Bitcoin Miners’ Digital Power Network Shows Off Industry Consolidation
Political advocacy group Digital Power Network launches, representing 50% of total US hash rate. A look at consolidation in the mining industry before next halving.
The Chamber of Digital Commerce, a political advocacy group dedicated to Bitcoin and the crypto sphere, has turned heads with an announcement that the members of its new mining-specific group represent more than 50 percent of the entire US Bitcoin mining industry.
The Chamber of Digital Commerce has existed since 2014, with its own registered committee able to make contributions to political candidates. Although its existence represented a significant step for the growing relationship between a hostile political establishment and the new economic world of cryptocurrency, its footprint remained relatively small for most of its existence. Campaign disclosures have only recorded $2700 in donations for any Congressional races, in 2017, but in March 2023 they partnered with a Texas Representative to introduce a bill supporting proof-of-work mining.
The Chamber’s work in getting this bill off the ground has apparently been quite useful in building up industry connections, because it made a major splash in late September by announcing the formation of a new working group: the Digital Power Network. With a mission statement of promoting the interests of American miners, the Network plans to partner with legislators to support fair and straightforward regulation over many aspects of the crypto industry. This is all well and good, but this new group has some real heft to back up these goals: its various members collectively represent more than half of the nation’s entire Bitcoin hash rate.
It’s easy to see why a group like this is so necessary, according to Perianne Boring, founder and CEO of the Chamber for Digital Commerce. She said in interviews that “digital asset mining, at its heart, is both an energy and national security matter, and we firmly believe that Bitcoin will drive policies that unite all political stakeholders to advance this crucial industry in the United States.” The various representatives in the Digital Power Network seem to share her enthusiasm, with Riot Blockchain CEO Jason Les claiming that “at its core, Bitcoin mining converts stranded, low-cost energy into a valuable commodity, which is why our industry has tremendous potential” and Marathon CEO Fred Thiel declaring the group “important for ensuring that the perspectives of digital energy stakeholders are considered.” These two firms alone are some of the most productive Bitcoin miners in the United States.
A development like this in the crypto mining world is vitally important not only for the possibilities of the group, but also for the state of the industry that such a group can even exist. Among these companies, one topic has been growing and growing in everyone’s mind: the upcoming Bitcoin halving. A planned occurrence within the Bitcoin blockchain, halvings occur every few years to ensure a stable taper in the supply of available bitcoins, and the next one is coming soon. After some time around April 2024, the same exact amount of work from mining rigs will produce half as much Bitcoin, and it will be up to the miners to figure out how to keep their businesses profitable.
Several strategies are immediately apparent for these companies: for one, most obviously, efficient equipment is key. Especially with growing concerns of the environmental impact of Bitcoin mining, the halving will make it simply unviable to actually use outdated equipment at large scale. Similarly, firms have been encouraged to diversify investments, build up cash reserves and several other tactics that point to one overall strategy: consolidation of capital. Smaller firms that are unable to remain functional after the halving, to buy new equipment or stay in business without cash flow, will simply be pushed out, and the survivors will have a larger share of the new pie to split amongst themselves.
This consolidation is already evident from the emergence of the Digital Power Network. Their site lists 11 major players as members of this miner advocacy group, and their consortium represents most of the US Bitcoin mining industry. It is certain that every one of these firms has given a great deal of thought to the upcoming halving, and in all likelihood this group is part of their long-term plans. And even outside of these major players, signs of this increasing consolidation are ubiquitous. For example, Hut 8, a Canadian bitcoin mining company, has received approval from the Supreme Court of British Columbia on September 18th, authorizing them to carry out a merger with US Bitcoin Corp. This new company will be chartered within the United States, and upon incorporation the new “Hut 8 Corp” will immediately become one of the largest mining companies in the nation. Hut 8’s stock price went up by 6.5% after gaining this approval, showing off the market’s confidence.
Between these firms that represent such a large chunk of the Bitcoin mining industry, and new mining giants forming by merger outside of the Digital Power Network, it seems clear that the consolidation of industry is a serious tactic for these companies to survive in a wildly competitive mining ecosystem. With all these giants, after all, how many smaller companies exist to make up the remaining share of the pie? And more to the point, how many of those companies will continue to exist a year from now? The world of Bitcoin and cryptocurrency is wide in scale and chaotic in temperament; it requires a deft hand to stay afloat. Yet, with moves like these, it seems clear that the miners have full confidence in their abilities to thrive, and this attitude is representative of the whole crypto scene. With an innovative and industrious mindset, Bitcoin has fostered a community of movers and shakers that can propel decentralized currency into the future.