Korea Trialled BTC Mining, Local Firm Developing BTC Exchange

North Korea (DPRK) has attempted to mine Bitcoin (BTC), Yonhap News reported August 27, citing a report compiled by a research unit from South Korea’s state-run Korea Development Bank (KDB).

Yonhap notes that the mining attempt – which was allegedly conducted “on a small scale” between May and July 2017 – appears to have been unsuccessful, although the reasons for this remain unclear.

According to Yonhap, the KDB report claims that North Korea’s interest resides in the essential “characteristics of cryptocurrencies, including anonymity, difficulties of tracing money and cashability.” The KBD research unit reportedly cited a local media report as the source of its information on the mining story.

KDB’s research unit has reportedly moreover claimed that a North Korean tech firm, Chosun Expo, is in the process of developing a Bitcoin crypto exchange, although no further details are given.

The research unit has also reported that its interviews with North Korean defectors suggest that the majority of the country’s citizens have scant knowledge of crypto, in stark contrast to their southern neighbours.

While widespread knowledge of crypto may apparently elude most citizens in the tight grip of a media-controlled state, North Korean hackers last week made news for allegedly infecting a cryptocurrency exchange with malware that unusually targeted both Windows and macOS systems.

Meanwhile, unconfirmed reports are emerging of an alleged upcoming blockchain conference in Pyongang this October. CNBC’s Ran NeuNer somewhat jocularly shared the news on Twitter earlier this week, quipping “Who’s coming?”

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New York State to See Bitcoin Mining Operation Powered by Hydroelectric Dam in Q4 2018

A California-based Bitcoin mining company has completed work on a repurposed hydroelectric dam to service its new mining farm, a press release announced Thursday, August 23.

DPW Holdings will now prepare to use the dam, which is located in Valatie Falls, New York, as the source of electricity for its yet-to-be-built mining facility towards the end of 2018.

The move means fresh competition for the steadily increasing miner population in New York State, where Coinmint signalled it would begin operations in an old smokestack with local government backing earlier this year.

DPW’s farm will meanwhile employ its own mining hardware, the AntEater, which it developed in conjunction with Samsung in January. It will run the operation via a dedicated subsidiary, Super Crypto Mining.

“This project provided a unique opportunity for DPW subsidiaries to collaborate and innovate to create a new model for cryptocurrency mining, for which electricity is by far the largest operational cost factor,” CEO and chairman Milton “Todd” Ault, III commented in the release.

“We look forward to bringing this innovative new facility fully on-line during the fourth quarter of 2018.”

Various U.S. states will see mining projects start raking in cryptocurrency in the near future, the DPW news coming two weeks after Asian giant Bitmain announced the creation of a complex in Texas into which it would invest $500 million.

Across the border in Canada meanwhile, prospective companies have faced mixed receptions from local authorities, with Quebec in particular voicing its opposition.

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Researcher Challenges Bitcoin Mining Energy Consumption Alarmists, Says Debate ‘Oversimplified’

A clean energy expert has hit back against the common perception that high energy consumption is an “Achilles Heel” for Bitcoin (BTC), in an article published by The Conversation August 20.

Katrina Kelly, Strategy Manager at the University of Pittsburgh’s Center for Energy, says that we need to shift the debate around Bitcoin mining away from energy-intensivity and towards where that energy is produced and how it is generated:

“By talking specifically about … the consumption of energy alone..many fail to understand one of the most basic benefits of renewable energy systems. Electricity production can increase while still maintaining a minimal impact on the environment….Not all types of energy generation are equal in their impact on the environment, nor does the world uniformly rely on the same types of generation across states and markets.”

Recent research estimates that mining could account for 0.5 percent of global energy usage by 2018 – but Kelly argues that the sources, not the amount, of energy is ultimately what matters.

China –  a country that has long been a crypto mining superpower due to its cheap electricity supply – uses largely fossil-based sources, which Kelly notes is highly problematic: the country is already ratcheting up devastating levels of carbon emissions.

Iceland, on the other hand – an increasingly popular spot for BTC miners – relies on almost 100 percent renewable geothermal and hydropower energy sources. In this case, Kelly argues,  miners’ power demands are “nearly irrelevant” to the health of the environment. The US Pacific Northwest – which has abundant supplies of low-carbon energy sources – is another such case, according to Kelly.

