Compass Mining customer Eng Taing
Eng Taing is in the business of making money.
He runs his own private equity firm with $ 250 million in assets under management (according to his website), invests in real estate, has worked in computer science and analytics at Apple – and he entered bitcoin back in 2013, long before it was popular to make even a passive bet on the crypto asset class.
Now, Taing runs 261 personal mining machines that generate the world’s most popular digital token.
“I just like making money,” Taing told CNBC.
“I invest in a lot of things. I have a lot of apartment buildings, I have nursing homes. I have GPU mines,” Taing continued. “I just like to look at where I can get some good arbitrage benefits, and I thought bitcoin mining presented that both from just, ‘Hey, I could get more bitcoin by having miners than buying bitcoin,’ especially in the scale I can get. into it – but also that I’m a big supporter of the future of bitcoin. “
Bitcoin operates on a proof-of-work mining model, which means that miners around the world run powerful computers to simultaneously create new bitcoin and to validate transactions. The process requires expensive equipment, some technical know-how and a lot of electricity. Taing decided to outsource most of this work with the help of Compass Mining, a service that hosts, delivers and operates mining rigs to retail miners who do not want to deal with the logistics of physically handling mining equipment themselves.
So far, the experiment is working pretty well, according to Taing. Of his 261 mining rigs, which include Canaan AvalonMiners, Bitmain Antminer S19 Pros and Whatsminer M30Ss, 200 are hosted through Compass in Nebraska and Canada. They generate about 2.8 bitcoins a month, or about $ 111,000, according to digital receipts he has given to CNBC.
Taing also earns revenue by buying and selling mine hardware to retail customers in Compass’ marketplace. They typically buy one or two at a time and are not as price sensitive.
CNBC spoke with several Compass customers to better understand the appetite for small-scale mining, as they increasingly compete with large industry players with massive operations. But Compass CEO Whit Gibbs says that’s exactly the point: to capture market share for retail miners and put the network in the hands of the people.
“It will effectively give small miners a significant share of bitcoin’s network hash rate, which has ultimately always been our goal,” Gibbs said. “We want to get 5% of the network controlled by retail miners and then move it up to 10% to 15% in the coming years.”
Gibbs says he has noticed that many people who would normally invest in real estate instead bring these dollars to mining because they are able to see a faster return on mining than they would if they bought one. rental property, especially as private equity steps in to buy houses and drive up prices.
Eng Taing is evaluating a previously genetically modified factory for recycling for bitcoin mining.
Compass clients range from self-proclaimed “plebs” that stack the smallest denomination bitcoin known as satoshi or “rate” to billionaire bitcoiner Jack Dorsey.
One of those plebs is Jon McClellan, a Texas-based lobbyist for AT&T. He currently owns a single bitcoin miner at Compass, Oklahoma, which he purchased in late 2020. For him, the desire is to mine partly ideologically, partly economically.
“I wanted to do my part to secure the bitcoin network – to have my own hashrate under my own power,” McClellan said, referring to his share of miners’ collective computing power worldwide.
“I knew that if I bought a miner, I would literally buy bitcoin every day, every minute, every second, every hour, no matter what happens in my life, budget-wise,” McClellan continued, calling the process. an “easy way to dollar cost average for bitcoin.”
McClellan says Compass was the only retail mining company that seemed accessible to the average person. Compass Mining allows customers to purchase (new or used) mining machines for between $ 4,500 and $ 25,800 on their website, after which they locate them in partner data centers and take care of the physical logistics and subsequent maintenance.
The return on investment for personal mining varies based on a few key factors, including the upfront cost of purchasing equipment, the number of miners you run, the cost of electricity and hosting, plus pool fees that allow a single miner to combine their hashing power. with thousands of other miners around the world to increase their chances of earning bitcoin.
