Google announced a new quantum computing chip called Willow, and doomsayers already think it could break Bitcoin in at least two ways.

According to Google, Willow can solve in five minutes a problem that would take most supercomputers 10 septillion years to solve. Critics say that this power could overtake Bitcoin’s hashrate in a matter of minutes, rewrite the Bitcoin blockchain, or even steal Satoshi Nakamoto’s coins.

The price of bitcoin (BTC) dipped slightly yesterday around the time of Google’s 4pm post-market announcement and over the past 24 hours, remains around 3% lower.

Willow reportedly reduces the rate at which qubits “leak” information to the outside, non-quantum environment, improving the chip’s ability to retain information needed for quantum computations. This improves the new chip’s ability to remain quantum instead of becoming a classical chip after too much data leakage.

With its breakthrough, Google moved quantum computing one step closer to becoming a practical reality and potential threat to Bitcoin’s security.

The first threat would be to Bitcoin’s mining network. Bitcoin is secured by a globally distributed network of computer operators who expend time, electricity, and machinery to hash numbers and compete for the right to add and order new transactions atop Bitcoin’s blockchain.

If a quantum computer could suddenly perform most of this computational work at a fraction of the network’s existing time, electricity, and machinery, that computer could overtake the network and censor, reorder, or even double-spend BTC transactions.

Read more: Crypto reacts to superconductor claims that made front-page news

Could Willow steal Satoshi Nakamoto’s bitcoin?

Beyond a hashrate takeover, the second threat people flagged was to Satoshi Nakamoto’s BTC. The Bitcoin creator still owns over 1 million BTC and used a rudimentary pay-to-public-key (P2PK) format to store unspent transaction outputs (UTXOs), which reveals the public address on-chain.

Because Satoshi’s public keys are public, this could give a quantum computer a chance to crack its associated private keys with brute force effort.

Unlike classical chips, quantum chips could execute an exponential amount of computation — as evidenced by Google’s reduction of a 10-septillion-year task to five minutes.

Bitcoin developers abandoned the P2PK format for a system that only reveals the public address during a transaction. Even then, the modern format generates a hash of a hash of the public key receiving the coins.

This not only improves privacy but also limits the allure of brute force attacks, since the attacker would have to decrypt the public key first, and then further proceed to decrypting its private key.

In short, modern standards reduce the chances of exposing the actual public key during most BTC transactions and are, therefore, more quantum-resistant than earlier standards. However, Satoshi’s coins — all of which were mined prior to 2012 — are still vulnerable to this P2PK format attack.

Ava Labs co-founder Emin Gün Sirer recommended freezing Satoshi’s coins and sunsetting P2PK transactions altogether. He also, of course, boasted that he has a method to make digital assets more quantum-resistant.

However, no one has stolen Satoshi’s private keys yet.

Bitcoin hasn’t fallen to a quantum computer yet

Most people, even after Google’s announcement, still doubt that quantum computing actually poses any near-term threat to Bitcoin’s hashrate or Satoshi’s coins.

Google also plans to research potential real-world applications for Willow, which indicates that its accomplishments are impressive yet narrow in scope. It’s not quite ready to leave the lab yet, so to speak. 

It serves as a good reminder, however, to blockchain developers. It’s important to make digital assets more quantum-resistant, and Bitcoin will probably need to hard fork a protocol change in the future to adopt quantum-resistant cryptography.

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According to new research, it’s likely that Satoshi Nakamoto conducted a 51% mining attack on the network in its first year of existence.

An in-depth data review of 2009 blocks mined by Patoshi — a nickname for a frequent miner who embedded a non-standard use of ExtraNonce within coinbase transaction data — suggests it’s very likely that they used hash power to reorganize Bitcoin’s blockchain. 

In other words, as Bitcoin historian Pete Rizzo explained, when Patoshi occasionally took breaks from mining, their computer restart was “so powerful that the miner [Patoshi] simply overwrote blocks found by other miners in their [Patoshi’s] absence.”

