We wanted to send out a comprehensive newsletter like we have done in the past, providing both company and industry updates. This is rather long, so we’ll put the important stuff at the top! First, from now until the end of the year, if you refer a friend who signs up for a year with more of the same amount of new or existing mining equipment, we’ll give you 2 free months of hosting for your rigs! This is a great way to get a bit more bang for your buck at our facility! Please have them email me at email@example.com and drop your name, Furthermore, please drop us a line and let me know how we’re doing. Do you enjoy the webinars? Are these newsletters a better form of communication? We would appreciate any feedback!
Some of you may have noticed that Nicehash has migrated to a newer version. All of your balance information has been updated in parallel. No action is needed, but if you would like to create a Nicehash account, you can do so via the link in your activation email, or by putting your BTC payout address into the top banner on Nicehash’s site. Please feel free to do so. You are able to change your payout token, and will enjoy lesser withdrawal fees through an account with them. BitCap will take no action and continuing mining to an external address with no input from you. Nicehash also now has free withdrawals to Coinbase via Bitcoin’s lightning network, if you are interested in setting that up as well.
We’re sure some of you have noticed the lack of webinars recently. When Bitcoin climbed back into the the $10,000+ range a few months ago, the phone started ringing again. We’ve had to divert resources away from marketing and back into construction. We have pivoted into hosting existing equipment rather than building new equipment for clients in the past year. Our website has been tweaked to reflect this pivot.
We are finding used mining equipment quite cheap right now, and we expect hardware prices to climb. Please reach out if you want to explore the used mining rig market. Please note however, we have a finite amount of space in the warehouse remaining. Due to the power moratorium in our county, we cannot expand in the near future, so once these spots are sold, that will be it for our datacenter and our growth capped. But once we are sold out, we will have more time to search for optimizing our profitability, even if that means looking outside the blockchain.
When it comes to Bitcoin price, Bitcoin tends to follow 4 year market cycles that revolve around its “halvening” or reduction in the inflation rate. The next “halvening” is slated to occur in May of next year, and we expect this halvening to produce a similar hype cycle that we experienced in 2017.
Many have shared a troubling trend we have seen over the last year is the bleeding of altcoins and the consolidation of money into Bitcoin. This measurement is known as “Bitcoin Dominance.” While this trend is certainly occurring and troubling, we personally don’t believe this trend will continue. We think similar to an economy in recession, money will flow to the safer assets in the space such as Bitcoin during bear markets. Similarly, another reason is that mining farms like ourselves tend to sell altcoins for Bitcoin, especially in downturn markets in order to preserve the value of what was mined. We believe the altcoin to Bitcoin ratio, which is arguably the most important factor in our profitability, will climb in the coming months as the bull market continues and investors feel safer placing riskier bets on smaller chains. We have already seen some decent gains to the ETH/BTC ratio during the last week, with BTC dominance falling from above 70% to below 68% as of this writing. Disclaimer: This is pure speculation, and we cannot confidently predict price movement with any degree of significant accuracy.
Outside of price movements, we’ve been talking about some changes for some specific protocols for a while. And while much of the changes have not occurred yet, they are closer and/or more likely to occur now. Outside of the altcoin to Bitcoin ratio, the other most important factor is difficulty, and as many know, there is a multi-year, multi-faceted, and multi-billion dollar cat-and-mouse game occurring on various blockchains. Many Proof-of-Work (mineable) chains (like Ethereum) are announced as “ASIC resistant” but as soon as a blockchain becomes profitable to mine, the incentive to design an ASIC, or chip, that is dramatically more efficient at that algorithm becomes a powerful adversary to decentralization of that project. Many projects have capitulated like Bitcoin, Zcash, Litecoin, and Dash. Others have an ongoing policy to kick ASIC’s off as soon as they are detected. By either slightly tweaking or trying out completely new mining methods to try to brick ASIC’s, we have seen this play out in a number of various projects throughout BitCap’s history. However, we have yet to see an approach this is 100% successful. Some of the ones that have acted in fighting ASIC chip manufacturers are Zcoin, Monero, Beam, Grin, and Bitcoin Gold. Many of these tweaks did not go far enough or were smaller projects that only impacted our profitability for a couple months. We have written about some of these before and their impacts were mild, but larger projects have now recognized the ASIC threat and are now taking more dramatic methods to make mining more fair.
Ethereum (Ethash): Ethereum is a $23 billion blockchain so it moves a bit slower than most. It finally has a rough implementation timetable for Programmatic Proof-of-Work (ProgPoW,) the tweak to ETHash that will kick off ASIC’s. While there are a few voices arguing against ProgPoW, the miners, developers, and shareholders have overwhelmingly indicated it will go live during the Berlin hard fork in early 2020. ProgPoW’s promise is that will brick existing ASIC’s and make it so new ASIC’s that come online are only 20% more efficient (instead of the 200% more efficient ASIC’s that exist currently), severely curtailing the incentive to design and build ASIC’s on Ethereum. We suspect that Ethereum’s hashrate is 30% or more ASIC driven, and it will be a very welcome change to have our largest mining algorithm become much more profitable overnight in February. In my opinion, ProgPoW is the best approach we have for fighting ASIC’s. It is an algorithm designed to utilize 100% of the GPU, so that an ASIC cannot strip parts of the GPU away for efficiency gain. Ethereum will not go full Proof-of-Stake for a few more years.
Ravencoin (x16r): RVN was a top mining choice for NVIDIA GPU owners this year, but this is no longer the case. ASIC’s were detected about a month ago, and already the RVN team has scheduled a hard fork for October 1st, 2019 to kick off ASIC’s. The new Algorithm is x16Rv2. We suspect it will become a major part of our rotation again next month.
Vertcoin (Lyra2rev3): VTC has a long history of forking off ASIC’s and botnets After unsuccessfully shaking off ASIC’s with their lyra, lyrav2, lyra2rev2, lyra2rev3 (plus probably more), they have decided to make a new mining algorithm a bit more dramatic in change. The development team is working through some final problems of their new brand new, built from the ground up mining algorithm, Verthash. They have yet to announce a hard fork date.
Monero (CryptonightR): XMR, the holy grail of privacy coins has a history of forking every 6 months just to stay ahead of ASIC’s. You may have noticed Cryptonight, Cryptonightv7, Cryptonightv8, and currently CryptonightR(v4) as an algorithm on your dashboard. This is Monero. However, much like Vertcoin, Monero’s incremental changes in their mining algorithm were not enough to shake ASIC’s for even 6 months, so the development team is radically changing their approach with a new algorithm called RandomX. RandomX is unique in that it is designed to run on CPU’s and is actually dramatically faster on CPU’s than GPU’s in its current state. However, this was the case with Cryptonight, and a whole host of other algorithms, and I expect GPU implementations of miners to compete with CPU’s in this algorithm in the coming months after its release. RandomX is currently being audited and is expected to ship before 2020.
That should do it. We wanted to keep it relevant to our mining niche. However, it is worth noting that the cryptosphere as a whole continues to grow with Ethereum gas limits being reached due to all the activity, hashrates continuing to go up or stay steady, and user adoption increasing globally. We appreciate any feedback you guys may have with this newsletter. We know this is all very dense, so if you want to unpack any topic a bit more, drop us an email or a line in Discord. Thanks for reading!