While carbon-density and “dirty power” supplies are the crux of Kelly’s article, she also offers another perspective to contextualize the Bitcoin mining controversy: if mining consumed an estimated 30 terawatt hours in 2017, banking continues to consume an estimated 100 terawatts of power each year. “[Even] if Bitcoin technology were to mature by more than 100 times its current market size, it would still equal only 2 percent of all energy consumption.”

As a recent Cointelegraph analysis noted, some have argued that energy-intensive and profit-driven Bitcoin mining could inadvertently drive innovation to further develop clean energy sources. Google information security engineer Marc Bevand told CT that:

“Because miners are so sensitive to electricity prices, they are often a driver pushing utilities to further develop renewables which are now the cheapest source of energy…If the energy use of cryptocurrency miners continue[s] to increase, it will help decrease the costs of renewables for society at large (increased demand → increased R&D → increased capacity & higher efficiency → lower costs through economies of scale).”

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Bitcoin Energy Consumption Could Drive Innovation, Says Research Associate

Bitcoin (BTC)–By now, most within and outside of the industry of cryptocurrency are familiar with the narrative surrounding Bitcoin energy usage. The argument goes that as Bitcoin becomes a more popular choice in terms of digital currency, the increase of miners looking to capitalize on transaction fees and reward payouts will increase, thereby also raising the hashing difficulty of the cryptocurrency.

The end result will be more rigs competing for the ultimate prize of the mined blocks–and also consuming a proportionally higher amount of energy. The debate has grown so large that environmentalists and other conservation oriented researchers and politicians have weighed in on cryptocurrency as “evil,” saying it promotes a type of waste that is not necessary in today’s digital age. Others have pointed to the overwhelming benefits of proof of work, and the associated electrical costs as a by-product of a maturing industry. In addition, many cryptocurrency projects have started to emerge that forego energy-intensive Proof of Work systems, while still providing the benefits of blockchain and secure digital payments.

Now, a researcher out of the University of Pittsburgh is weighing in with a bold claim: that energy consumption related to Bitcoin is being unnecessarily criticized by people who find Proof of Work to be a flaw for Bitcoin, when in reality it constitutes a usable feature. Dr. Katrina Kelly-Pitou, electrical and computer engineering research associate at the University of Pittsburgh, wrote an article for the outlet The Conversation in which she claims that the environmental conservation slant against Bitcoin is being used to spread false claims, in addition to being grossly oversimplified in terms of the impact of the technology. In particular, she uses the idea of Bitcoin’s energy crisis as a ‘red herring,’ that distracts people from pursuing a deeper understanding of digital currencies in favor of the knee-jerk reaction to mounting energy costs,

“I am a researcher who studies clean energy technology, specifically the transition toward decarbonized energy systems…New technologies – such as data centers, computers and before them trains, planes and automobiles – are often energy-intensive. Over time, all of these have become more efficient, a natural progression of any technology: Saving energy equates to saving costs.”

As Dr. Kelly-Pitou points out, technologies naturally follow a curve of becoming more resource efficient, which includes Bitcoin and miners finding a way to cut costs while still retaining the benefits of blockchain and reward payouts. Instead of focusing on how much energy Bitcoin mining consumes, Dr. Kelly-Pitou makes the argument that the technology should be focused on developing into a more efficient model, while the greater portion of society should look to renewable resources as a way to supply the power for advancing technological innovation.

Instead, the current narrative is one to shun the growth of a new industry–cryptocurrency being one of several technologies to draw the ire of environmental conservationists–thereby slowing down the overall progress of society as opposed to finding ways to merge technology with more efficient energy production. As she puts it, energy-focused conversations have the effect of keeping Bitcoin in a category of misunderstood, with people failing to go beyond a surface-level of understanding,

“Like many other aspects of the energy industry, bitcoin is not necessarily a ‘bad guy.’ It’s simply a new, and vaguely understood, industry. The discussion about energy consumption and bitcoin is, I believe, unfair without discussing the energy intensity of new technologies overall, specifically in data centers.”

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Nvidia Stock Falls as Q3 Revenue Estimates Hit by Crypto Mining Decline

U.S.-based graphics processing unit (GPU) manufacturer Nvidia stocks fell after announcing its third-quarter estimates, MarketWatch reported August 16. The firm’s revenue was affected by a decrease in crypto mining as digital currency markets slumped earlier this year.

Nvidia shares declined more than five percent in the extended session. The closing price in the regular session was $257.44, down 0.6 percent. Nvidia forecasted its third quarter revenue between $3.19 billion and $3.32 billion, lower than the figure predicted by analysts of $3.34 billion.