A 51% attack is exactly what it sounds like — achieving 51% control of the Bitcoin network, measured by hash rate, to overpower other miners and regain control of new transaction confirmations.

Patoshi — a portmanteau of ‘pattern’ and ‘Satoshi’ — was mining in 2009 when it was extremely likely that Satoshi Nakamoto owned the only computer connected to the network. This has led many people to conclude that Patoshi and Satoshi were the same person.

More detailed analysis by Wicked Smart Bitcoin this week that builds on Lerner’s research also suggests that Patoshi probably conducted a 51% mining attack during 2009.

Because Bitcoin has always been a proof-of-work (PoW) blockchain, whichever miner works the hardest earns the right to mint coinbase rewards and add transactions to the ledger. During Patoshi’s breaks from mining, no other miner completed enough hashing work to prevent them from returning and taking back control.

Satoshi’s ‘51% attack’ was an attack in name only

It is important to note that bitcoins had no value in 2009, so the attack was a stress test and not for financial gain.

Although the actions of Patoshi, who was likely Satoshi, meet the definition of a ‘51% attack,’ that term is a poor characterization of what occurred. Again, because bitcoins had no financial value at the time, the conduct was simply for research purposes or inadvertent. 

Indeed, Satoshi had one of the only computers connected to the Bitcoin network in early 2009 during these blockchain reorgs. Among other research pursuits, Satoshi also seemingly tested the Bitcoin network’s Difficulty Adjustment by varying hash power contributions in 2010.

All of these actions occurred while bitcoins were free. To be clear, miners could earn coinbase rewards for mere pennies worth of electricity, and Martti Malmi gave away 30,000 bitcoins via a free website ‘faucet’ throughout 2010.

Read more: High severity bug in Bitcoin Core affects 17% of full nodes

So while it might be true that Satoshi carried out a 51% attack on Bitcoin, it would have yielded no immediate financial gain. To this day, Satoshi has sold nearly zero of the 1.1 million coins mined during the first two years of the currency’s existence.

As Wicked Smart Bitcoin summarized to Protos, “While Satoshi shepherded Bitcoin through its first year of existence, it looks like he may have conducted some real-world stress tests such as the reorgs in May 2009 and purposefully orchestrated downward difficulty adjustment in May 2010.

“None of these acts seemed malicious in nature but were rather to check the integrity and robustness of the system he had built.”

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In a recent viral video, HBO talk show host Bill Maher wholeheartedly broadcasted his belief that crypto mining consumes 8% of world electricity production. Unfortunately for Bill, that’s completely untrue.

In fact, the real figure is less than 1%. Estimates range from 90 to a maximum of 240 terawatt-hours (TWh) per year, with most estimates for worldwide bitcoin mining in 2023 nearer to 121 TWh. Even the US Energy Administration estimates somewhere in the region of 120 TWh.

Although significant, this figure isn’t even a single percentage point of global electricity consumption in 2023, which totaled over 27,000 TWh. Even using the highest, 240 TWh figure, crypto mining’s electricity consumption would still be below 1%.

Maher broadcast the claim across national television and internet streaming services, including in posts to his 10.8 million followers on X (formerly twitter) and 938,000 on Instagram.

Viewers dunk on the talk show host

Comments rained in — many laughing at Maher’s obvious error. “This has been debunked at length,” wrote Fil Hanson on Instagram. “This is embarrassingly wrong and reflective of your ignorance of the topic,” added Todd Leonardi. “Reiterating a talking point without any research into it,” lamented Matt Blumenberg.

Read more: Bitcoin mining is more difficult than ever

On X, Bitcoiners attempted to ratio Maher’s post with comments like “You’ve embarrassed yourself on live TV well done” and “This is embarrassing, even for you.” 

Maher’s social media accounts, which are likely controlled by an agency, have not responded to any of the criticisms. Protos reached out to Maher for comment but hadn’t received a response prior to publication time. 

A single crypto asset, bitcoin, consumes more than 90% of all electricity production across all proof-of-work blockchains. That said, even tripling or quadrupling the highest estimates of crypto’s electricity use wouldn’t get anywhere close to Maher’s claim of 8%.

