Cryptocurrency mining, where banks of specialized computers rush to solve complex algorithms and build data blocks of transaction activity on the blockchain to earn cryptocurrency, is energy intensive, to say the least. From the outset, China kept a stranglehold on the market owing to abundant and cheap energy, including in the coal plant hubs of inner Mongolia and Xinjiang, resulting in more than half of the world’s mining activity occurring in the country. However, Beijing is facing pressure to control carbon emissions, and it is pointing its finger directly at cryptomining for its failure to meet targets. To that end, Chinese regulators have taken unprecedented action in shutting down crypto miners, shining a spotlight on cleaner energy solutions, like those offered by ISW Holdings Inc. (OTCPK: ISWH) (Profile), which just got a head start in a race for power in the United States. The Chinese shutdown also means that all those coins that would have been mined by Chinese firms are up for grabs, which is good news for ISWH and crypto miners such as Marathon Digital Holdings Inc. (NASDAQ: MARA), CleanSpark Inc. (NASDAQ: CLSK), Riot Blockchain Inc (NASDAQ: RIOT) and Bitfarms Ltd. (NASDAQ: BITF)
- ISWH formed a JV with Bit5ive, North America’s largest provider of collective management services and official distribution partner of industry juggernaut Bitmain.
- ISWH expanded into Georgia with land lease development agreement that includes first-phase, seven-acre property tailored for cryptocurrency mining operations.
- Phase 1 includes 20 megawatts deployed across 20 of latest-generation, 1-MW POD5 units expected to initially generate $10 million in annual revenue.
- The complete project is targeting 100 MW that will generate in excess of $100 million per annum.
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North America Will Dominate Cryptomining Market
With Bitcoin prices exploding from around $157 in 2015 to a high of almost $65,000 this year, crypto mining competition has become intense, as evidenced by the explosion of hashrate, mining nomenclature for aggregate Bitcoin computing power worldwide. The forced mining exodus in China resulted in hashrate plunging to a one-year low, as Chinese companies packed up their machines to head for different countries.
Lower hashrate, effectively less competition, equates to higher revenue and profits for miners. Ultimately, the hashrate will continue to eke back upward as, much like the digital ledger tracking Bitcoin transactions, the marketplace becomes more decentralized. Estimates are that Beijing’s crackdown will slash the country’s mining capacity by 90% with North America expected to become the dominant crypto mining market.
ISW Holdings Inc. (OTC: ISWH) is a diversified portfolio company specialized in strategic brand development, early-growth facilitation and brand identity. The Nevada-based company has a healthcare division focused on telehealth and a partnership with Bengala Technologies for innovations in the supply chain management space,. In addition, last year ISWH teamed up with Bit5ive LLC on a mission to mine cryptocurrency with zero carbon footprint. With consideration for the significant shift in mining activity that is underway, the joint venture between ISWH and Bit5ive couldn’t have been timed better.
Bit5ive, North America’s largest provider of collective management services and mining equipment, is an official distribution partner of Bitmain, the world’s top provider of cryptocurrency mining equipment. Further, Bit5ive produces POD5 mining centers and Power Skid 2.5, which together represent the most efficient cryptocurrency mining infrastructure solution available on the market today.
$5.8 Million in Revenue
The JV with Bit5ive didn’t take long to produce tangible results. Forged in May 2020, the partnership produced ISWH’s first POD5 by December. The POD5 features a fleet of Bitmain Antminer s17s, recognized as some of the more powerful cryptomining machines today, although they’re not without some technical challenges, according to Bit5ive founder Robert Collazo. Currently, hashing is ready to begin any day.
In May, Alonzo Pierce, president and chair of ISW Holdings, commented that internal analysis showed that the company can turn a profit at the Pennsylvania facility with Bitcoin pricing “above the low $20k’s.” Even with the recent correction as market participants fret over Beijing’s negativity towards crypto, Bitcoin is still more than $32,000 per coin.
The hashrate at the project has been increased to 54,000 Th/s (terahashes per second). The POD5 is expected to generate more than $500,000 per month in revenue, or approximately $5.8 million annually. As hashrate is maximized, Pierce forecasts a reduction in proportional direct costs associated with mining operations, spearheaded by the expertise of the Bit5ive team to make optimization tweaks.
Ramp to $100 Million in Revenue
This month, ISWH expanded into Georgia with the finalization of a land lease development agreement. The agreement grants ISWH full use of a first-phase, seven-acre parcel of property tailored for cryptocurrency mining operations, complete with access to energy resources capable of powering over 100 megawatts (MW) of mining capacity. Phase 1 will consist of approximately 20 MW of power deployed across 20 of the latest-generation 1-MW POD5 units expected to initially generate $10 million in annual revenue.
