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CryptoSuperNinthList-Nov2022.pdf

Our Ninth CryptoSuper500 list. As of this report the economic value of newly generated Bitcoin has dropped to $6.2 billion from $9.7 billion since OrionX’s prior report in June of this year. Ethereum mining was also generating $9.4 billion in value at that time, but that has collapsed to zero as of mid-September with the Merge and full conversion to proof of stake. Since our first list, produced four years ago, global hash rate has increased by a factor of 5.2 in four years, for a compound annual growth rate (CAGR) of 51%. Bitcoin’s value is up more modestly, with a CAGR around 25% since November 2018, but the price remains highly volatile; very recently volatility has been similar to that of the NASDAQ stock index. This presentation and the full research report for the ninth CryptoSuper 500 list (available at orionx.net/research-reports) provide analysis of the technologies and trends surrounding proof of work cryptocurrencies. This is not, and must not be considered as, financial, investment, or legal advice. The author has investments in Bitcoin and several Bitcoin mining companies.

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@OrionX_net
November 2022
Stephen Perrenod
CryptoSuper 500 – Ninth List
Top Cryptocurrency Supercomputers
@OrionX_net
©2022 OrionX.net
Digital Money or
Digital Property
Store of value
Safe?
Unit of account
Supply?
Medium of exchange
Stable?
Money 3.0 is:
Money in the Internet
“Money has become
information. Bitcoin is energy
securely encapsulated as
information. Electrons to
eternal bits.” - @moneyordebt
a 500-year advance in accounting with
triple-entry ledgers on a timechain
Money 3.0
@OrionX_net
©2022 OrionX.net
✦ Bitcoin and cryptocurrency represents technology for Money
3.0
– 0.x – shells, beads
– 1.0 – gold and silver coins
– 2.0 – national fiat currencies
– 3.0 – Decentralized digital Money stored in, sent across the Internet
– Some might say cryptocurrencies are simply digital assets
✦ Most of the current 21,000+ coins will prove to be worthless in
the long run, the distribution of market cap falls off very
steeply (power law index -1.57 of the ranking)
✦ Very few use Proof of Work
✦ Surprise: your Bitcoin is not in your hardware wallet or paper
wallet. That just holds the keys.
OrionX position
Money 3.0
@OrionX_net
©2022 OrionX.net
▪ It’s not either/or with blockchain and bitcoin, it’s both
▪ They are each layers in an integrated stack
▪ Blockchain (or timechain) is the triple entry ledger of
chained transaction blocks: sender wallet, blockchain,
receiver wallet
▪ A consensus algorithm (e.g. Nakamoto) that enforces
security and prevents double spending is required:
Mining, it also enforces a monetary policy
▪ An incentive is required to cause the algorithm to be
computed and transactions added to the chain:
Cryptocurrency/Coin
▪ Smart contracts and second layer chains extend the
functionality and scaling for fast, small transactions
Blockchain or Bitcoin? Gold, Fiat or Bitcoin?
Table 1. Advances in monetary technology. Aristotle defined the first four attributes required for
money over two millennia ago. We have added Fungibility “one is as good as another” to the
table. Bitcoin is private, global money on a decentralized, highly replicated leger.
Monetary Technology Advances
@OrionX_net
©2022 OrionX.net
CryptoSuper
Methodology
✦ We only consider Reusable Proof of Work mined (minted) coins, since they are
the only ones using significant supercomputing power
– Non-mined coins usually use Proof of Stake, Pre-mining (“air drop”), or some Byzantine Fault
Tolerant algorithm. They either start with mining or an air drop
– The US $ started out as Proof of Work (mining, minting) then switched to Proof of Stake
(paper certificates against gold, silver) and now is an “air drop” of sorts, created by banks
when new loans are made, or fiscal debt monetization, backed by reserves at the Fed
✦ The mining protocols and hash rates vary in very large degree between coins
– Total Hashrate for Bitcoin is over 250 Exahash/s and other top coins are mostly in the
Terahash/s domain, considerably less
✦ Most RPOW coins require ASICs to be profitably mined, GPU mining still possible
with some
✦ We compare mining pools by using the Economic value of coins produced per
year = number of blocks mined x number of coins per block x price per coin and
adding transaction fee revenue
– Pools are aggregators of many sources of hash rate including their own, other businesses,
and individual miners. They act as brokers to share collective rewards in proportion to
hashrate contributed to a pool, for modest fees
✦ We tabulate pools that are responsible for over $50 million annual economic value
