Hydrogen (OP)
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October 19, 2019, 10:03:40 AM |
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When it comes to producing Bitcoin, China is the pre-eminent power in the world. The People's Republic boasts the largest mining companies, and dominates the manufacture of chips and other equipment used to mine Bitcoin. A U.S. startup wants to change all that with a bold plan to make Texas the global hub of Bitcoin mining. On Tuesday, San Francisco-based Layer1 announced it has raised $50 million from billionaire Peter Thiel and others to move forward with its plan, which includes running its own power sub-station and purchasing solar and wind energy produced on the plains of West Texas.
According to co-founder Alex Liegl, Layer1's facility will consist of dozens of acres that lie 150 miles west of Midland, Texas—"literally in the middle of nowhere"—and will rely on a proprietary new technology for cooling the chips used to mine Bitcoin.
Bitcoin mining, which consumes large amounts of electricity, typically takes place in colder areas where it is easier to prevent equipment from overheating. Layer1, however, believes its cooling technology will make Texas a viable location despite the heat. The state also offers additional benefits in the form of light regulation and cheap power.One Bitcoin is currently worth around $8,300—well off its all time high of nearly $20,000 in late 2017 but still much higher than 2016 when it traded as low as $300. Under Bitcoin's mining system, miners compete to win an award distributed every ten minutes or so. Currently, the reward is 12.5 Bitcoins—a figure that will halve to 6.25 next May. Liegl says Layer1 aspires to be the biggest Bitcoin miner in the world by controlling all aspects of the process—from chip manufacturing to electricity production to cooling. In the longer term, the company plans to use its mining facilities as a base layer for a larger cryptocurrency enterprise that will include financial services.Layer1 launched in late 2018, with Liegl then describing it as an "activist fund for cryptocurrencies" that would invest in protocols, including a privacy focused project called Grin. At the time, the startup did not disclose mining aspirations, and raised a modest $2.1 million from Thiel, Digital Currency Group and the late investor Jeffrey Tarrant. "From an ideological perspective, for Bitcoin to grow into its multi-trillion potential, it needs a U.S. company to lead," says Liegl. "This ideology resonates with Peter [Thiel] and our other investors." Despite Layer1's large ambitions, its backers—which also include Shasta Ventures and undisclosed wealthy cryptocurrency owners—are keeping a decidedly low-profile for the new investment, which gives Layer1 a valuation of $200 million. Thiel and other investors declined to be interviewed for this story.Crypto mining in recent years has been a ferociously competitive business, but Layer 1 believes changes in the industry have provided an opening to wrest market power from China. A new Bitcoin mining strategy In the early years of Bitcoin, from 2009 to roughly 2013, it was viable to mine the cryptocurrency by using a home laptop, like Liegl did when he got his start mining Bitcoin in his Stanford University dorm room. The mining process involves solving random math problems that determine who will build the next block on Bitcoin's blockchain—a tamper-proof ledger of transactions. The first to solve the math problem also receives a reward in the form of Bitcoins. As the cryptocurrency caught on and prices soared, however, companies began designing special computers optimized to mine Bitcoin. This in turn led miners to join crypto mining pools—combining their computing power in order to share the proceeds whenever a member receives a Bitcoin reward. China has dominated the Bitcoin mining industry—estimates say it accounts for around 60% of production—in large part because its government has provided miners with cheap access to electricity. The leading company has been Beijing-based Bitmain, which runs two massive mining pools and is also the leading seller of the specialized chips now needed to mine Bitcoin.
But Bitmain has stumbled in recent months. While the company's 33-year-old CEO boasted in mid-2018 of grand plans to use artificial intelligence to further dominate the mining world, Bitmain has since suffered large losses and had to lay off half of its staff of 3,000.Bitmain's troubles weren't the only factor revealing an opening in Bitcoin mining for Layer1. Liegl says the dynamic of mining has shifted. He thinks buying the latest custom chips previously gave miners an edge, but now the tech has become commoditized. "From 2012-2019, it was mining 1.0 and a function of (capital expenditure) and who can get the newest chip first," Liegl says. "Now, we're in 2.0, where (operating expenses) matter most." Under this thesis, Layer1 believes its plans to develop "full-stack" operations in West Texas will let it capture market share—in part because it won't be vulnerable to third party suppliers raising prices when the price of Bitcoin goes up. An industry in flux In moving into West Texas, Layer1 may have to tread cautiously given that the region has been burned by the cryptocurrency industry in the past. In July, Wired magazine ran a feature article describing how Bitmain promised the town of Rockland, Texas hundreds of good jobs operating mining pools, but then abruptly pulled out, despite a concerted good-will campaign by local officials. Liegl, who says his colleagues at Layer1 include veterans of Apple, Google, and Goldman Sachs, plans to proceed much differently. He says the company will be respectful of government officials, and local sensibilities. If Layer1 can successfully become a major force in the mining world, the company's presence could shake up the geo-politics of Bitcoin. In recent years, there have been fears that China's dominance could lead miners in that country to collude in order to manipulate records on the blockchain that records all Bitcoin transactions. If American companies can make major inroads into mining, Liegl says, Bitcoin will become more decentralized—a key tenet for the cryptocurrency's supporters. Layer1 isn't the only North American company to plan a big move into crypto mining. Canada-based Blockstream, a consultancy with ties to many Bitcoin insiders, revealed it is building massive data centers for Bitcoin mining in the province of Quebec and in Adel, Georgia.
