Lending for Mining Companies
In 2009, the first-ever bitcoin — a.k.a. the Genesis Block — was mined using an average personal computer. Effectively, the equipment cost almost quite low, if not nil. However, since then the process has become increasingly complicated and resource-intensive, as more and more professional miners competed for bitcoin rewards.
To keep block generation at a stable rate the Bitcoin network is designed to evaluate and alter its difficulty of mining roughly after every two weeks, or 2,016 blocks. Today, mining a block on the blockchain platform requires immense computational power and unprecedented levels of regular investment for equipment and maintenance.
While the inception of application-specific integrated circuits (ASICs) and graphics processing units (GPUs), aided cryptocurrency mining with efficiency and competitive edge, it made mining a professional venture that could not be achieved at home. Naturally, this brings up the question, how then do individual miners profit? Unfortunately, most miners barely make the profit margin by themselves and are forced to join mining pools.
Mining and Profitability
Cointelegraph predicts that in all probabilities, 2020 will be an onerous year for mining companies especially with the reduced rewards and increased difficulty following the Bitcoin halving of May 2020.
As such, the only path to generate more blocks and therefore make a significant profit is by gaining increased computational strength. However, maintaining a cost advantage through greater computing ability requires electrical power, infrastructural power, and human resource. Therefore, the bigger and more scalable the mining pool, the more the profit margin.
Enhancing Profits with Cryptocurrency Lending
Usually, cryptocurrencies like bitcoin are valued against other fiat or digital currencies like USD and so on. Thus, liquidating or selling them to pay for mining rigs and operations is not a profitable solution for most mining companies. However, with a lack of efficient and prudent solutions, mining pools are often forced to sell off their existing assets.
Presently, with the inception of DeFi protocols, the mining scene is witnessing a ray of hope. Mining companies are increasingly seeking bitcoin-collateralized cryptocurrency loans for meeting energy costs or funding their mining rigs. Consequently, lending platforms are beginning to customize their lending services, especially for mining companies.
Hybrid Bank — Innovating Solutions in Crypto Lending
Recognizing the disadvantage that mining companies face when they have to sell off their assets, Hybrid Bank offers them crypto-collateralized lending services. This allows miners to gain from their earnings, thereby envisioning the advantage of being able to keep the ownership of a company’s digital assets without having to liquidate. This further guarantees that even if yields generated collapse over time, mining companies will still have stability and anchorage to the benefits of their already-earned cryptocurrency rewards.
As a part of its diverse portfolio of lending services for individuals, mining companies, and exchanges, Hybrid Bank enhances the scalability factors of cryptocurrency mining companies through optimized Loan-to-Value rates. Holding true to the DeFi protocols, it is also a fully decentralized, transparent, permissionless, and censorship-resistant platform.