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In April, pseudonymous researchers Mononaut and 0xB10C confirmed a long-held suspicion that Bitmain influenced a concerning percentage of the bitcoin mining network. Today, follow-up research confirms the sway of Bitmain over ‘proxy’ mining pools.

Although bitcoin miners are technically able to switch mining pools as they wish, this research reveals that as a practical matter, many of them rarely if ever switch away from Bitmain-led work templates.

A detailed follow-up analysis applied a weighted similarity score of transaction ordering and block templates across 37% of Bitcoin’s hashrate. The analysis revealed that many supposedly independent mining pools are mostly passing along Bitmain-templated work to their miners.

Read more: New research suggests Bitcoin mining centralized around Bitmain

Specifically, Poolin and BTC.com are 99% and 98% similar to the Bitmain-operated AntPool.

Although these three mining pools are the most similar, there are even more proxy-like relationships with others. Blocks produced by pool operators Ultimus, Braiins, Binance, and Spider also have over 80% correlation to this Bitmain-led trio.

It has never been a secret that Bitmain manufactured the world’s overwhelming, physical majority of bitcoin mining machines. However, its lesser-known role in the day-to-day operations of bitcoin mining pools is now under scrutiny thanks to original research by 0xB10C.

The ongoing research series by 0xB10C and Mononaut is careful to disclaim that the similarity of work across pools and miners accepting block templates from Bitmain entities does not necessarily indicate that Bitmain controls their work.

Indeed, miners often accept Bitmain defaults and block templates out of convenience — not because they are succumbing to an explicit directive.

0xB10C operates Bitcoin network monitoring tools like miningpool-observer and peer-observer, and fork-observer. The researcher is also a long-term recipient of a philanthropic grant from OpenSats.

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Bitcoin’s mining difficulty is at all-time highs – and with it, the difficulty of turning a profit. Revenues from the computer rigs that secure the world’s most valuable blockchain are at 12-month lows.

Miners’ use of electricity – including its financial cost and environmental impact – is at an all-time high. Worse, this top expense of mining companies is accelerating. Since the beginning of 2023, Bitcoin’s hashrate increased 91% from 256 exahashes per second to a record 746 exahashes per second this month.

A smoothed trend line of hashrate, which varies considerably day-to-day, trends up-and-to-the-right along a rarely interrupted vector.

Read more: Tether-owned Northern Data accused of fraud by former execs

Earlier this year, the hard-coded reward for solving Bitcoin’s computational puzzle halved from 6.25 to 3.125 BTC per block of transactions. That instantly reduced miners’ revenue – which is at a 12-month low.

Making matters worse, Bitcoin’s difficulty adjustment adjusts upward as more mining rigs come online. Yesterday, it upticked 3.58% to another all-time high, further reducing the expected reward for newly deployed mining rigs.

Amid all of these costs, bankruptcies and financial troubles at mining companies are proliferating.

Rhodium declared bankruptcy and is trying to sustain operations via debtor-in-possession financing. As of their latest quarterly reports, Core Scientific, Griid, Greenidge Generation, and Argo Blockchain all admitted to owing more debt than assets. The founder of BitFarms resigned a month ago.

Of the 24 largest publicly traded bitcoin miners, 20 have declined in price over the past 30 days.

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Much like hopeful lottery players who play despite knowing the odds are stacked firmly against them, there are still bitcoin miners who refuse to join a conventional mining pool.

Defiant, they choose to work alone — the solo miners of the Bitcoin network.

Solo mining is risky and mathematically irrational. Almost every miner joins large pools — usually set up to benefit Bitmain — for their predictable revenue. The chances of correctly solving Bitcoin’s mathematical puzzle working alone are nearly 0%.

Yet ‘near zero’ doesn’t equal zero. Protos has put together a chart detailing when in the past 10 years, solo bitcoin miners have struck it lucky — click here to view.

