North American bitcoin mining companies all use mining pools to ensure steady block rewards, gathering hash power from miners operating remotely to compete with China’s industrialized farms. Most of these mining companies use mining pools based in China (pools whose headquarters and perhaps hash energy collection servers are located in China) because the fees they charge for collecting and distributing hash energy are lowest in the world.
However, the days of unregulated mining pools serving the North American market could end. And hoping to fill that potential void, DMG, a diversified mining company headquartered in Vancouver, is opening a new pool for North American miners with an emphasis on full compliance with all regulations.
The mining landscape today
Bitcoin mining in North America was recently hit in the arm by a dramatic decrease in difficulty as the rainy season in China’s Sichuan province ended and miners went offline.
In a recent newsletter, media company Bitcoin HASHR8 described the change:
“… Huge amounts of hashrate are coming offline due to the end of the rainy season in Sichuan. That means miners both generate higher earnings and have a significant reduction in their input costs once the difficulty adjusts to the hashrate drop. “
A recent report Based on data from BTC.com, it was noted that this drop in mining difficulty includes the largest percentage drop (at 16 percent) since the first miners with ASICs were brought online in 2012.
The HASHR8 report also noted that, thanks to this drop and recent bitcoin price increases, miners are entering an “extremely lucrative” mining period. This would be a continuation of a trend such as Coinmetrics reported that in October bitcoin miners generated an estimated $ 353 million in revenue, 8 percent more than the month before.
DMG sees a golden opportunity in compliance
With the landscape so ripe for lucrative mining, a Vancouver-based blockchain company DMG has announced its new mining pool, Blockseer, which is “committed to transparency and good governance” for the North American market.
In its announcement DMG added:
“Blockseer’s new Bitcoin mining pool will be North America’s first bitcoin mining pool to not only meet the US government’s Office of Foreign Assets Control (OFAC) compliance for BTC addresses, but also the highest level of transparency, accountability and corporate governance. “
Sheldon Bennett, COO of DMG Blockchain Solutions, said Bitcoin Magazine that the company knows that it competes with Chinese pools that can offer lower fees for the affiliated miners.
“We try not to compete on price,” he explains. “Instead, we provide more value to companies that care about fair billing and clean mining blocks (that is, not supporting crime by blocking known nefarious transactions in our polar mines).”
Bennett added that farms are willing to pay a premium for compliance.
“We believe companies will be willing to pay standard mining pool fees (i.e. 2 percent) for full transparency and to ensure that their servers / miners are not involved in adding North Korean or Iranian or other to the black list OFAC’s posted wallets when moving Bitcoin. ” he said.
DMG is fully regulated as a public company listed on the TSX Venture stock exchange, which means it must follow all relevant regulations, including independent third party audits, IT audit standards and internal controls.
Ethan Vera, Co-Founder and CFO of Seattle-based mining software vendor Luxor, which currently operates the only mining pool in North America, is seeing major changes in the North American mining landscape, which will eventually require the presence of compliant pools.
“I think we’re going to see a change here for a number of reasons; miners are becoming more and more institutional and need a compliant hash counterpart. Profit switching can make North American pools more profitable for miners and will further integrate mining pools into larger products such as ASIC financing, exchanges or hosting services, ”he said. Bitcoin Magazine. “The benefits of working with a US-based mining pool is that you can contract with a company operating in the same legal jurisdiction, with real remedies in the event that something arises.”
Ryan Porter, Head of Business Development at BitOoda and an avid observer of the North American crypto scene, also sees growing acceptance among miners that some regulatory compliance may be required in the future.
“As for the differences between offshore and North America, I think what we’ve seen lately with the US regulators’ action against BitMEX for not having anti-money laundering (AML) practices and knowing your client’s (KYC) policy could serve as an indication of the difficulties in using offshore service providers, ”said Porter Bitcoin Magazine. “I believe there will be a demographic of miners here in North America who will choose to use a mining pool that meets those regulatory boxes.”
Despite the difficulty in competing with the fees offered by China-based mining pools, Porter isn’t surprised by DMGs venturing into space.
“Mining companies need to find new ways to differentiate themselves to attract new customers rather than just competing on fees,” he explains.
The long way forward
Still, DMG will go a long way to take advantage of a fundamental change in the way mining companies have selected pools to date. US and Canadian mining companies usually choose to sign up with pools in China that offer the lowest rates.
“The reality is that the majority of miners are agnostic,” said John Lee Quigley, head of research at HASHR8. Bitcoin Magazine. “A consideration such as the location of the mining pool is low on the priority list. Most miners will make their decision based on factors directly related to profit margins. Factors such as fees, add-on services, and industry connections are much more important to miners [than transparent regulatory compliance]. “
In his interview with BItcoin Magazine, Vera echoed that point of view.
“The majority of new miners in North America continue to join the major mining pools in China,” he said. “In most cases, profitability trumps all other considerations, and the Chinese pools historically offer the lowest fees.”
And even if mining companies fail from China-based pools, DMG won’t be the only North American option available. An industry insider said Bitcoin Magazine confident that more mining pools will announce North American operations soon.
“As more North American miners accumulate hashrate in 2020 and 2010, I wouldn’t be surprised if new North American mining pools are established to reach this growing market,” Thomas Heller, COO of HASHR8, said in a conversation with Bitcoin Magazine.
At one of the most interesting moments in the history of Bitcoin mining, a significant change in the distribution of mining pool activities appears to be imminent. Whether farms are willing to allow lower fees in exchange for regulatory compliance is an open question, but one that DMG could soon be able to answer.