BT Daily News: How Bitcoin Ordinals Can Chance the Future of Mining, and more
1. How Bitcoin Ordinals Can Chance the Future of Mining, and more
BACKGROUND ON BITCOIN MEVThe Bitcoin network today is not a total MEV wasteland — but it is still very early.
“There’s more MEV on Bitcoin than Bitcoiners like to acknowledge,” Robert Miller, product lead at FlashBots, said on a live stream about MEV. “And there’s some MEV in Bitcoin that just isn’t really being exercised by miners right now,” he added.
For example, Lisa Neigut, a Lightning Network engineer at Blockstream, broadened the Bitcoin overton window on MEV with an article about Lightning Network MEV. Neigut theorizes about opportunities for searchers and miners from Lightning Network use, and she considers how searchers on Bitcoin may impact on-chain transactions for Lightning Network channels.
For now, most MEV conversations center around non-Bitcoin networks like Ethereum. But a robust decentralized finance ecosystem built on Bitcoin can quickly change that. A sustained on-chain craze of NFT-related activity could have the same effect. For example, one particularly well-known instance of NFT MEV (on Ethereum) occurred when a searcher paid $7 million to buy every Cryptopunk NFT at their floor prices.
UNPACKING THE BITCOIN NFT CRAZE
Bitcoin historians know that on-chain collectibles and art originated on Bitcoin. In December 2012, Meni Rosenfeld published “Overview Of Colored Coins,” which explained that “it is possible to color a set of coins to distinguish it from the rest.” And NFTs were born.
Casey Rodarmor kickstarted the modern era of Bitcoin NFTs with his ordinals.com inscriptions project. In a blog post explaining inscriptions, Rodarmor explained that, “Inscriptions are digital artifacts native to the Bitcoin blockchain… They do not require a separate token, a side chain, or changing Bitcoin.”
Images, audio, video, HTML, SVG, JS, CSS — anything can be an inscription transaction. Some node operators even inscribed seed phrases on the blockchain. (Listen to Rodarmor’s interview on the Galaxy Digital podcast for more information on his journey to launching Ordinals.)
Taproot — the highly anticipated Bitcoin upgrade that went live three days after Bitcoin notched its all-time price high of $69,000 — is largely credited with the on-going burst in on-chain NFT activity in Bitcoin. But components of the protocol’s SegWit upgrade several years earlier created the landscape for excess data to be stuffed into Bitcoin blocks. Speaking candidly, Eric Wall wrote on Twitter that the entire craze is “essentially possible by mistake.”
CRITICISM OF BITCOIN ORDINALS
For every person who thinks the Ordinals project is exciting and entertaining, at least one Bitcoin enthusiast is staunchly opposed to the idea. A multitude of leading voices from the Twitter-based Bitcoin community have pulled no punches expressing their view of stuffing JPEGs into Bitcoin blocks.
For example, a notorious Bitcoin polemicist who uses the pseudonym Mr. Hodl expressed his disapproval of Ordinals by saying, “I'd censor the shit out of anyone that clogged up the chain.” Blockstream CEO Adam Back also reminded his followers in a now-deleted tweet that these Bitcoin-embedded NFTs are “fair game for miners to censor the crap as a form of discouragement.” Bitcoin Twitter personality Pierre Rochard joined the melee by suggesting with apparent snark that node operators who inscribed an NFT on Bitcoin should “apologize to your node and don’t do it again.” Jimmy Song, former partner at crypto fund Blockchain Capital and a former advisor at now-shuttered crypto exchange LVL, simply tweeted, “Luxor will be punished by the market.”
Alex de Vries, a long-time Bitcoin cynic and purported environmentalist, joined these pro-Bitcoin personalities in their harsh criticism of Ordinals. Taking to LinkedIn, de Vries claimed that the “carbon footprint” of the famous block mined by Luxor was “equivalent to the per passenger carbon footprint of taking a flight from New York to Tokyo and back 446 times.” (It should be noted that de Vries is not known for his intellectual rigor.)
