Bitcoin mining is big business. In just ten years, bitcoin mining, where bitcoin tokens are rewarded to those that maintain the bitcoin network, has morphed from a bedroom-based, money-making hobby into a billion dollar industry.
Digital Currency Group, a venture capital company that owns digital currency investing firm Grayscale, digital currency prime broker Genesis, and bitcoin and crypto news outlet Coindesk, this week unveiled its new subsidiary, Foundry—and will invest $100 million into mining bitcoin in North America over coming months.
With bitcoin miners in China dominating the network, the move is expected to go some way to rebalance the distribution of those that maintain the bitcoin network—though Foundry chief executive Mike Colyer doesn’t see China as “a major threat” to bitcoin, despite recent warnings the Chinese government could “effectively block or reverse [bitcoin] transactions.”
“Over the past three or four years the story has been on China dominating [bitcoin mining],” Colyer said, speaking over the phone.
In May, research from University of Cambridge revealed China, where bitcoin mining pools have prospered thanks to cheap, renewable electricity, accounts for 65% of the bitcoin network’s computing power, with the U.S. the second-largest bitcoin mining country, contributing 7%.
“I personally don’t view that as a major threat to bitcoin,” Colyer said. “The economic investment that [an attack on bitcoin] would require is immense.”
It’s thought it would require almost $700,000 per hour to launch an attack on the bitcoin network, according to calculations made by Crypto51.
Last week, the executive chairman of payments network provider Ripple, Chris Larsen, warned in an opinion piece published in The Hill that as the majority of bitcoin network computing power is located in China, the “Chinese government has the majority needed to wield control over those protocols and can effectively block or reverse transactions.”
Others in the bitcoin and cryptocurrency community have dismissed the idea.
“Just because there are mining operations in China, it does not mean that hardware can be seized,” Samson Mow, chief strategy officer at bitcoin development company Blockstream, told the BTC Times.
Colyer expects interest in bitcoin mining, which is currently driven by energy and infrastructure costs, to surge over the next three years.
“This isn’t about the U.S. dominating the hash rate, that will never happen,” Colyer said. “There are going to be nation states that want to participate [in bitcoin mining], especially those countries that have access to low-cost energy infrastructure and a great investment environment.”
Digital Currency Group is betting that Foundry, which it says it “quietly” formed last year, can succeed where other bitcoin mining hopefuls have failed.
China-based bitcoin mining giant Bitmain had planned to create hundreds of mining jobs in Rockdale, Texas, in 2018 before abandoning the idea.
Just this year, Layer1 announced it raised $50 million to build a bitcoin mining operation in the U.S. but has recently been accused of misleading investors about the makeup of its “founding team.”