Depending on the definition of a ‘solo-mined’ block, there might be fewer than 300 such blocks produced in the last decade of Bitcoin’s existence. According to a March 10, 2023 estimate, solo miners’ luck had dwindled to one block every 10 months on average.

To put that single block into context, conventional pools usually mine 43,200 blocks every 10 months.

Others estimate the odds at even worse than that one in 43,200. Hass McCook of the Bitcoin Mining Council claimed the odds were “one in 1,400,000.”

However, neither of those estimates has predicted the 11 solo-mined blocks found within the past six months. Over the past few months at least, solo miners have been enjoying a hot streak of luck.

Read more: First bitcoin mining pool adds Stratum V2 feature to circumvent Bitmain

So, how many total blocks have solo miners mined since Satoshi Nakamoto disappeared in 2011? Cointelegraph estimated the number of solo mined blocks at just 270 as of March 2023.

However, it’s impossible to know the exact number. First of all, miners don’t have to disclose their membership in any pool. Although solo blocks are usually obvious by their irregular data, sophisticated solo miners could attempt to disguise their rogue block by using lookalike templates and headers.

The very non-pool-like ‘pool’ for solo miners

The vast majority of blocks discovered by solo miners in the past decade have come from the Solo CK Pool.

A mining ‘pool’ only by the strictest of definitions, Solo CK is, in effect, a non-pool service for solo miners who aren’t hyper-privacy conscious. Unlike a pool, miners who point hash rate to the service pay for 100% of their own mining costs, receive $0 compensation for working without mining a block, and receive 98% (less a 2% convenience fee) of their coinbase reward when they mine a block.

Retrieving all blocks tagged ‘Solo CK Pool’ reveals 275 solo-mined blocks — possibly the majority of what is likely a maximum of a few hundred solo-mined blocks since 2011.

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Swan, a firm focused on offering Bitcoin financial products, is abandoning mining, shelving its planned initial public offering (IPO), and laying off employees, according to a post on X (formerly Twitter) by the firm’s CEO Cory Klippsten. 

Swan’s managed mining business targeted large institutional investors with the opportunity to partner with it and invest in mining facilities. The initial announcement of this product noted that Tether had “already dedicated substantial capital to establishing a major presence in bitcoin mining, much of it through Swan.”

In a statement to Protos, Tether said, “Tether’s hosted contracts with Swan’s mining entity are unaffected and we do not expect any interruptions. The team running such operations is segregated and will continue operating normally.”

Apparently, despite the partnership with Tether, the unit has failed to deliver on Swan’s “expectation of significant near-term revenue.” This apparently led to the decision to delay an apparently planned IPO.

The post also notes that Swan has had to perform a ‘staff reduction’ this week, though numbers were not provided. At least one employee in an education role, Stephen Livera, took to X to state that his position had been eliminated.

Read more: Swan Bitcoin’s custodian now owned by Ripple — but execs have major beef

Despite Swan seeming to have some issues, Klippsten still claims to believe “this is an incredible moment in time for Bitcoin.”

Klippsten had previously criticized Celsius, one of Swan’s competitors, claiming that “the Celsius ‘mining IPO’ was always just marketing puffery.” Now he tells his followers that he will “see you on the battlefield. #TeamBitcoin.” 

Protos has reached out to Swan to determine how ending the managed mining program will affect partners, and how many employees were laid off, and it directed us to Klippsten’s post on X.

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Ask most active crypto traders to define MEV, and they’ll likely recall the acronym ‘Miner Extracted Value’ or use a phrase like ‘the money that miners make by cheating at DeFi.’

Ask a more sophisticated user, and they would define it as ‘Maximal Extractable Value’ or the money made from block production by reordering, censoring, or adding transactions.

Finally, ask almost anyone if MEV occurs on Bitcoin, and they’ll probably say no, MEV is mostly on Ethereum or Solana. However, MEV does exist on Bitcoin. In fact, Bitcoin is the first blockchain that had MEV.

MEV on Bitcoin #1: Full RBF

In modern mempools — queues of transactions awaiting inclusion in a block — modern pool operators select the transactions that bid the highest transaction fees. This wasn’t always the case.

