According to one analyst, the sale of Bitcoin miners has increased 400% in the last three weeks, posing a problem for the mining industry as the continued sale depletes a key source of revenue.
Australian Bitcoin miner Iris Energy will lose 3.6 Exahashes/second of mining power after defaulting on a $108 million loan.
Iris Energy will not repay loans taken against equipment operated by two wholly-owned company vehicles, choosing instead to develop its other business operations.
Iris Energy – Entities Do Not Provide Much Cash Flow
According to the Nasdaq-listed miner, the two entities are not providing enough cash flow to service the credit lines, after other subsidiaries using the equipment pulled out of hosting agreements. Pursuant to a security agreement with the creditor, Iris Energy will close operations at these two facilities.
Consequently, Iris Energy will look to acquire mining equipment from Bitmain to self-mine, and may also leverage its data center capacity for other hosting companies.
In addition to the mining machines used as collateral, Iris Energy operates 1.1 EH/s of mining power and expects to implement another 1.3 EH/s.
Mining is the process of securing any Blockchain network that uses the Proof-Of-Work consensus model. A consensus model is a set of rules that govern the transition of a Blockchain from one state to another.
Miners accumulate “confirmed” transactions into a transaction block, and then “mine” the transaction block to add it to the Blockchain. Included in the mined block is the solution to a complex mathematical problem, for which the miner needed to use significant computing power to solve.
Miners earn coins by showing that they spent computing power. Multiple miners compete for the right to post a new block of transactions. It becomes more and more difficult to mine cryptocurrencies like Bitcoin, as the number of miners on the network increases.
Iris Energy Among the Heavyweights Fighting for Profitability
Mining has more or less moved into the realm of large corporations operating specialized data centers. While these companies benefit from economies of scale, rising energy prices caused by the war in Ukraine and falling Bitcoin prices have made it difficult for several miners to pay down debt.
The price of producing new BTC, also known as the Minimum Cost of Production, has also been rising, meaning that it is becoming increasingly difficult for miners to remain profitable.
Crypto market analyst Charles Edwards predicts that if the price of Bitcoin falls below the minimum cost of production, many miners will become unprofitable and unable to pay their debts.
Edwards added that the sale of Bitcoin miners had increased by 400% in the last three weeks. The increased sales will put further downward pressure on the BTC price and deplete a key source of revenue.
After news of Iris Energy’s default hit the wires, its share price fell more than 12% in intraday trading, to $1.64.
By Audy Castaneda
