Bitcoin (BTC) miners have begun to express a number of concerns ahead of the next halving event, which is set to occur in April.
During the halving, the Bitcoin mining reward will be cut from 6.25 BTC to 3.125 BTC. Additionally, the Bitcoin network’s hash rate recently reached an all-time high, making it more difficult to mine a Bitcoin reward.
#Bitcoin\'s hashrate will hit one Zettahash by early 2026 if we continue the growth rate since 2023.
I\'ll be curious to see how much the halving impacts this, if at all. pic.twitter.com/lmsGEF8Aon
— Sam Wouters (@SDWouters) February 27, 2024
As a result, Bitcoin miners require more computing power to solve the cryptographic puzzles that underlie every Bitcoin transaction.
ASIC Shortage Underway
Due to this, many miners have started doubling down on energy efficient practices and infrastructure to ensure that their operations remain profitable post halving.
Yet the need for more computing power, coupled with Bitcoin’s rising price ahead of the halving, has led some infrastructure providers to believe that a shortage in mining equipment is on the horizon.
Demand for Bitcoin application-specific integrated circuit (ASIC) miners in particular has sparked concern amongst mining suppliers.
Taras Kulyk, Founder and CEO of SunnySide Digital – an infrastructure provider for the Bitcoin mining industry – told Cryptonews that if the upcoming halving cycle reflects the previous halving event, the industry is likely to see an era of ASIC shortages.
“The previous halving event resulted in many miners experiencing a situation where they had to go to an active secondary market to find readily available digital mining hardware from respected vendors,” he said.
Kulyk added that this shortage could become even more severe if Bitcoin’s price surges past $100,000.
“We may end up in a bull-market scenario similar to what the industry experienced in 2021, where ASICS were not easily available,” he said. “Miners liquidating their fleets and not taking advantage of hardware in the secondary market will likely be hit hard.”
Miners Start to Pay Premiums for ASICs
Unfortunately, ASIC scarcity has already begun to impact some of the largest miners in the industry.
For example, Bitcoin miner Riot Platforms recently reported in its annual investor K-10 report about a constrained supply of semiconductors needed to produce highly specialized ASIC machines.
Due to this, Riot and several other mining firms are being forced to pay premium prices for the dwindling number of ASICs available on the market.
This will no doubt be detrimental to the profitability of mining businesses, especially as computing power becomes more expensive and mining rewards decrease with the halving.
According to Riot’s report, ASIC chips are a key component of Bitcoin mining due to their specific design.
“We believe ASIC miners are the most effective and energy-efficient miners available today, and we believe deploying them at scale, including in quiet immersion-cooled environments, with their more efficient heat dissipation and reduced wear-and-tear compared to traditional air-cooled hardware, will enable us to continue growing our hash rate and optimize the output and longevity of our miners once they are deployed,” the report stated.
Interestingly, Bitcoin ASIC manufacturer Canaan recently reported its Q4 2023 earnings,disclosing that the company generated revenue of $49 million – a decrease of 16% compared to the same period in 2022. Canaan further noted that its ASICs were sold at lower prices compared to the market in 2022.
Phil Harvey, Founder & CEO of Sabre56 – a Bitcoin mining facility developer – told Cryptonews that this may be the case due to Canaan offering lower efficiency equipment.
“Canaan’s access to chips and supply isn’t as high as MicroBT or Bitmain,” he said. “Therefore, their quantity may be lower than large-scale miners’ requirements.”
New-Generation ASICs Come to Market
Harvey also pointed out that the industrialization of mining is underway – and he believes this is resulting in a reduction of older-generation ASICs for many suppliers.
Echoing this, Sanjay Gupta, Head of Strategy at Auradine – a Bitcoin mining infrastructure solution provider – told Cryptonews that he expects miners will need to replace older, less efficient mining hardware that will become uneconomical post-halving.
“With the increasing global hash rate, they will likely need to more than double their computational effort for the same block rewards,” said Gupta.
In order to accommodate this, Gupta explained that Auradine is advancing mining hardware solutions to boost energy efficiency in anticipation of the upcoming Bitcoin halving.
“The company focuses on incorporating cutting-edge ASIC chip technologies, emphasizing features like low-voltage operation and ultra-dense transistor designs,” he added. “By shrinking ‘process nodes,’ Auradine aims to integrate more transistors on a chip, enhancing computational power and energy efficiency.”
According to Gupta, this approach reflects Auradine’s commitment to addressing challenges brought on by the halving, where a doubling of computational effort requires a strategic focus on energy-efficient mining processes.
Gupta further shared that Auradine has been shipping its mining solutions in bulk quantities to miners across the world.
Upgrading Existing Mining Equipment
Although advancements are being made for ASIC mining solutions, Kulyk noted that he believes that the mining industry will face hardware scarcity post-halving regardless.
Due to this, he noted that SunnySide Digital is working with a number of miners to optimize their existing hardware solutions.
For example, Kulyk explained that SunnySide Digital has partnered with ePIC Blockchain – a mining control board and firmware provider – to ensure that enterprise clients have access to advanced solutions.
He mentioned that ePIC Blockchain has created a “UMC” control board that increases efficiency on existing Antminer mining hardware. Kulyk commented that SunnySide Digital has begun to incorporate this into used equipment that the firm will resell on a pilot basis, which may expand based on market uptake.
“To date, we’ve sold almost 20,000 units to our ecosystem and there are numerous discussions for ongoing, larger orders,” said Kulyk. “There are numerous technology offerings that allow existing digital mining fleets to be optimized using hardware augmentation and firmware augmentation.”
Miners Must Be Energy Efficient Moving Forward
While miners need to be aware of infrastructure scarcity, another critical point is ensuring that operations are energy efficient. This will help miners remain profitable as Bitcoin rewards decrease and energy consumption rises.
“The upcoming halving has already impacted the U.S. digital mining sector with the scarcity of financing, greater focus on treasury management, as well as the deleveraging of balance sheets across the sector,” said Kulyk.
To put this in perspective, Kulyk noted that large, publicly traded miners like Core Scientific have been pushed into bankruptcy, yet are now reemerging with a new focus on operational efficiency.
However, challenges remain for miners, as Harvey pointed out that the energy market globally is under advanced scrutiny.
“The Energy Information Administration (EIA) has been issuing letters to request for power consumption for Bitcoin miners and data centers,” he said.
Harvey further noted that there is currently a vast lack of power generation to satisfy future growth across all industries that rely on energy.
“Basin Electric, which covers North Dakota, South Dakota, Montana, Nebraska, and Wyoming, has raised its rates and abolished the peak power/curtailment rate,” he noted as an example. “The power rate has gone up and we estimate that over 100 MW of miners have now been affected by this rate change, rendering any future mining in the states under Basin unfeasible.”
While this may be, it’s noteworthy that some Bitcoin miners are still opening new facilities.
Haris Basit, chief strategy officer at Bitdeer — a publicly traded mining service provider — told Cryptonews that Bitdeer has over one gigawatt of new facilities planned over the next 24 months.