Bitcoin’s first block construction policy was First Seen, an altruistic policy by early miners who believed that it was worth sacrificing a bit of profit in order to provide a better experience to merchants accepting bitcoin payments. 

At the time, the Bitcoin community was concerned about small business adoption, with ‘Bitcoin Jesus’ Roger Ver evangelizing bitcoin point-of-sale terminals and apps to business owners. In order to make their experience of receiving an on-chain payment more seamless, miners vowed to include transactions in the block in their received order. 

‘First Seen’

Because the mining policy was First Seen, merchants could simply monitor a public mempool, see that the customer broadcast a valid transaction, and render the good or service immediately — trusting that miners would include the customer’s transaction in the next block, even if it took an average 10 minutes to mine each one.

Although this policy benefitted merchants, the First Seen policy was ludicrously altruistic. Soon, rogue miners started accepting Replace By Fee (RBF) transactions, thereby overriding a First Seen, lower fee-bidding transaction with a ‘later seen,’ higher fee-bidding transaction.

This was the first instance of MEV on bitcoin. Mining pool operators began searching for RBF to maximize profitability.

As a practical definition, MEV is the extra money available from producing blocks by overriding the defaults of node software. By manually rewriting their Bitcoin Core node to prioritize higher fee-bidding transactions, these RBF miners earned Bitcoin’s first MEV.

Soon, the simple economics of this practice overtook a majority of the Bitcoin network. Full RBF became commonplace, deprecating First Seen entirely. By default, bitcoin mining pools now honor RBF flags and accept higher fee-bidding transactions, even if valid, conflicting transactions arrive earlier.

Early bitcoin miners would call today’s commonplace practice of Full RBF to be Miner Extracted Value. Nowadays, people consider it standard practice.

Read more: US indicts Ethereum validators for exploiting MEV trader

MEV on Bitcoin #2: Out-of-band payments and non-standard transactions

There is another method for bitcoin miners to earn MEV: rewriting the defaults of their full node to include non-standard transaction types when constructing blocks.

Consider block 774,628, a non-standard block produced by mining pool Luxor which contains only one transaction, a 3.94MB picture.

The picture, a modified version of the ‘Magical Internet Money’ meme from the r/Bitcoin Reddit, was an advertisement for an NFT collection. The community dubbed Luxor’s block, containing the largest transaction in Bitcoin history by file size, ‘The Big Wizard.’

There were two non-standard characteristics of this block. First, Luxor manually overrode its node defaults to allow a single transaction to exceed Bitcoin Core’s then-customary size limit. The transaction used a clever amalgamation of Bitcoin’s Taproot and SegWit upgrades to stuff an enormous amount of image data into a single transaction.

Although the transaction was valid according to consensus rules, the miner had to manually construct a block to accommodate its non-standardness.

Second, The Big Wizard paid only a couple hundred dollars (‎0.009 BTC). Instead of bidding according to the customary, on-chain process, this user paid Luxor outside of the transaction (in cash, via another transaction, or otherwise). Censoring other transactions to include a lower fee-bidding transaction because of an out-of-band payment is MEV.

Again, MEV is the extra money available from producing blocks by overriding the defaults of node software. In this case, Luxor received MEV not only by manually overriding file size defaults but also by receiving out-of-band payment.

MEV on Bitcoin #3: Stacks reward

A third-party blockchain, Stacks, has a peculiar auction that allows bitcoin miners to earn MEV. The relevant details are simple. Stacks has its own blockchain that pays a reward in its native token, STX, to users who contribute bitcoin to its auction wallets.

Miners discovered this simple process and quickly began extracting value. The path to profit was simple: censor others’ bitcoin contributions, contribute a trivial amount, win the auction, and sell the STX payout.

Censoring others’ bitcoin transactions to prioritize miners’ transactions to extract value from an on-chain auction is a quintessential form of MEV on Bitcoin.