Top Crypto Miner At Record Bitcoin Production, Bear Market Over?
The Bitcoin (BTC) mining and data center hosting company Riot has recently announced its production and operations update for January 2023. It has produced a new all-time high of 740 Bitcoin in the last month.Can the recent reports of eased inflation and the change of tightening policies by the Federal Reserve (FED) in 2023, plus the return of capital to the crypto market, be a sign of the end of the bear market and the renaissance of the new bull cycle?
After the reeling collapse of the crypto exchange FTX and the crypto winter, Riot faced intense headwinds. The mining difficulty rose against Bitcoin prices, which fell almost 64% in 2022.
With the new year and the favorable conditions of the global economy, companies like Riot have increased their mining production considerably following the Bitcoin price action.
Riot has been able to increase its Bitcoin mining production by 62% in comparison with January 2022. Last month they produced 740 BTC, a substantial change from January 2022 of 458 BTC.
According to the Riot report, the company currently held approximately 6,978 BTC as of January 31, all produced by the company’s self-mining operations. Furthermore, Riot sold 700 BTC in January, generating net proceeds worth $13.7 million.
Riot reached a goal of 12.5 exa hashes per second (EH/s) in total hash rate capacity in Q1 of 2023. Still, due to recent damages and difficult weather conditions in Texas in late December, this is expected to be delayed by the company.
After the range formed in most of 2022, Riot’s stock price has increased considerably since January 2023 despite losses in infrastructure and the delayed increase of production from the company. RIOT is currently trading on the Nasdaq for $6.70.
As the number of hashes generated and solved per second increases, so does the hash rate of the Bitcoin network. As the number of hashes increases, so does the security of the Bitcoin network. And with the recent capital flowing into the most prominent cryptocurrency on the market, as revealed by a CoinShares report, it is a sign of improvement for 2023 in Bitcoin price action and the start of a new trend.
Following a month with high volatility, Bitcoin is consolidating above its support level of $22,600. Currently trading at $23,000, Bitcoin aims at the resistance wall of $24,200 to reduce the bull trend and break new levels.
Heartland Energy Intern Will Analyze and Report on Bitcoin Mining Impacts on Public Power
South Dakota-based Heartland Energy is seeking applications for a summer Intern who will analyze and report on the impacts of bitcoin mining operations on public utilities.“The successful candidate will work directly with our Operations team, having the opportunity to advance their knowledge and gain experience working in the wholesale power industry,” the job description for the position notes.
Heartland Energy provides wholesale power to public power communities across South Dakota, Minnesota, Iowa and Nebraska. Based in Madison, SD, Heartland Energy also provides a suite of customer service programs including economic development, energy efficiency, cybersecurity and more.
As Heartland Energy is approached with large economic development loads, “we often ask ourselves which customer systems can handle a large addition to their system,” said Nate Jones, Chief Operations Officer at Heartland Energy in response to questions from Public Power Current.
“In addition, it is highly likely that we don’t know the limit that our municipal systems can handle. Many times, we have to respond that our customers wouldn’t be capable of supplying that type of load without significant infrastructure improvements,” he said.
“But in the end, we don’t have any real answers as to what portions of the system would need to be upgraded and what the cost of these upgrades would be. To complicate things further, bitcoin mining operations are looking for short-term deals likely not wanting to pay back lofty infrastructure costs over long periods of time,” Jones said in an email.
Heartland Energy hired a consultant “to tell us what our municipal systems were/are potentially capable of for load additions without the need to add a substation or make major upgrades. For example, perhaps Customer A can handle a 2 MW load addition, but this same load would push Customer B to a breaking point,” he said.
The internship was designed to fill in the gaps for Heartland for those customers that it didn’t have data for. “The intern would be doing data gathering on the following pieces of information and performing a simple analysis (power system study) to determine the headroom on each system.”
Jones said that the intern will deliver a final report to Heartland Energy at the conclusion of his or her internship.
“We like all of our interns to deliver an end of the summer presentation and report to staff and our Board,” he noted.