Bitcoin broke through the USD$10,000 resistance point yesterday for the first time since August 2019, and while this prompted an almost automatic selloff that brought it back down, it speaks more to a period of consecutive growth for the cryptocurrency post-halving. If pundits are right then the post-halving era is likely to send BTC skyward within the next two years, but in the interim, it will mean companies involved in mining cryptocurrency will have some curious problems to solve regarding their continued profitability. One of those could be whether or not to shift to altcoin mining – like Ethereum.
Hive Blockchain Technologies (HIVE.V) knows all about that, and has been preparing for months.
Their latest developments include new agreements, effective as of June 1, 2020, for hosting and management of their new GPU-based high performance computing equipment in Iceland. They’re not using it to mine Bitcoin, though. You can’t mine bitcoin using GPU’s. Instead, this round of server farms, hosted by colocation services, are for Ethereum—the world’s number two cryptocurrency by market cap.
“Our assumption of direct control of our operations in Iceland, and these new hosting and management agreements, are expected to significantly lower our cost to mine Ethereum or other digital currencies, and improve mining performance from our GPUs, thereby increasing our gross mining margins in Iceland. Further, we now have full control of our operations and destiny globally. This is an important step in our approximately 18-month process to increase transparency, accountability and profitability across our mining operations,” said Frank Holmes, interim executive chairman of HIVE.
The upgrade in colocation facilities agreement they signed into is expected to cut their monthly facilities and operations costs in half when compared to their prior service provider agreement. It will also improve efficiency and output of their GPU operations.
To be sure, Ethereum isn’t Bitcoin.
It doesn’t have its cachet, nor its price, nor its function. It’s not meant to be traded or mined as a place to store value, which is what Bitcoin has turned into, but instead as a token required for entry into a functional, decentralized marketplace. It’s the world’s decentralized supercomputer where people can write out and execute smart contracts, and both run and do business. There’s nothing suggesting that Hive has considered the implications or potential use value of decentralized applications inherent in the Ethereum blockchain, but are instead using it as a potential secondary revenue source.
It’s not a bad bet. It’s trading at USD$242.22 at the time of writing, and while Bitcoin is roughly $9,500, the lowest price tag makes it easier to mine. There’s also the pending swap of consensus protocol to be considered. When Ethereum does ultimately make the switch to Proof-of-Stake, Hive will be in the unique and enviable position of being the custodian of a large amount of pre-mined Ethereum, which they could then stake and enjoy an increased chance to close block after block without the necessity of a large energy cost. Their Ethereum holdings could literally grow for a fraction of the cost they’re paying now.
Their two-year agreement is with Advania Data Centers ehf for hosting and related colocation services for their approximately 4,000 GPU-based mining rigs. The deal included hosting, power usage, shelving, data center operations and maintenance, and security. The service, power and internet access availability goal is 99.8%.. They offer 3.45 megawatts and Hive has the option to expand its operations by 40%. The energy is green, optimized for data centres and includes Advania’s data center design, which enables direct air cooling instead of having to pipe in expensive air conditioning.
Hive has also expanded its relationship with Blockbase Group to provide software services for its GPU’s in Iceland. Blockbase is the company providing similar services for Hive’s GPU-based operations in Sweden.
Low cost electricity, a strong altcoin mining base and colder climates to cut down on air conditioning. Hive’s doing all the right things.