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Often find myself in deep
holes in mining. 1 I have been stuck on is the ASIC supply chain bottleneck and how those constraints affect the overall network growth. There are 2 things that concern me for overall growth of NA miners: supply chain bottlenecks and capital constraints
holes in mining. 1 I have been stuck on is the ASIC supply chain bottleneck and how those constraints affect the overall network growth. There are 2 things that concern me for overall growth of NA miners: supply chain bottlenecks and capital constraints
Let's start with supply chain constraints. Until a reliable NA manufacturer enters the game, China will continue to have a competitive edge in the ASIC realm because machines are created & assembled there. Delivery timeframes and tariffs continue to create a lag for NA miners.
Hardware is increasingly becoming difficult to obtain with constraints at the foundry level (TSMC & Samsung). Letâs take TSMC for example. As Iâve said beforeâŠ
In TSMC's 2018 annual report, the company produced 10,436 products for 481 customers. They have limited manufacturing space at their facilities and have to account for massive customers outside of the bitcoin mining space, including Sony, Qualcom, Broadcom, and, famously, Apple.
This supply constraint at the foundry level is what limits supply for mining machines, as even if there is a massive increase in demand from miners, the best a mining manufacturer can do is attempt to secure future capacity to match that demand.
Thatâs the dilemma we are facing currently. Bitmain and MicroBT are rumored to be sold out of capacity until summer of next year.
fun fact: each time a mining manufacturer wants to test out the foundries newest manufacturing process it is an expensive and risky experiment at best. Itâs been said a test run costs about $10M, with a chance the design is not usable. This makes for very expensive R&D.
As bitcoin mining equipment manufacturers are considered small players by the foundries, they are required to pre-pay in order to secure space. From my research, it appears that space is assessed on an annual basis & mining companies have historically been low on the totem pole
Although, it seems like with TSMCâs 5NM release, Bitmain was one of the handful of customers that had space, so maybe things are changing!
I do believe we will continue to increase our hashrate but capital constraints will also be continue to be an issue. We are at 134 Eh/s currently. Letâs take the talked about a suggested 25% growth. That would bring us to 33.5 Eh/s in NA. (h/t @ethan_vera)
For mining machines alone, we can assume a $600M requirement to get to that slice w/ current network hashrate. Granted we are not accounting for any additional infrastructure cost or secondary hardware machine sales, which we could ignore, for illustrative purposes.
Mining isnât traditionally a VC play, not only does it have high upfront cost, but the ongoing capital requirements can seem endless. In other VC industries, a lot of upfront money is spent, but scaling is almost infinite because as production ramp ups costs are negligible.
If mining isnât in the VC playbook, it begs the question, well where are miners getting money for ASICs and infrastructure?
Thats why I am excited to be working at @novogratz Galaxy Digital, focusing on helping grow this space. I'm also excited to see groups like @Melt_Dem @CoinSharesCo , @SinoCrypto and @sqcrypto all working in the mining space. There's lots to be done!
Figuring out how to build infrastructure, raise cap for infrastructure, and how to refresh machines every few years is now the challenge miners faceâadd that with secure the hardware as discussed earlierâŠand you can see why mining isnât the simplest industry to jump into.
With all that...incredible talent exists in the industry, which will increase our NA slice of the pie. Some building, some financing, and some researching. All searching for the best/lowest energy cost to be a long-term producer of bitcoin mining.
Here are some great ppl to follow:
@ajscalia
@btc_buddhist
@_rrybarczyk
@JessePeltan
@BitcoinBroski
@thomasheller_
@ethan_vera
@JuricaBulovic (best mining friend)
@brian_wright21
@NickHansen600
@upstreamdatainc
@MartyBent
@GAMdotAI
@karimhelpme
...many more
@ajscalia
@btc_buddhist
@_rrybarczyk
@JessePeltan
@BitcoinBroski
@thomasheller_
@ethan_vera
@JuricaBulovic (best mining friend)
@brian_wright21
@NickHansen600
@upstreamdatainc
@MartyBent
@GAMdotAI
@karimhelpme
...many more