MEV on Bitcoin #4: Stealing free mints

The fourth type of MEV on Bitcoin occurs in one of the newest categories of bitcoin transactions: Ordinals. Ordinals software allows Bitcoin users to mint and trade fungible tokens like ORDI or non-fungible token collections like Bitcoin Frogs.

Founders of both fungible and non-fungible often promote their collections with a free mint: an opportunity for users to create an Ordinal without paying any fee or royalty. This provides them with an instant profit if the collection is listed at any price above their round-trip transaction fee on a secondary marketplace.

Free mints also enable another form of MEV on Bitcoin. 

Mining pool operators, operating their own mempools and easily able to scan for mint transactions in real time, can easily censor minting transactions and replace them with their own.

Sure, some Ordinals founders create rules to limit the number of free mints available at certain times or wallets, so not every free mint is fully vulnerable to MEV. Nevertheless, many free mints provide MEV opportunities to miners — especially popular and long-running Ordinals collections that have quick listings on secondary exchanges.

Similarly, many fungible Ordinals are listed on multiple, decentralized exchanges. If a Bitcoin user places an order that a miner can front-run, back-run, or sandwich, this is also an obvious vulnerability to MEV.

MEV on Bitcoin is concerningly centralizing

MEV is concerning not only because it steals money from everyday users but also because it’s a powerfully centralizing force. Indeed, MEV is a sophisticated suite of financial trading strategies. Counteracting MEV requires even more complicated software, infrastructure, and R&D expenditures.

Long-time Bitcoiner Eric Wall summarized the four types of MEV that are making bitcoin miners extra profit, outlined and expanded in detail above.

Because MEV rewards quantitative traders, high finance, and other Wall Street-type behavior, MEV steadily extracts money and power away from average users into the biggest mining pools.

In other words, MEV exists on Bitcoin, and that’s not good for decentralization. Sure, the dollar value of MEV on Ethereum and Solana is much larger than on Bitcoin. Nevertheless, as layer 2s, sidechains, DEXs, and other types of Ethereum-like projects join Bitcoin, MEV will increase — and with it, centralization.

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Kerrisdale Capital’s Sahm Adrangi, who has been earning something of a reputation in the crypto industry, has short-sold Riot Platforms (NASDAQ:RIOT). RIOT was trading at $9.85 per share when Adrangi tweeted a couple minutes prior to NASDAQ’s 9:30am open. Within an hour, it had dropped 10% to $8.84. 

The move seemed to vindicate the privileged, Miami Beach-based fund manager, whose aggressive media appearances have given the crypto community little reason to support him. Indeed, until now, he’s perhaps best known for making a few million dollars flipping a mansion and getting arrested at 3am in the Hamptons on charges of driving while drunk and high on cocaine.

Adrangi’s initial capital came mostly from his family, with a New York Magazine profile revealing that he started in 2009 with “$300,000 of his and his parents’ money.”

On Wednesday, he equated his unremarkable stock trade to “a war against bitcoin miners” and called the workers who secure the world’s most important blockchain “an industry of snake oil salesmen that are incinerating both investor capital and the environment.”

Read more: Is Tether becoming Bitcoin’s most influential miner?

Critics respond to Kerrisdale Capital report on Riot Platforms

Critics have labeled Adrangi a Karen and laughed at his fund’s underperformance. They highlighted his losing trades, such as his short-sale of Uranium Energy Corporation on March 23, 2023, which has doubled in price since he bet against the company.

In his report, Adrangi wrote that “Riot incinerates cash” and correctly noted that it has “increased its shares outstanding 6-fold” via dilutive share offerings. Because Riot has diluted its shares, its price has declined 43% year-to-date despite bitcoin itself rallying 60%. Adrangi predicts that Riot will continue to dilute shareholders indefinitely.

Bitcoin miners responded to some of the allegations in Kerrisdale Capital’s report. A miner who worked inside Riot’s Rockdale mine debunked Adrangi’s safety concerns around fluid flammability and arc flashes and called Adrangi’s complaints about the company’s receipt of Texan government subsidies via ERCOT ​​naïve. Overall, the miner predicted Kerrisdale would lose money on its short-sale.