each in Bitcoin or Dogecoin. No other coins have pools that qualify
@OrionX_net
©2022 OrionX.net
Supercomputing for decentralized monetary network
Cryptocurrency
Mining is Green
Supercomputing
✦ Method: We estimate the annual economic value of mined crypto, only Proof of Work coins
✦ Bitcoin market cap $320 billion (November 11, 2022, 19+ million BTC at $16,800)
✦ Bitcoin daily production = $16 million (miners also receive $0.2 million in fees)
– money supply inflation under 1.8%, was cut in half in May, 2020
– 24 hours x 6 blocks per hour x 6.25 coins x $16,800
✦ Annual production run rate, Bitcoin, about $6 billion
✦ Ethereum #2 by market cap at $150 billion, has abandoned Reusable POW and moved to Proof of
Stake; it is no longer a mined coin or supercomputing application; large owners collect yield by staking
✦ Top Mining Pools produce revenue of $6.5 billion annually across top 2 mined coins, including new
coins and transaction fees. Very little revenue from the next few proof of work coins at current prices
✦ Bitcoin mining is cleaner than average global use of energy; also, Bitcoin, unlike most electricity
outputs, is not consumption, it is production that creates permanent value (mostly rising), only 1%
goes to transaction fees, 99% to new economic value
✦ In a press release and briefing of Q3 results, the Bitcoin Mining Council estimated that 59% the
industry’s electricity inputs are from sustainable sources, based on a survey of their miners
representing 45% of all Bitcoin hashrate. They report that Bitcoin mining uses just 0.16% of global
energy and responsibility for only 0.10% of CO2 emissions

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CryptoSuperNinthList-Nov2022.pdf

  • 1. @OrionX_net November 2022 Stephen Perrenod CryptoSuper 500 – Ninth List Top Cryptocurrency Supercomputers
  • 2. @OrionX_net ©2022 OrionX.net Digital Money or Digital Property Store of value Safe? Unit of account Supply? Medium of exchange Stable? Money 3.0 is: Money in the Internet “Money has become information. Bitcoin is energy securely encapsulated as information. Electrons to eternal bits.” - @moneyordebt a 500-year advance in accounting with triple-entry ledgers on a timechain Money 3.0
  • 3. @OrionX_net ©2022 OrionX.net ✦ Bitcoin and cryptocurrency represents technology for Money 3.0 – 0.x – shells, beads – 1.0 – gold and silver coins – 2.0 – national fiat currencies – 3.0 – Decentralized digital Money stored in, sent across the Internet – Some might say cryptocurrencies are simply digital assets ✦ Most of the current 21,000+ coins will prove to be worthless in the long run, the distribution of market cap falls off very steeply (power law index -1.57 of the ranking) ✦ Very few use Proof of Work ✦ Surprise: your Bitcoin is not in your hardware wallet or paper wallet. That just holds the keys. OrionX position Money 3.0
  • 4. @OrionX_net ©2022 OrionX.net ▪ It’s not either/or with blockchain and bitcoin, it’s both ▪ They are each layers in an integrated stack ▪ Blockchain (or timechain) is the triple entry ledger of chained transaction blocks: sender wallet, blockchain, receiver wallet ▪ A consensus algorithm (e.g. Nakamoto) that enforces security and prevents double spending is required: Mining, it also enforces a monetary policy ▪ An incentive is required to cause the algorithm to be computed and transactions added to the chain: Cryptocurrency/Coin ▪ Smart contracts and second layer chains extend the functionality and scaling for fast, small transactions Blockchain or Bitcoin? Gold, Fiat or Bitcoin? Table 1. Advances in monetary technology. Aristotle defined the first four attributes required for money over two millennia ago. We have added Fungibility “one is as good as another” to the table. Bitcoin is private, global money on a decentralized, highly replicated leger. Monetary Technology Advances
  • 5. @OrionX_net ©2022 OrionX.net CryptoSuper Methodology ✦ We only consider Reusable Proof of Work mined (minted) coins, since they are the only ones using significant supercomputing power – Non-mined coins usually use Proof of Stake, Pre-mining (“air drop”), or some Byzantine Fault Tolerant algorithm. They either start with mining or an air drop – The US $ started out as Proof of Work (mining, minting) then switched to Proof of Stake (paper certificates against gold, silver) and now is an “air drop” of sorts, created by banks when new loans are made, or fiscal debt monetization, backed by reserves at the Fed ✦ The mining protocols and hash rates vary in very large degree between coins – Total Hashrate for Bitcoin is over 250 Exahash/s and other top coins are mostly in the Terahash/s domain, considerably less ✦ Most RPOW coins require ASICs to be profitably mined, GPU mining still possible with some ✦ We compare mining pools by using the Economic value of coins produced per year = number of blocks mined x number of coins per block x price per coin and adding transaction fee revenue – Pools are aggregators of many sources of hash rate including their own, other businesses, and individual miners. They act as brokers to share collective rewards in proportion to hashrate contributed to a pool, for modest fees ✦ We tabulate pools that are responsible for over $50 million annual economic value each in Bitcoin or Dogecoin. No other coins have pools that qualify
