10.04.2024

Experts looked at the impact of Wall Street finance on bitcoin mining

Institutional funding of publicly traded companies has disadvantaged individual and small miners and may have long-term implications for network dynamics. This is the conclusion reached by Bitfinex.

The analysts timed their study to coincide with the upcoming halving in April.

The report reveals changes in the cryptocurrency mining ecosystem over the past decade.

According to experts, the increased role of listed digital gold mining companies marks a shift away from the decentralized vision of individual participants contributing to the security of the network.

“Corporates are solely focused on shareholder returns, operating at a very different scale and with clear priorities compared to their smaller competitors,” the study said.

Analysts stressed that such organizations have financial performance placed above the altruistic ideals of bitcoin creators. Strategic decisions are made in the context of the need to maximize profits and manage investor expectations.

Public companies do not pursue other community ideals like network security, peer-to-peer access and resistance to censorship.

The current situation both offers opportunities and challenges the underlying principles of the digital gold blockchain, the analysts pointed out.

Experts noted that the influx of capital and the “professionalization” of mining operations are leading to an increase in hash rate, thereby improving the overall security and stability of the network.

At the same time, concerns about centralization and the influence of corporate interests are growing. Considering that the first cryptocurrency network emerged as open, borderless and resistant to control by individual organizations.

“As these companies grow and strengthen their position, the community has been careful to ensure that the decentralized spirit of the network and Satoshi [Nakamoto]’s game theory principles remain intact,” the experts explained.

Wall Street has changed the rules of the game

The report also states that Wall Street investor funding in corporate mining has fundamentally changed the incentive structure of the network.

Resource inequality is setting the stage for corporations to scale operations, secure more favorable power contracts, and invest in new technologies.

As a result, large players are increasing their efficiency and profitability on a scale unattainable by the average individual miner or large independent competitor.

Analysts have questioned whether a more centralized landscape could threaten the “decentralized spirit of bitcoin.” The latter could affect network security and the distribution of mining rewards.

Survival of the fittest

Questions about the future of independents, enthusiasts, and the geographic distribution of hashrate are in the spotlight.

To the first, the experts suggested innovation and collaboration to ensure viability. They noted mining pools, which offer the opportunity for small players to pool computing power for shared rewards to remain competitive.

The sustainability of solo mining can be supported by continued innovation in technology, including the development of more efficient hardware, the use of renewable energy.

Analysts cited the geographic diversification of mining the first cryptocurrency as critical to keeping the network decentralized. Emerging markets with access to renewable or unused energy resources offer a fertile ground for mining digital gold.

Recall that Galaxy Digital experts estimate that approximately 15-20% of the total computational capacity of the bitcoin network will be unprofitable after halving.

Experts interviewed by Bloomberg suggested that obsolete devices from the United States will be sold for relocation to regions with cheaper energy tariffs like Africa.

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Коля Мельниченко

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