After the first hour of trading down in response to the report, Riot shares steadily recovered. As of pre-market trading on Friday, the stock was back to $9.49 — barely changed from the initial report and well within the range of the past 30 days.

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Ask a typical Bitcoiner to name the most influential mining company, and they would almost certainly name Bitmain. The company is by far the world’s dominant mining rig manufacturer and leads a near-majority of mining pools: Antpool and its many sockpuppets.

Quietly, however, stablecoin giant Tether has been increasing its influence with a variety of bitcoin miners across the globe.

The stablecoin giant recently invested $100 million in Bitdeer, a publicly traded company operated by a Bitmain co-founder, and it’s also the leading investor in Blockstream, Bitcoin’s leading development company.

Funded partly by Tether, Blockstream has an operating mining division and a dedicated purchasing division that securitizes Bitmain mining rigs. Bitfinex, Tether’s sister exchange, is the trading venue for the Blockstream Mining Note.

Tether has also either invested in or funded :

• Salvadoran bitcoin mine Volcano Energy
• A Bitcoin mine in Uruguay.
• Swan Mining, which has deployed over $330 million from Tether and other investors. Tether also partners with Swan in its managed mining service.
• German bitcoin miner Northern Data AG. It bought equity in the company and established its €575 million debt facility in November.
• Bitcoin miner ZettaHash.

Tether also has a mining-like operation called Luganodes focused on the Tron blockchain.

Read more: First bitcoin mining pool adds Stratum V2 feature to circumvent Bitmain

Profits from Tether capitalize bitcoin mines

In all, Tether has seemingly made good on its promise to invest at least $500 million into bitcoin mining over the past six months. If that pace of investment continues, Tether could become one of Bitcoin’s most influential mining companies.

Of course, the bitcoin mining industry isn’t large enough to absorb much more than a few billion dollars in annual investment. Total bitcoin miner revenue for an entire year is approximately $16 billion. The market capitalization for all mining companies is a single-digit multiple of that revenue.

The largest bitcoin mining companies, including Foundry, ViaBTC, CleanSpark, Marathon, Bitdeer, Riot, and MicroBT, boast values ranging from the high hundred millions to low-single digit billions. The largest company, privately held Bitmain, has sought financing at a valuation exceeding $40 billion.

One of the most profitable companies per employee in the world

Tether claims to be one of the most profitable companies per employee in the world. It reported a profit of $4.5 billion in Q1 2024, a number that exceeds the $4.3 billion in net income for the largest company in the US by assets, Fannie Mae.

Tether employs about 100 workers while Fannie Mae employs 8,100. Both companies expect to earn tens of billions of dollars in profit this year.

Of course, Fannie Mae uses the US ​​Financial Accounting Standards Board-controlled term ‘net income’ on its SEC Form 10-K when reporting its $4.3 billion in profit. Tether, in contrast, simply reported $4.5 billion in ‘profit,’ without adhering to any particular definition of that term.

If the two quarterly ‘profit’ numbers are comparable — and only Tether knows if they are — Tether claims $45 million in quarterly profit per employee versus Fannie Mae’s $530,000.

Indeed, interpreting Tether quarterly reports is more art than science. The company has never released audited financials and its executives consistently use non-standard words and phrases that don’t conform to US accounting standards.

For example, all of the information in Tether’s quarterly attestation ‘is not financial statements of Tether Holdings Limited’ yet is somehow ‘financial information extracted from its accounting records,’ whatever that means.

In any case, Tether generates an extraordinary amount of profit from interest on its reserves backing USDT and other stablecoins. Because its stablecoins are not yield-bearing for token holders, Tether simply keeps all interest income itself as corporate profit.

The company claims to hold over $112 billion worth of interest-bearing assets yet pays $0 in interest to tokenholders. Needless to say, that provides plenty of profit for Tether to invest in the bitcoin mining industry.

UPDATE 19:17 UTC, December 3 2024: Updated the piece for clarity.

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