"There's definitely an opportunity to take away market share from some of the other firms," says Samson Mow, Blockstream's chief strategy officer. "(Specialized chips) have started to reach their limits in terms of efficiency, so the playing field will continue to level off."https://fortune.com/2019/10/15/what-is-bitcoin-mining-layer1-peter-thiel-crypto-investment/.... This details start ups in america and canada launching initiatives to reduce china's global mining dominance. The texas start up, aspiring to be the largest in the world, is funded $50 million by Peter Thiel with $150 additional million from shasta ventures and bitcoin whales who would prefer to remain anonymous. They plan to control every aspect of their mining operation ranging from power generation, to chip fabrication and anounced proprietary cooling technology they believe will give them advantages over other miners. Canadian based blockstream is mentioned in the last 2 paragraphs of the article. They're said to be constructing massive data centers in quebec and georgia devoted towards bitcoin mining. I guess we'll see more information for that revealed later. Both mining operations seem to believe ASICs and semiconductor chips have become commoditized enough to level the playing field between mining competitors. Whether via limits in fabrication process of technology they seem to think most of the advantages inherent in that area have been exhausted. Interesting take.
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DiamondCardz
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October 19, 2019, 10:19:34 AM |
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I was hoping to see something in that article talking about them using solely sustainable energy. I see that they're using wind and solar power, would have been nice to see a commitment to them using a % percentage minimum of renewables. I think it's a pretty big problem how much fossil fuels a lot of these large mining operations use up, if we want to stop Bitcoin from having insane negative externalizes we really need to get on top of that (and to be fair, even in China where regulation is quite poor, a good proportion of energy used by mining ops there is renewable).
Good to see that the hashing power of the network will be coming less centralized in China, though.
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BA Computer Science, University of Oxford Dissertation was about threat modelling on distributed ledgers.
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Hydrogen (OP)
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October 19, 2019, 10:34:43 AM |
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I was hoping to see something in that article talking about them using solely sustainable energy. I see that they're using wind and solar power, would have been nice to see a commitment to them using a % percentage minimum of renewables. I think it's a pretty big problem how much fossil fuels a lot of these large mining operations use up, if we want to stop Bitcoin from having insane negative externalizes we really need to get on top of that (and to be fair, even in China where regulation is quite poor, a good proportion of energy used by mining ops there is renewable). AFAIK hydro electric power being cheaper than coal, oil, natural gas and assorted fossil fuel based options make it the most popular option. Many mining operations in china are located near dams/rivers. Cost effectiveness makes a surplus of energy generated through hydroelectric plants the most attractive option, making most mining ops relatively clean, despite lack of regulation or environmental awareness. There are bitcoin miners who utilize coal but it is not the #1 preferred energy source of choice due to it being more expensive and dirty than power sources with smaller carbon footprints. In cases where coal is utilized its usually due to state and regulating bodies heavily subsidizing it, or offering tax breaks in exchange for creating jobs and stimulating local economies. Bitcoin mining being very mobile and limited only by need for internet connection makes it easy for miners to setup operations in areas with cheap, clean, untapped surpluses of energy. There are normally no new power plants being constructed to power bitcoin miners. They're typically harnessing power from existing plants that is already being generated which tends to negate negative environmental effects.
