Customer of Compass Mining Eng Taing
Eng Taing is in the business of making money.
He runs his own private equity firm with $250 million in assets under management (according to his website), invests in real estate, worked in data science and analytics at Apple — and he got into bitcoin in 2013, long before it was popular to even make a passive bet on the crypto asset class.
Now Taing runs 261 personal mining machines generating the most popular digital token in the world.
“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 residences. I have GPU mines,” Taing continued. “I just like to look at where I can get a good arbitrage edge, and I thought bitcoin mining presented that both of just, ‘Hey, I could get more bitcoins by having miners than buying bitcoin, especially on the scale I can get into it – but also that I’m a big believer in the future of bitcoin.””
Bitcoin operates on a proof-of-work mining model, which means miners around the world use powerful computers to simultaneously mint new bitcoins and validate transactions. The process requires expensive equipment, some technical know-how and a lot of electricity. Taing decided to outsource most of this work to Compass Mining, a service that hosts, supplies and operates mining rigs for retail miners who don’t want to deal with the logistics themselves. physical handling of mining equipment.
So far, the experiment is working quite well, according to Taing. Of its 261 mining rigs, which include Canaan AvalonMiners, Bitmain Antminer S19 Pros and Whatsminer M30S, 200 are hosted by Compass in Nebraska and Canada. They generate about 2.8 bitcoins per month, or about $111,000, according to digital receipts he provided to CNBC.
Taing also earns income by buying and selling mining equipment to retail customers on the Compass marketplace. They usually buy one or two at a time and are not as price sensitive.
CNBC spoke with several Compass clients to better understand the appetite for small-scale mining as they increasingly compete with major industry players with massive operations. But Compass CEO Whit Gibbs says that’s exactly the point: to capture market share for retail miners and put the network in the hands of the people.
“It will effectively give smaller miners a substantial share of the Bitcoin network hashrate, which has always been our goal,” Gibbs said. “We want 5% of the network to be controlled by retail miners and then increase that to 10% to 15% in the coming years.”
Gibbs says he’s noticed that a lot of people who would normally invest in real estate are instead bringing those dollars into mining because they’re able to see a faster return on investment than they would if they were buying a rental property, especially as private equity. intervenes to buy houses and drive up prices.
Eng Taing assesses a former GM factory for reuse for bitcoin mining.
Compass customers range from self-proclaimed “plebs,” who stack the smallest bitcoin denomination known as satoshis, or “sats,” to Bitcoin billionaire Jack Dorsey.
One such pleb is Jon McClellan, a Texas-based lobbyist for AT&T. He currently has a single bitcoin miner with Compass in Oklahoma, which he purchased in late 2020. For him, the desire to mine is part ideological, part financial.
“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 was going on in my life, budget wise,” he said. continued McClellan, who calls the process an “easy way to convert the average dollar cost to bitcoin.”
McClellan says Compass was the only retail mining company that seemed accessible to the average person. Compass Mining allows customers to purchase mining machines (new or used) between $4,500 and $25,800 on their website, then locate them in partner data centers and take care of physical logistics and subsequent maintenance.
The return on investment for personal mining varies depending on a few key factors, including the initial cost of purchasing equipment, the number of mining machines you use, the cost of electricity and accommodation , as well as pool fees, which allow a single miner to combine their hashing power with thousands of other miners around the world 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 payback is around two years. He currently earns around $400 per month, although he has to pay $150 for hosting costs, so he earns around $250. But McClellan plans to expand operations this year to Texas, Oklahoma or Wyoming, as all three states are friendly to the bitcoin mining industry.
Taing says he has about 18 months before achieving a return on investment with profit margins of around 65% to 70% to cover operating expenses. Unlike other clients, however, Taing has a special 0% pool fee rate through Foundry.
Gibbs, the CEO of Compass, says their customer base is mostly retailers, which he defines as miners who buy one to five machines, investing between $10,000 and $50,000.
“That’s really where the majority of our business has been for the past six months,” Gibbs said, while noting that Compass is starting to serve more institutional clients.
Nevin Bannister, for example, uses Compass to set up a large-scale bitcoin mining operation in hopes of bringing it to the public market.
“They make it really simple,” Bannister said. “They’re a great turnkey option. They help you buy the machines, they hook them up for you, they maintain all the operations.”
So far, Bannister has purchased 6,000 rigs, of which 1,500 are operational. Most are housed in Oklahoma, and they have just under a hundred in Canada.
Although Bannister did not disclose his monthly earnings, he told CNBC that each platform is expected to produce around 0.015 bitcoin per month. At 1,500 platforms, this hypothetically produces 270 bitcoins per year, or $10.7 million.
“I’m a serial entrepreneur. I’ve sold several companies and love learning new things,” continued Bannister, who says on his LinkedIn page that he’s founded start-ups that have sold for value. combined of more than $800 million. “It’s like entering the Internet at the very beginning.”
Ultimately, Gibbs thinks institutional buyers like Bannister will be a good thing for smaller miners, as their investment will help reduce overall costs and make more space available for retail customers.
Setting up bitcoin mining from Compass Mining’s client, Eng Taing.
Jack Dorsey also leaning
Jack Dorsey’s Payment Company Block (formerly Square) is also looking to make it easier for the little guy to start bitcoin mining.
In a series of tweets earlier this year, Block’s chief hardware officer, Thomas Templeton, laid out the company’s plans for next steps.
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. , through maintenance and mining”.
To that end, the company solves a major barrier to entry: mining rigs are hard to find, expensive, and delivery can be unpredictable. Block says he is open to creating a new ASIC, which is the specialized equipment used to mine bitcoin.
Setting up bitcoin mining from Compass Mining’s client, Eng Taing.
Templeton writes that Block is also looking to improve mining reliability and user experience.
“Common issues we’ve heard with current systems are heat dissipation and dust. They also become non-functional almost every day, requiring a time-consuming reboot. We want to build something that works” , tweeted Templeton. “They are also very loud, which makes them too loud for home use.”
Democratizing access to bitcoin mining is a big part of this project’s mission statement.
“Mining isn’t for everyone,” Dorsey wrote in October, just months after the United States first eclipsed China as the world’s top destination for bitcoin miners. “Bitcoin mining should be as simple as plugging a rig into a power source. There are not enough incentives today for individuals to overcome the complexity of running a minor for themselves.”
Gibbs says he welcomes another player into the retail bitcoin mining space.
“This is going to be hugely beneficial for bitcoin and ultimately for us as well,” Gibbs told CNBC.
“My understanding of what they’re offering will be more of a low-power home product, probably more of a low-yield product, but it will give people a first taste of bitcoin mining,” Gibbs continued. He speculates that as individuals get the bug to grow their hashrate, they will turn to Compass or its rival River Financial to expand their operations.
“I really think as part of Jack’s mission in general, he wants to get mass adoption of bitcoin, and he’s going to throw dollars behind anything that he thinks will get more people to pay attention to it,” said said Gibbs.
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