“This agreement puts us in position to scale up into a top-five global cryptocurrency mining position by volume,” said Pierce. Regarding companies emigrating from China, Pierce notes that ISWH is already taking calls from companies looking for a scalable new home. He added that the goal is to execute on a strategy to deploy 100 MW that will generate $100+ million per annum.
POD5s, Pools and Plans
Visually, POD5s are similar to a high-tech shipping container. A closer look shows they are cutting-edge technology systems including racks of customized Bitmain computers utilizing renewable energy resources built on high-resistance steel. The result are units that maintain a favorable year-round climate with efficient electricity, making it a suitable structure for harsh environments at a much lower cost and faster build out.
The first generation POD was developed in 2017, while gen 3 was produced in 2020. With its new larger facility now operational, Bit5ive has a target of adding 100 new POD5s to its portfolio by the end of the year.
Going forward, the partners intend to join a mining pool, a group of miners that share processing power over a network to maximize profits. Bit5ive obviously has a close relationship with Bitmain, so its Antpool is a possibility, but there are many to choose from that have potential to benefit from the JV’s assets. In a Waypoint podcast, Bit5ive owner Collazo opined that there is no longer value in tackling mining individually because of the poor risk/reward dynamics. “We will definitely be using a pool. There is no doubt about that,” he said.
Grocers Aligned to Eliminate Food Waste
Still in its nascency, cryptocurrencies can be quite fickle, as with almost any emerging market. The news of China’s crackdown was inevitable, as Beijing never really got behind the industry. As it happens, it catalyzed a pullback in Bitcoin and altcoins (any crypto not named Bitcoin), which is a normal part of a healthy market.
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In the absence of intermediaries, DEXs take on a non-custodial framework. This means that you retain custody of your cryptocurrency and are responsible for managing your wallets and private keys. Holding your private keys is considered a boon to users who want to maintain complete control of their assets. However, this comes with the risk that your keys could get lost, stolen, or destroyed; or in the unlikely possibility that you become incapacitated or pass away suddenly, if no one knows your password, your keys can’t be accessed. We will be offering the freedom of choice on how you wish to manage your money, The lack of an intermediary also means that most DEXs have limited counterparty risk and are not required to follow Know-Your-Customer (KYC) or Anti-Money-Laundering (AML) regulatory standards, this is the regulatory danger but we have preplanned, take a look at our Six Suite of products, Smart Blockchain based KYC and AML, a paradigm shift in the industry.
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Marathon Digital Holdings Inc. (NASDAQ: MARA), one of the largest enterprise Bitcoin self-mining companies in North America, will be looking to guzzle up some of the coins available from shuttered Chinese miners. The company has already been on a roll and ratcheting-up capacity. As of July 1, Bitmain delivered about 18,702 S19 Pro ASIC miners to Marathon’s facility in Hadin, MT. The company’s active fleet is nearly 19,400 miners that produced 265.6 new minted bitcoins during June, increasing total bitcoin holdings to approximately 5,784.
CleanSpark Inc. (NASDAQ: CLSK) is a diversified company with a suite of software solutions for microgrid energy modeling, energy market communications and energy management solutions, as well as being an environmentally conscious Bitcoin miner. The sources of power for the company’s mining facility are comprised of nuclear power, hydroelectric power and solar, resulting in 95% of the electricity utilized for mining to qualify as carbon free, which it is working to boost to 98%. In April, CleanSpark disclosed agreements to purchase 22,680 Bitmain S19j Pro and S19 miners in a bid to increase its total hashrate capacity to more than 1.1 EH/s (exahashes per second) by summer.
Riot Blockchain Inc (NASDAQ: RIOT), which focuses on mining Bitcoin and hosting Bitcoin mining equipment for clients at its operations in Texas and upstate New York, recently completed its $80-million acquisition of Whinstone US from Germany-listed Northern Data. Riot plans to immediately commence further development of additional facilities at Whinstone’s Texas facility in order to bring the property from 300 MW currently to capacity of 750 MW. The operations will add to Riot’s Bitcoin haul that totaled 227 in May and 924 for the year through May.
Bitfarms Ltd. (NASDAQ: BITF), a green cryptocurrency miner with five industrial-scale facilities located in Québec, is the newest NASDAQ-listed crypto play, joining the exchange on June 21, 2021. Since starting its Bitcoin Inventory Pilot Program in early January 2021, Bitfarms has been adding almost all newly mined Bitcoins to its balance sheet to the tune of 1,114 mined Bitcoin through June 9. Since its founding in 2017, Bitfarms has mined over 11,300 Bitcoin with 100% renewable hydropower.
As it happens, the news from China shocked the market, but it didn’t change the trajectory for digital currencies in the grand scheme of things. No one in the market seems rattled about it and, fact is, it has afforded a rare opportunity for expeditious growth for companies big and small as outsiders matriculate to the U.S. and Canada.