The two largest Bitcoin mining pools, BTC.com and Antpool, lost much of their hashing power during the crypto winter. Both pools owned by Bitmain signaled the implosion of the mining market, culminating in Bitmain laying off 50% of its workforce.
If Bitmain’s November hash rate disclosures are accurate, the giant controlled a total of 4.5% of all Bitcoin mining operations.
At the start of 2018, many miners expected crypto prices to continue to appreciate or, at the very least, remain stagnant. The aftermarket price of graphics cards, a common piece of mining equipment, reflected this dynamic: a Nvidia GeForce GTX 1080, a high-end GPU mining gear, was selling in stores for $549 but trading for over $1,000 on the open market. Most electronics stores were empty of equipment, and mining equipment across the industry was selling at a premium.
However, the decline in the market reversed the trend. Cryptocurrency returns have declined relative to prices. And, at many mining facilities, the cost of electricity and maintenance exceeded revenues. Bitcoin’s price deterioration from $13,800 to $3,800 meant miners had to decommission power-hungry machines, sell obsolete hardware and, in some cases, even file for bankruptcy.
How mining pools work
Mining pools are collections of miners – in exchange for a small fee, these miners can reduce the volatility of bitcoin payouts. Usually, for an average miner, it will take a year or more to solve the Bitcoin algorithm and reap the 12.5 BTC ($48,000) jackpot.
Instead, these miners band together to earn BTC rewards on a regular basis. If a single miner from a pool discovers a correct solution, this reward is shared with all other participants in proportion to their contribution to the hashing power.
Bitmain is losing its grip on mining
Bitmain is losing its grip on the Bitcoin network. Bitmain’s two mining pools, BTC.com and Antpool, have been reduced to just 30% of the overall market; a relative decline of 27% since the start of the year.
During this time, the overall network hash rate did not contract in line with price, and instead tracked multi-month price declines. This means that many miners may have operated at a loss before shutting down their rigs, and now, at the bottom of the market, they are finally shutting down their facilities.
It appears that Bitmain is ceasing operations to reflect current market conditions. These changes are reflected in the dominance of Bitmain’s mining pools. If prices remain stagnant, miners will continue to bleed. However, if bitcoin performs well in 2019, it will breathe new life into the industry as platforms come back online in their thousands.