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Wexnident
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October 19, 2019, 11:36:48 AM |
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I just hope they are able to reduce the dominance of china in the mining industry of Bitcoin. And I'd take their perspective on the chups to be on s bottleneck to be true. The market is pretty much saturated already since most big companies have mining powers close to each other and even if there are differences with the quality, they're almost close to negligble. Quality is done, it is time for quantity to lead the way
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▀▀▀▀▀▀▀██████▄▄ ████████████████ ▀▀▀▀█████▀▀▀█████ ████████▌███▐████ ▄▄▄▄█████▄▄▄█████ ████████████████ ▄▄▄▄▄▄▄██████▀▀ | LLBIT | | | 4,000+ GAMES███████████████████ ██████████▀▄▀▀▀████ ████████▀▄▀██░░░███ ██████▀▄███▄▀█▄▄▄██ ███▀▀▀▀▀▀█▀▀▀▀▀▀███ ██░░░░░░░░█░░░░░░██ ██▄░░░░░░░█░░░░░▄██ ███▄░░░░▄█▄▄▄▄▄████ ▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀ | █████████ ▀████████ ░░▀██████ ░░░░▀████ ░░░░░░███ ▄░░░░░███ ▀█▄▄▄████ ░░▀▀█████ ▀▀▀▀▀▀▀▀▀ | █████████ ░░░▀▀████ ██▄▄▀░███ █░░█▄░░██ ░████▀▀██ █░░█▀░░██ ██▀▀▄░███ ░░░▄▄████ ▀▀▀▀▀▀▀▀▀ |
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el kaka22
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October 19, 2019, 12:20:32 PM |
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200 million dollars used in what way is the most important part. If you include the energy required and the solar panels and wind turbines and everything that is not bitcoin related to make it feasible and then spend a lot less on machines it would be different, sure it would still be a HUGE mining operation, that is not even a question but with money like this they could have literally created and manufactured their own ASIC machines if they wanted to and that would have resulted with not a bad business plan neither.
In the end there will be one rival for the Chinese mining operations if they can achieve it and the more decentralized we get on mining the better, I hope there will be a lot more people getting into mining because we need to stop Chinese monopoly on btc mining.
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NathanJB
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October 19, 2019, 01:27:47 PM |
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200 million dollars used in what way is the most important part. If you include the energy required and the solar panels and wind turbines and everything that is not bitcoin related to make it feasible and then spend a lot less on machines it would be different, sure it would still be a HUGE mining operation, that is not even a question but with money like this they could have literally created and manufactured their own ASIC machines if they wanted to and that would have resulted with not a bad business plan neither.
In the end there will be one rival for the Chinese mining operations if they can achieve it and the more decentralized we get on mining the better, I hope there will be a lot more people getting into mining because we need to stop Chinese monopoly on btc mining.
It is really time to shut down on china. This country is unlike other open-minded and developed countries. This communits country likes to monopolize and control everything and the very moment they feel that they are already superior than others, they would then use it to bully them and let them follow its will. Mining should be widespread so that the operation of the network is not at the mercy of one nation or company alone. This is one way of reducing the risk.
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CryptoBry
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October 19, 2019, 01:39:43 PM |
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I have a good level of interest with this development because I am concerned that China is the dominant single leader when it comes to Bitcoin mining (ironically its government does not like Bitcoin, in the first place) which is not good if we have to talk about decentralization of power and influence. Good to see that Layer1 is coming up with this ambitious and grand plan of becoming a big player in the Bitcoin mining industry with the hope of reducing the leadership of China.
At the same time, its plan to be using renewable and green power is quite admirable. In case they will open up the project for crowdfunding, I would certainly be supporting this one. However, the bottom line here, just like any other business, is profitability and sustainability. Let's see how they can make it a very competitive platform that can hopefully rival that of China.
Go go go Layer1...we are all behind you all the way!
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Vishnu.Reang
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October 19, 2019, 01:59:18 PM |
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I don't know how this is going to work. For starters, the price of mining rigs in Texas is at least 50% higher than those in China. And more worryingly, the average electricity price is around $0.09 per KWh, which is almost 200% higher than what they have in China. I don't understand how they can compete against the Chinese miners under current circumstances.
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dothebeats
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October 19, 2019, 04:20:27 PM |
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When you have the likes of Peter Thiel on-bord a cryptocurrency startup, at first it would feel weird knowing that the guy co-founded PayPal, a service which bitcoin dared to combat for the last few years ![Cheesy](https://bitcointalk.org/Smileys/default/cheesy.gif) Texas’ conditions for a mining farm seemed to be not that ideal, although if Layer1 managed to create an excellent design for their farms then they’re in to fight head-to-head against China’s largest farms. Similar to like Avalon did before the Chinese took over the scene, I just wish that Layer1 would come up with their own line of miners so as to better the competition and improve the tech yet again for everyone.
