Thanks to everyone who has shown tremendous support with the newsletter. Means alot that you all didn’t find it complete trash. Also, thanks to to folks who pointed out typos and logical flaws in some of my analysis. Keep that kind of stuff coming and I will continue to do my best to edit things. I have been in the space a long time but am still learning new things literally every week! So thanks for helping me learn along the way too!
That being said, let’s just get right into the March edition. Topics I want to discuss are
Cloud Mining/Colocation
Solo Mining Insanity
Cloud Mining/Hosting Overview
While I won’t go into recommendations on who you should or should not go with, I will try to give you background on where we came from and where we are today.
A Brief History of Cloud Mining
Around the same time ASICs started coming out, we started seeing industrious entrepreneurs trying to pass forward their upside in bitcoin price swings in exchange for pulling their revenues to the present. i.e. they have the ability to buy miners in bulk pricing, and have cheap power, the make a commoditized product called Cloud Mining.
Basically a nice interface to turn key mining set up for a premium.
Large purveyors in this ecosystem that come to mind are Genesis Mining, now Genesis Digital Assets (not to be confused with Genesis Trading). Marco Streng, Marco Krohn and Jakov Dolic started that business model. In their case specifically, they had great facilities they had built in Iceland, and resold the hashrate.
Below is a quick video of one of their farms. I think this one specifically is for ETH but you get the point.
Other players in the space that come to mind were Nimbus Mining ran by a Greg Bachrach and BitDeer ran by Jihan Wu. All with very similar business models.
It’s interesting because alot of these companies were very legit. However, customers still would try to bring law suits etc. It is very much the case of the person who invests $5 causes millions in customer support and legal drama. Just the nature of the beast I guess.
Customers usually aren’t able to see the operation inside, for a multitude of reasons. So whenever something goes sideways, or the difficulty goes up, or the price slides, there was inevitably folks complaining. That nature doesn’t seem to have changed.
Current Providers
Some of the newer entrants into the space are the likes of Compass Mining and Blockware.
Blockware was started by Mason Jappa and my dear friend Matt deSouza (R.I.P.)
Matt was a titan of research and altruism. Truly a great loss to the community when he passed on. Mason now carries the torch of Blockware Solutions. He is also an advisor to RIOT. Mason in his own right is a legend.
Compass is ran by Whit Gibbs. The goofiest dude in bitcoin. LOL!
Whit used to run a podcast and a software product called HASHR8. Now he is full on into the mining industry hands on.
These two providers above have tweaked the original business model to something that is slightly better imho. You get on their platform, buy the machine, and they will source the collocation for you. Either at a site they own, or at one of their partner sites. Its great because a pleb miner can’t just call Core Scientific and get collocation space for 1-5 machines. So these providers will partner with large colo providers and buy large chunks of capacity from them.
It is a middle man play that is seemingly a win win.
However, due to supply chain constraints I am sure folks are mad when they purchase something that doesn’t come online for a few months. But that is just the nature of the beast. If it was easy, every one would be mining.
Solo Mining Insanity
Well, well, well. You lucky SOB finally cracked a block with one ASIC! Congrats you defeated all odds. Oh wait, and your friend did too, the next day after? Wow, that’s impre… And your other buddy did the week after? OK!? WTF IS GOING ON!
Welcome to BITCOIN BABY! Where the points are made up and the odds don’t matter.
As you might be aware about a month ago, there were a string of solo miners running incredibly small hashrates that were solo mining blocks via CK Pool. If you didn’t know, crawl out from under your rock and let the sun hit your face. You are starting to look a bit pale.
I wanted to talk a little bit about how and why and a bit of the backstory here. So I will start there with the backstory. Dr. Con Kolivas is a LEGEND not only in bitcoin, but also in the Linux development community. The guy has been doing kernel patches for two decades. Outside of the Linux community, CK is a titan of Bitcoin development as well. TLDR; if you are running an asic or GPUminer, you owe CK a massive thank you as he did most of the work on cgminer. If you want to nerd out harder, check out his github here. https://github.com/ckolivas
CK and another legend named kano have worked on solo projects in mining for a long time. Basically, in order to really solo mine a bitcoin block, there is alot of house keeping that has to be done. Running a reliable and very well peer’d full node, propagation, transaction validations, blah blah blah. What ck and kano did with ckpool is basically allow you to not do any of the heavy lifting, in exchange for rolling the dice. I personally have used ckpool in the past (last I remember was 2014 maybe 2015 when 2-3PH was A MASSIVE AMOUNT).
All that to say that solo mining is not just plug and play, but some industry guys made it possible to do it that way. With that being said, I can’t really calc the odds of all these solo blocks being mined back to back. But suffice to say its probably several orders of magnitude higher odds than hitting the lottery. 10x, maybe even 1000x more likely to hit the lottery than to have back to back solo mined blocks by folks running only a few machines. I have bored you enough with history and background now! But yes, it’s insane!