The Protocol: Bitcoin Mining Faces New Challenges as Power Costs Eat Profit

2 hours ago

Welcome to The Protocol, CoinDesk's play wrapper of the astir important stories successful cryptocurrency tech development. I’m Margaux Nijkerk, a newsman astatine CoinDesk.

In this issue:

Bitcoin Mining Faces 'Incredibly Difficult' Market arsenic Power Becomes the Real Currency
Bitcoin Liquid Staking Gains Momentum arsenic Lombard Launches BARD Token and Foundation
Optimism Taps Flashbots to Supercharge OP Stack Sequencing
Hemi Labs Raises $15M to Expand Bitcoin Programmability

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Network News

BITCOIN MINING PLAYERS FACE CHALLENGING MARKET: Bitcoin miners person agelong been defined by the boom-and-bust bushed of the four-year halving cycle. But the crippled has present changed, immoderate of the industry’s astir salient executives said astatine the SALT league successful Jackson Hole earlier this week. The emergence of exchange-traded funds, surging request for powerfulness and the imaginable of artificial quality (AI) reshaping infrastructure needs mean miners indispensable find ways to diversify oregon hazard being near behind. “We utilized to travel present and speech astir hash rate,” said Matt Schultz, CEO of Cleanspark. “Now we’re talking astir however to monetize megawatts.” For years, mining companies — whose gross derived chiefly from producing bitcoin — lived and died by the halving cycle. Every 4 years, rewards were slashed successful fractional and miners scrambled to chopped costs oregon standard up to survive. According to these executives, that bushed nary longer defines the business. “The four-year rhythm is efficaciously breached with the maturation of bitcoin arsenic a strategical asset, with the ETF and present the strategical treasury and whatnot,” Schultz said. “The adoption is driving demand. If you work thing astir the astir caller ETF, they've consumed infinitely much bitcoin than person been generated truthful acold this year.” Cleanspark, which present operates 800 megawatts of vigor infrastructure and has different 1.2 gigawatts successful development, has begun turning its attraction beyond proof-of-work. “Our velocity to marketplace with the energy has created opportunities specified that present we tin look astatine ways to monetize powerfulness beyond conscionable bitcoin mining,” helium said. “With 33 locations, we present person a large woody much flexibility than we ever did before.” Schultz is not unsocial successful calling the industry's displacement successful concern model. Patrick Fleury, CFO of Terawulf, echoed the sentiment and didn’t sugarcoat the nett compression the miners are feeling. “Bitcoin mining is an incredibly hard business,” helium said. He broke down the economics of bitcoin mining successful straightforward terms: with energy costing 5 cents per kilowatt hour, it presently costs astir $60,000 to excavation a azygous bitcoin. At a bitcoin terms of $115,000, that means fractional the gross is consumed by powerfulness alone. Once firm expenses and different operating costs are factored in, the margins tighten quickly. In his view, profitability successful mining hinges astir wholly connected securing ultra-low-cost power. — Helene Braun Read more.

BITCOIN LIQUID STAKING RISES: For astir of its history, bitcoin has been touted by its supporters arsenic integer gold: an plus to clasp alternatively than use. That passivity has near trillions of dollars’ worthy of BTC sitting idle successful wallets, disconnected from the output strategies and composability that specify decentralized concern (DeFi). The emergence of liquid staking tokens promises to alteration that, positioning bitcoin not lone arsenic a store of worth but arsenic a productive plus integrated into on-chain superior markets. Liquid staking allows users to connection their crypto to assistance unafraid a web and person successful instrumentality a liquid, tradable token that represents the staked assets and tin beryllium utilized crossed DeFi portion the archetypal tokens proceed earning staking rewards. Lombard Finance has emerged arsenic 1 of the salient projects successful bitcoin liquid staking. Its flagship product, LBTC, is simply a yield-bearing token backed 1:1 by BTC. When BTC is deposited into the Lombard protocol, the underlying coins are staked, chiefly via Babylon, a protocol enabling trustless, self-custodial bitcoin staking. Users person LBTC successful return, which tin beryllium deployed crossed DeFi ecosystems portion the archetypal bitcoin earns staking rewards. This dual functionality is key. Holders tin support vulnerability to bitcoin portion utilizing LBTC successful lending, borrowing and liquidity proviso crossed protocols specified arsenic Aave, Morpho, Pendle and Ether.fi. Designed for interoperability, LBTC moves crossed Ethereum, Base, BNB Chain and different networks, preventing liquidity fragmentation and ensuring bitcoin tin enactment successful a multi-chain DeFi environment. — Jamie Crawley Read more.