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Mometaskers
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October 19, 2019, 05:56:56 PM |
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So, this is what Thiel was busy with after he left California? I don't know how this is going to work. For starters, the price of mining rigs in Texas is at least 50% higher than those in China. And more worryingly, the average electricity price is around $0.09 per KWh, which is almost 200% higher than what they have in China. I don't understand how they can compete against the Chinese miners under current circumstances.
Maybe it's more about preparing for the time that the Chinese government completely stops the operations of mines? The government has mentioned last April iird that they want to phase out mining operations. They haven't given any deadlines and we don't know if they are bluffing but if they do push through, it will be chaotic if it was not done gradually. Maybe Thiel expect the project in Texas to be operational by then?
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Pearls Before Swine
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October 19, 2019, 06:51:42 PM |
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I think it's a pretty big problem how much fossil fuels a lot of these large mining operations use up, if we want to stop Bitcoin from having insane negative externalizes we really need to get on top of that (and to be fair, even in China where regulation is quite poor, a good proportion of energy used by mining ops there is renewable).
Yes, but this *is* Texas we're talking about here and if you aren't from the states, then you should realize that many millionaires were made in that state by the oil drilling business. I'm not disagreeing with you about the importance of using clean energy, just pointing out a sliver of history. Good to see that the hashing power of the network will be coming less centralized in China, though.
Agree fully. I have never mined bitcoin and don't pay much attention to which country has what percentage of hashing power, but I am well aware that China is huge as regards mining. Being from the states it's nice to see an operation like this being started. I'm also not surprised that Peter Thiel is doing his thing as a venture capitalist, and his involvement lends a lot of credibility to the project. He is not a man to throw money at something he thinks is going to lose. I don't know how this is going to work. For starters, the price of mining rigs in Texas is at least 50% higher than those in China. And more worryingly, the average electricity price is around $0.09 per KWh, which is almost 200% higher than what they have in China. I don't understand how they can compete against the Chinese miners under current circumstances.
They'll figure it out. I'm almost certain they've crunched the numbers and figured out how profitable it is. All that math is done up front before any announcement is made.
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Willitivity
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October 19, 2019, 09:15:02 PM |
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This is actually a good development and a win win for crypto in these trying times. But seriously, mining us kinda cheaper in China than Texas with regards to cost of power. Unless they plan sourcing theur own power via sustainable energy, but that would also cust alot more to set-up things. Hopefully, they have a clear pathway for this, I would love to see this project succeed.
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AmoreJaz
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October 19, 2019, 09:25:56 PM |
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This is actually a good development and a win win for crypto in these trying times. But seriously, mining us kinda cheaper in China than Texas with regards to cost of power. Unless they plan sourcing theur own power via sustainable energy, but that would also cust alot more to set-up things. Hopefully, they have a clear pathway for this, I would love to see this project succeed.
renewable resources are really expensive at the start but few months of operations and you will get the roi, and afterwards, its free! i hope they are considering renewable energy to integrate in their operations. they have the money to spend anyway. and they are also helping the environment for such initiatives. time to transfer the mining crown to others!
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exstasie
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October 19, 2019, 09:38:33 PM |
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On Tuesday, San Francisco-based Layer1 announced it has raised $50 million from billionaire Peter Thiel and others to move forward with its plan, which includes running its own power sub-station and purchasing solar and wind energy produced on the plains of West Texas. Liegl says Layer1 aspires to be the biggest Bitcoin miner in the world by controlling all aspects of the process—from chip manufacturing to electricity production to cooling. In the longer term, the company plans to use its mining facilities as a base layer for a larger cryptocurrency enterprise that will include financial services. I'm always skeptical when I hear about mining infrastructure visions like this, especially with regard to stateside ASIC manufacturing. However, Peter Thiel is a shrewd investor, which bodes well, and controlling the process from top to bottom should obviously yield much better margins than current business models. I'm interested to see how this pans out.
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Sithara007
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October 20, 2019, 04:19:51 AM |
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So, this is what Thiel was busy with after he left California? I don't know how this is going to work. For starters, the price of mining rigs in Texas is at least 50% higher than those in China. And more worryingly, the average electricity price is around $0.09 per KWh, which is almost 200% higher than what they have in China. I don't understand how they can compete against the Chinese miners under current circumstances.
