Public mining companies increase 25% of BTC hashrate

What’s new? According to Hashrate Index analyst Jaran Mellerud, the share of public miners in the bitcoin hashrate increased by 295% to 58 EH/s over the year. During the same period, the performance of private miners increased by 58% to 177 EH/s. Public miners' hashrate first increased in January 2022, when mining company Core Scientific went public. Since then, the rate has gradually increased and now is 25%.

Hashrate Index research

Hashrate is the total computational power in the bitcoin network. The mining difficulty determines the amount of computing power it takes to find a new block in the blockchain. The parameter changes every 2016 blocks, or about once every two weeks. This ensures that the time it takes to find a block is around 10 minutes.

What else does the report say? In October 2021, the share of private miners in the BTC hashrate was 90%. During the bull market last year, some private miners were planning to go public. Most of those deals were postponed as the market began to decline. With the exception of Core Scientific's listing, the growth in the share of public miners in the BTC hashrate came at the expense of an organic increase in their capacity.

Core Scientific's listing led to a dramatic increase in the share of public miners in the bitcoin hashrate. As of January 2022, the company's figure was 6.6 EH/s, which has since grown to 13 EH/s — nearly 5% of the total BTC hashrate. That share makes Core Scientific the largest public miner. The company plans to increase capacity to 17 EH/s by the end of 2022.

Core Scientific is followed by Marathon Digital and Riot Blockchain, which also plan to expand capacity to 23 EH/s and 13,5 EH/s respectively by mid-2023. In addition, Marathon doubled its bitcoin mining in September, bringing the company's total value in BTC reserves to $206 million.

According to Mellerud, by 2023, the share of public miners in bitcoin hashrate could reach 40%. His prediction is based on large shipments of mining equipment. Some companies have tens of thousands of rigs in stock waiting to be connected, the analyst added.

At the same time, Mellerud noted that the growth in the share of public miners may slow down due to the financial problems of some companies. If those firms go bankrupt, their assets could be auctioned off to private miners with more profitable positions. Thus, in September, Arcane Research analysts noted that all cryptocurrency mining companies, with the exception of Argo Blockchain, continue to suffer losses due to the bear market.

In addition, most public miners operate in North America, which has been hit hard by rising energy prices. Some companies, such as Northern Data, operate in Europe, where price inflation has been most severe. In August, Norwegian miner Kryptovault announced the transfer of capacity beyond the Arctic Circle due to rising electricity prices. In July, the Swedish Ministry of Energy announced that miners would be provided with electricity on a residual basis.

In the long term, as competition in the industry grows, miners will have to look for cheap and unused power sources in remote parts of South America, Asia and Africa.

According to Mellerud, given that most publicly traded mining companies prefer to hold on to their territory in the US and Canada (Bitfarms is an exception), they are likely to miss out on some of the cheapest energy opportunities. Private miners are most likely to take advantage of them. Mellerud believes that in the long run, public miners will not control more than half of the network.

In September, digital infrastructure and cryptocurrency mining solutions provider Compute North filed for bankruptcy in the US Bankruptcy Court for the Southern District of Texas. The reasons for the decision were the growing pressure on the company due to the effects of crypto winter and the rising cost of energy.

To learn more about how bitcoin's rising hashrate is affecting miners, see this GetBlock Magazine's article.