McClellan, who took out a $ 10,000 bitcoin-backed loan through Coinbase at an 8% interest rate to buy his single miner, says his ROI is about two years. He currently withdraws about $ 400 a month, though he has to pay $ 150 for hosting fees, so he earns about $ 250. But McClellan plans to upscale its business this year in Texas, Oklahoma or Wyoming, as all three states are favorable to the bitcoin mining industry.
Taing says he has about 18 months before he achieves ROI with profit margins of around 65% to 70% to cover operating expenses. Unlike other customers, however, Taing has a special rate of 0% for pool fees through Foundry.
Gibbs, Compass CEO, says their customer base is mostly retail, which he defines as miners buying one to five machines and investing somewhere between $ 10,000 and $ 50,000.
“That’s really where most of our business has been over the last six months,” Gibbs said, noting that Compass has started serving more institutional customers.
Nevin Bannister, for example, uses Compass to build a large-scale bitcoin mine in hopes of bringing it to the public market.
“They make it really simple,” Bannister said. “They are a great turnkey option. They help you buy the machines, they connect them for you, they maintain all operations.”
So far, Bannister has purchased 6,000 rigs, of which 1,500 are in operation. Most are housed in Oklahoma, and they have just under a hundred in Canada.
Although Bannister would not disclose his monthly turnover, he told CNBC that each rich should produce about 0.015 bitcoin per month. At 1,500 rigs, it hypothetically produces 270 bitcoin a year, or $ 10.7 million.
“I’m a serial entrepreneur. I’ve had several companies that I’ve sold and I just love learning new things,” continued Bannister, who says on his LinkedIn page that he has founded start-ups that have sold for a total value of over $ 800 million. “It’s like getting on the internet in the early days.”
Ultimately, Gibbs believes that institutional buyers like Bannister will be a good thing for the smaller miners because their investment will help reduce costs in general and make more space available to retail customers.
Compass Mining customer Eng Taing’s bitcoin mining setup.
Jack Dorsey also leans in
Jack Dorsey’s payment company Block (formerly Square) is also looking to make it easier for the little guy to start mining for bitcoin.
In a series of tweets earlier this year, Blocks general manager of hardware, Thomas Templeton, outlined the company’s plans for the next steps.
Templeton says the goal is to make bitcoin mining – the process of creating new bitcoins by solving increasingly complex computational problems – more distributed and efficient in every way, “from purchase, to setup, to maintenance, to mining.”
To this end, the company solves a major barrier to entry: Mining rigs are difficult to find, expensive, and delivery can be unpredictable. Block says it’s open to making a new ASIC, which is the specialized gear used to mine for bitcoin.
Compass Mining customer Eng Taing’s bitcoin mining setup.
Templeton writes that Block also seeks to improve the reliability and user experience of mining.
“Common problems we’ve heard with current systems are around heat dissipation and dust. They also become non-functional almost every day, requiring a time-consuming restart. We want to build something that just works,” Templeton tweeted. “They are also very noisy, which makes them too loud for home use.”
Democratization of access to bitcoin mining is a big part of the mission of this project.
“Mining is not accessible to everyone,” Dorsey wrote in October, just months after the United States for the first time ever overlooked China as the world’s best destination for bitcoin miners. “Bitcoin mining should be as easy as connecting a rig to a power source. There is not enough incentive today for individuals to overcome the complexity of running a miner for themselves.”
Gibbs says he welcomes another player to the retail bitcoin mining area.
“It will be hugely beneficial for bitcoin and ultimately for us too,” Gibbs told CNBC.
“My understanding of what they are emitting will more be a home-based, low-power consumption, probably more a low-yield product, but it will give people the first taste of bitcoin mining,” Gibbs continued. He assumes that when individuals make the mistake of growing their hash rate, they will look to Compass or rival River Financial to expand their operations.
“I really think that in line with Jack’s mission in general, he wants to get mass adoption for bitcoin, and he wants to throw dollars behind everything he thinks will make more people aware of it,” Gibbs said.
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