The company reported that crypto mining sales were significantly lower than expected in Q2, adding that it does not expect to make significant blockchain-related sales for the rest of the year. Colette Kress, chief financial officer at Nvidia, said:

“Our revenue outlook had anticipated cryptocurrency-specific products declining to approximately $100 million, while actual crypto-specific product revenue was $18 million. Whereas we had previously anticipated cryptocurrency to be meaningful for the year, we are now projecting no contributions going forward.”

In the second quarter, the company’s net income was $1.1 billion, or $1.76 per share, while a year earlier the figure was $583 million, or 92 cent per share. Total revenue rose 40 percent to $3.12 billion, according to Reuters.

Analysts polled by FactSet suggested that while the company’s revenue from crypto mining hardware will decline, it will see significant growth in its gaming and servers sales.

Revenue from Nvidia’s gaming sector is expected to grow by 47 percent to $1.75 billion on a year-on-year basis, while data-center revenue is expected to surge 78 percent to $740 million.

In June, analysts expressed concerns that the success of another GPU producer, Advanced Micro Devices Inc.’s (AMD), may not last long if crypto mining quiets down, or if miners choose GPUs by other manufacturers. In earlier months, the company’s share price had grown up to 30 percent due to a crypto mining boom. The analysts explained then:

“Cryptocurrency strength has to some degree offset the slow and steady progress establishing momentum in desktop and server microprocessors after several years away from those markets — but that higher revenue has driven higher operating expense, which further raises the bar for the processor business if crypto momentum should fade.”

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Genesis Mining to End Unprofitable Crypto Contracts

Cloud mining service Genesis Mining is forcing some clients to upgrade to a five-year subscription or else lose services, it announced Thursday.

The Iceland-based startup said in a blog post that it will end open-ended contracts for customers who are not earning enough to cover maintenance fees in roughly two months due to the ongoing declining cryptocurrency market. Clients who wish to retain services must upgrade to a new premium account.

Mining is getting more complicated and energy-intensive, the company said, forcing it to reconsider its policies. Now, all users will have to switch to a five-year contract with no option for early termination. The fee for every trillion hashes per second (TH/s) will drop to $180 however, down from $285.

The company said:

“Unfortunately, bitcoin went into a downward trend around January. This trend combined with the heavily rising difficulty around April and May reduced mining outputs even further. As a result, some user contracts are now mining less than the daily maintenance fee requires to be covered, and thus they entered the 60 days grace period, after which open-ended contracts will get terminated.”

Nor is Genesis Mining the first firm to find mining for certain customers unprofitable – in June, Hashflare announced that it was shutting down its bitcoin mining operations and cancelling users’ contracts, because “the payouts were lower than maintenance for 28 consecutive days,” according to its official Facebook page.

Image via Shutterstock

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Bitmain Hits $15 Billion Valuation With Recent Backing From Uber's Largest Shareholder

Bitcoin (BTC) mining behemoth Bitmain is now valued at $15 billion after closing a pre-Initial Public Offering (IPO) funding round with backing from high-profile investors, QQ News reported August 4.

The fresh financing deal, which is said to have closed on Saturday, notably includes investments from Chinese tech conglomerate Tencent and Japan’s Softbank, another tech giant whose 15 percent stake in Uber makes it the drive-hailing app’s largest shareholder.

Tencent, meanwhile, is the developer of China’s dominant social media platform WeChat, which has over 1 billion global users and outstripped Facebook’s market cap by $72 billion in March of this year.

According to QQ, Bitmain is planning to launch its IPO on the Hong Kong Stock Exchange  this September at an estimated valuation of $30 billion. As Cointelegraph previously reported, Bitmain’s CEO Jihan Wu hinted at plans for the IPO in early June.

In February 2018, Bitmain reportedly held 70-80 percent of the global market for Bitcoin mining hardware, and posted between $3 and $4 billion in operating profits in 2017 — higher than American graphics processing unit (GPU) manufacturer Nvidia.

At the end of July, Fortune reported that Bitmain earned around $1 billion in net profit for the first quarter of 2018, the same month it closed a $300-400 million Series B funding round which inched its valuation upward to $12 billion.

Meanwhile, another Chinese crypto mining giant, Canaan Creative, is planning to launch its own IPO — also on the Hong Kong Stock Exchange.

Just yesterday, Bitmain revealed it will construct a $500 million blockchain data center and mining facility in Texas as part of its expansion into the U.S. market, hoping to initiate the center’s operations by early 2019.