Maybe it's more about preparing for the time that the Chinese government completely stops the operations of mines? The government has mentioned last April iird that they want to phase out mining operations. They haven't given any deadlines and we don't know if they are bluffing but if they do push through, it will be chaotic if it was not done gradually. Maybe Thiel expect the project in Texas to be operational by then? Just noticed that Peter Thiel is involved. It's not just surprising but encouraging as well for the Bitcoin users. That said, we still haven't heard much about the proposed closure of the mining farms in China. As far as I know, all the giant mining farms are still operating without any issue in that country and as per the latest data, more than 80% of the hashpower is still generated in mainland China. And given the size of the mining farms there, I really doubt whether this proposed mining farm in Texas can offer any sort of competition. Perhaps Thiel is expecting the price of Bitcoin to go up drastically after the block reward halving (which is less than 12 months away).
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EdvinZ
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October 20, 2019, 05:40:37 AM |
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North America is a good place to install wind power generators. With renewable electricity, mining can be very profitable. I think these guys will eventually become world leaders in mining, because in China with this type of activity constantly happen some incidents. It feels like the Chinese government wants to completely ban mining in their country.
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Google+
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October 20, 2019, 05:50:09 AM |
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I think the Texas state will not easily defeat the mining industry of China because China has become the largest mining company, and you should know that currently mining companies are not easy because the total supply of bitcoin is already very limited it will make it difficult to get bitcoin, mining it will be increasingly difficult to do.
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Kyraishi
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October 20, 2019, 06:28:53 AM |
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I was hoping to see something in that article talking about them using solely sustainable energy. I see that they're using wind and solar power, would have been nice to see a commitment to them using a % percentage minimum of renewables. I think it's a pretty big problem how much fossil fuels a lot of these large mining operations use up, if we want to stop Bitcoin from having insane negative externalizes we really need to get on top of that (and to be fair, even in China where regulation is quite poor, a good proportion of energy used by mining ops there is renewable).
Good to see that the hashing power of the network will be coming less centralized in China, though.
It's a huge environmental issue, fossil fuels are slowly killing our planet and a lot of the problem comes down to companies using only fossil fuels to power their companies. It's going to be pretty hard for mining operations to power themselves of solely renewable energy sources, but it's good to see them at least try to do something about it - better then nothing I guess. Texas has no competition against China to be honest, they are already way too big and rich with their operations and the US isn't just powerful enough.
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Mometaskers
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October 20, 2019, 07:50:22 PM |
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So, this is what Thiel was busy with after he left California? I don't know how this is going to work. For starters, the price of mining rigs in Texas is at least 50% higher than those in China. And more worryingly, the average electricity price is around $0.09 per KWh, which is almost 200% higher than what they have in China. I don't understand how they can compete against the Chinese miners under current circumstances.
Maybe it's more about preparing for the time that the Chinese government completely stops the operations of mines? The government has mentioned last April iird that they want to phase out mining operations. They haven't given any deadlines and we don't know if they are bluffing but if they do push through, it will be chaotic if it was not done gradually. Maybe Thiel expect the project in Texas to be operational by then? Just noticed that Peter Thiel is involved. It's not just surprising but encouraging as well for the Bitcoin users. That said, we still haven't heard much about the proposed closure of the mining farms in China. As far as I know, all the giant mining farms are still operating without any issue in that country and as per the latest data, more than 80% of the hashpower is still generated in mainland China. And given the size of the mining farms there, I really doubt whether this proposed mining farm in Texas can offer any sort of competition. Perhaps Thiel is expecting the price of Bitcoin to go up drastically after the block reward halving (which is less than 12 months away). That's another possibility. Businesses are about profits anyway. Even if the operation cost of the Texas mine is larger than that in China, if they can recoup all that should the price hike, then it's worth the effort.
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stompix
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October 22, 2019, 08:44:49 AM |
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I don't know how this is going to work. For starters, the price of mining rigs in Texas is at least 50% higher than those in China.
Read the article a little more carefully: Liegl says Layer1 aspires to be the biggest Bitcoin miner in the world by controlling all aspects of the process—from chip manufacturing to electricity production to cooling. In the longer term, the company plans to use its mining facilities as a base layer for a larger cryptocurrency enterprise that will include financial services. And more worryingly, the average electricity price is around $0.09 per KWh, which is almost 200% higher than what they have in China. I don't understand how they can compete against the Chinese miners under current circumstances.
Average means nothing. The average price per Kwh in New York (state) is 18 cents (residential) but just 6 cents industrial: https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_5_6_aDon't compare averages, nobody is mining with the average, be it by country, state or county because China has become the largest mining company
Please bump this topic when it will become a country again. Back on topic: In the longer term, the company plans to use its mining facilities as a base layer for a larger cryptocurrency enterprise that will include financial services I really don't get this and all my instincts are pointing to something really really bad about their plans.
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