OPTIMISM AND FLASHBOTS TEAM UP: Optimism is teaming up with Flashbots to revamp however transactions are processed crossed its OP Stack ecosystem, aiming to marque immoderate of Ethereum’s astir fashionable layer-2 networks faster and much customizable. The concern centers connected sequencing, the behind-the-scenes process that determines however rapidly a transaction confirms, which trades are prioritized, and however overmuch users yet pay. Optimism says Flashbots’ infrastructure, which is already liable for building much than 90% of Ethereum’s blocks, volition present bring near-instant confirmations and user-friendly transaction ordering to each concatenation successful the alleged Superchain.This matters due to the fact that the OP Stack underpins much than 60% of each Ethereum layer-2 activity, the Optimism squad claims, including immoderate of the astir well-known layer-2 chains similar Base, Unichain, World Chain, Ink and Soneium. Until now, precocious sequencing features specified arsenic ultra-fast settlement, frontrunning extortion and customized compliance rules were disposable lone to the largest chains with resources to physique them in-house. With Flashbots connected board, those features volition beryllium disposable via tools for immoderate task gathering connected Optimism’s OP stack. — Margaux Nijkerk Read more.

HEMI LABS RAISES $15 MILLION: Hemi Labs, the Bitcoin programmability web founded by Jeff Garzik, raised $15 cardinal successful backing to accelerate improvement and grow its ecosystem. The circular included YZi Labs (formerly Binance Labs), Republic Digital, HyperChain Capital, Breyer Capital, Big Brain Holdings, Crypto.com and others, according to an emailed announcement.The institution said the funds volition enactment applications for borrowing, lending and trading connected Bitcoin portion further processing its Hemi Virtual Machine (hVM), a furniture that embeds a Bitcoin node wrong an Ethereum VM — the word for a decentralized strategy that tin execute astute contracts and process transactions connected Ethereum. — Jamie Crawley Read more.

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In Other News

Aave Labs introduced Horizon, a caller level dedicated for organization borrowers to entree stablecoins utilizing tokenized versions of real-world assets (RWAs) similar U.S. Treasuries arsenic collateral. At launch, institutions volition beryllium capable to get Circle's USDC, Ripple's RLUSD and Aave’s GHO against a acceptable of tokenized assets, including Superstate’s short-duration U.S. Treasury and crypto transportation funds, Circle’s output fund, and Centrifuge’s tokenized Janus Henderson products. The level aims to connection qualified investors short-term financing connected their RWA holdings and let them to deploy output strategies. — Kristzian Sandor Read more.
Google Cloud is moving guardant with plans to motorboat its ain layer-1 blockchain, positioning the web arsenic neutral infrastructure for planetary concern astatine a clip erstwhile fintech competitors are processing their ain distributed ledgers. In a LinkedIn post published Tuesday, Rich Widmann, Google’s caput of Web3 strategy, provided caller details connected the project, known arsenic the Google Cloud Universal Ledger (GCUL). He described the level arsenic a credibly neutral, high-performance blockchain designed for institutions, supporting Python-based astute contracts to marque it much accessible to developers and fiscal engineers. “Any fiscal instauration tin physique with GCUL,” Widmann said, arguing that portion companies similar Tether whitethorn beryllium improbable to follow Circle’s blockchain and outgo firms similar Adyen whitethorn hesitate to usage Stripe’s, Google’s neutral infrastructure removes those barriers. — Siamak Masnavi Read more.

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Regulatory and Policy

The crypto industry's Washington lobbyists are trying to gully a enactment successful the soil implicit the marketplace operation measure that's steaming done the U.S. Senate, saying they can't backmost a instrumentality that wouldn't afloat support bundle developers from being held liable for atrocious actors abusing their technology. The manufacture made its lawsuit to the Senate's Banking and Agriculture committees "with 1 voice," sending a missive Wednesday signed by Coinbase, Kraken, Ripple, a16z, Uniswap Labs and much than a 100 different crypto businesses and organizations, including astir each of the large U.S. lobbying groups. This unified effort comes the week earlier the Senate gets backmost to work, and is apt to rekindle afloat negotiations connected the connection of the authorities that represents the industry's apical U.S. goal. — Jesse Hamilton Read More.
The U.S. Commodity Futures Trading Commission is astir to driblet to a azygous commissioner erstwhile Democrat Kristin Johnson leaves the bureau adjacent week, and the lone different idiosyncratic waiting successful the wings to articulation the regulator is President Donald Trump's president nominee, Brian Quintenz. As of Sept. 3, the five-member committee volition driblet to one, due to the fact that that's erstwhile Johnson plans to exit. "In advancing an docket successful the sanction of growth, it is captious not to dismantle the foundational resilience that supports fiscal stableness and protects the broader economy," she said successful a farewell connection encouraging the bureau to instrumentality to the fundamentals arsenic caller technologies travel connected board. — Jesse Hamilton Read more.

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