Compass Mining customer Eng Taing
Eng Taing is making money.
He runs his own private equity company with $ 250 million in assets under management (according to his website), invests in real estate, has worked in computer science and analysis at Apple ̵[ads1]1; and he started using bitcoin back in 2013, long before it was popular to make a passive effort on the cryptocurrency class.
Taing now operates 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 senior housing. I have GPU mines,” Taing continued. “I just like to look at where I can get a good arbitrage advantage, and I thought bitcoin mining presented that both from just” Hi, I could get more bitcoin by having miners than buying bitcoin, especially in the scale I can get into it – but also that I have great faith in 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 knowledge and a lot of power. Taing decided to outsource most of this work with the help of Compass Mining, a service that hosts, supplies and operates mining rigs for retail miners who do not want to handle the logistics of physically handling mining equipment themselves.
So far, the experiment has worked quite well, according to Taing. Of his 261 mining rigs, which include Canaan AvalonMiners, Bitmain Antminer S19 Pros and Whatsminer M30Ss, 200 host Compass in Nebraska and Canada. They generate about 2.8 bitcoins a month, or about $ 111,000, according to digital receipts he gave to CNBC.
Taing also benefits from buying and selling mining hardware to retail customers in Compass’ marketplace. They usually buy one or two at a time and are not as price sensitive.
CNBC spoke with several Compass customers to better understand their appetite for small-scale mining as they increasingly compete with large industrial players with massive operations. But Compass chief Whit Gibbs says that’s exactly the point: to take 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 a rental property, especially as private equity goes in for buying houses and raising prices.
Eng Taing is evaluating a former GM factory to use for bitcoin mining.
Compass clients range from self-proclaimed “plebs”, who stack the smallest denomination of bitcoin known as satoshis, or “rate”, to billionaire bitcoiner Jack Dorsey.
One of those plebs is Jon McClellan, a Texas-based lobbyist for AT&T. He currently has a single bitcoin miner at Compass in Oklahoma, which he bought in late 2020. For him, the desire to mine is partly ideological, partly economic.
“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 the collective computing power of miners around the world.
“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 to bitcoin. “
McClellan says Compass was the only mining company that seemed available 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, then find 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 drive, the cost of electricity and hosting, plus pool fees, which allow a single miner to combine their hash power with thousands of other miners worldwide. to increase their chances of earning bitcoin.
McClellan, who took out a $ 10,000 bitcoin-backed loan through Coinbase at an interest rate of 8% to buy his only miner, says his return is about two years. He currently earns around $ 400 a month, although he has to pay $ 150 for hosting fees, so he earns around $ 250. But McClellan plans to scale up its operations 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 until he achieves returns with profit margins of around 65% to 70% to cover operating expenses. Unlike other customers, however, Taing has a special price of 0% for pool fees through Foundry.
Gibbs, the Compass boss, says their customer base is primarily retail, which he defines as miners buying one to five machines and investing somewhere between $ 10,000 and $ 50,000.
“This is really where most of our business has been over the last six months,” said Gibbs, noting that Compass is starting to serve more institutional customers.
Nevin Bannister, for example, uses Compass to develop a large-scale bitcoin mining operation in hopes of taking it to the public market.
“They make it very easy,” Bannister said. “They are a great turnkey alternative. They help you buy the machines, they connect them for you, they maintain all operations.”
So far, Bannister has bought 6,000 rigs, of which 1,500 are in operation. Most live in Oklahoma, and they have just under a hundred in Canada.
Although Bannister would not disclose his monthly income, he told CNBC that each rig would produce about 0.015 bitcoins a month. At 1,500 rigs, it hypothetically produces 270 bitcoin a year, or $ 10.7 million.
“I’m a series founder. 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. “This is like getting on the internet in the first few days.”
Ultimately, Gibbs believes that institutional buyers like Bannister will be a good thing for the smaller-scale miners, because their investment will help reduce costs overall 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 for hardware, Thomas Templeton, outlined the company’s plans for the next step.
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.”
Towards that goal, the company solves a major entry barrier: Mining rigs are difficult to find, expensive and delivery can be unpredictable. Block says it is open to creating a new ASIC, which is the specialized equipment used to mine bitcoin.
Compass Mining customer Eng Taing’s bitcoin mining setup.
Templeton writes that Block is also looking to improve the reliability and user experience of mining.
“Common problems we’re heard with today’s systems are around heat dissipation and dust. They also become non-functional almost every day, which requires a time-consuming reboot. 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 for everyone,” Dorsey wrote in October, just a few 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 simple 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 into the bitcoin mining business.
“It’s going to be hugely beneficial for bitcoin and ultimately for us as well,” Gibbs told CNBC.
“My understanding of what they’re putting out is going to be more of a home-based low power consumption, probably more of 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 increasing the hash rate, they will look to Compass or rival River Financial to expand operations.
“I really think in line with Jack’s mission in general, he wants to get mass adoption for bitcoin, and he’s going to throw dollars behind everything he thinks will get more people to take that into account,” Gibbs said.
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