  • 6. @OrionX_net ©2022 OrionX.net Supercomputing for decentralized monetary network Cryptocurrency Mining is Green Supercomputing ✦ Method: We estimate the annual economic value of mined crypto, only Proof of Work coins ✦ Bitcoin market cap $320 billion (November 11, 2022, 19+ million BTC at $16,800) ✦ Bitcoin daily production = $16 million (miners also receive $0.2 million in fees) – money supply inflation under 1.8%, was cut in half in May, 2020 – 24 hours x 6 blocks per hour x 6.25 coins x $16,800 ✦ Annual production run rate, Bitcoin, about $6 billion ✦ Ethereum #2 by market cap at $150 billion, has abandoned Reusable POW and moved to Proof of Stake; it is no longer a mined coin or supercomputing application; large owners collect yield by staking ✦ Top Mining Pools produce revenue of $6.5 billion annually across top 2 mined coins, including new coins and transaction fees. Very little revenue from the next few proof of work coins at current prices ✦ Bitcoin mining is cleaner than average global use of energy; also, Bitcoin, unlike most electricity outputs, is not consumption, it is production that creates permanent value (mostly rising), only 1% goes to transaction fees, 99% to new economic value ✦ In a press release and briefing of Q3 results, the Bitcoin Mining Council estimated that 59% the industry’s electricity inputs are from sustainable sources, based on a survey of their miners representing 45% of all Bitcoin hashrate. They report that Bitcoin mining uses just 0.16% of global energy and responsibility for only 0.10% of CO2 emissions
  • 7. @OrionX_net ©2022 OrionX.net Great Chinese Mining Shutdown ✦ The US is now the largest provider of Bitcoin mining power with a 38% share as of January 2022, following the Great Chinese Mining Shutdown of mid-2021. ✦ Rumors came out in late May 2021 about a Chinese crypto mining shutdown. This time it was serious. The ban rolled out province by province in the key mining provinces of Inner Mongolia, XinJiang, and Sichuan. The big blow came on June 19. ✦ Global hashrate has now exceeded prior high, miners in China sold or relocated many of their mining rigs. Some mining has restarted, presumably unregulated, such that China is #2 provider with 21% share (as of January 2022), followed by Kazakhstan with 13% and Canada 6%. Russia has dropped in share. ✦ These four countries provide over ¾ of all Bitcoin mining hash rate. ✦ This data comes from the Centre for Alternative Finance, U. Cambridge, based on monitoring four of the largest Bitcoin pools. ✦ Why ban mining? 1. limit capital flight 2. control electricity usage 3. better impose regulation and taxes if the ban is relaxed in the future 4. make space for the central bank digital Yuan e-CNY <—- the real reason
  • 8. @OrionX_net ©2022 OrionX.net ✦ A number of publicly traded Bitcoin mining companies have listed shares, these have market caps at or above ~ $20 million and produce 1/6 of all Bitcoin ✦ Most are HQ’d in the US and Canada, also UK, Australia ✦ Data from company web sites and Yahoo Finance, 11/3/22 ✦ If these and some additional Bitcoin mining public companies can implement their plans, by early 2023 they could have over 25% of global hash rate among them Publicly traded Bitcoin Mining Companies ✦ Table 2. The top publicly traded Bitcoin mining companies, some of these companies have other business lines, most are pure plays. In general, these are new businesses with significant venture capital invested and large capital expenses devoted to ramping up hashrate with new mining rigs, so although they may have good operating margins on mining most are not profitable. Many of these are also keeping much of the Bitcoin they mine in their treasuries. Data from Yahoo Finance on 11/3/22 , hashrateindex.com, and company websites. Company Market Cap $Million Earnings 2021, $M Stock Price $ Hash Rate plans in Exahashes/sec Bitcoin Held Daily Bitcoin mined Argo Blockchain 41 31 0.86 215 MWatts (up to 7?) 1,295 8 Bitfarms 185 22 0.90 4.2 now 5,243 16 Cipher Mining 235 -80 0.95 1.3 now, 6.9 early 2023 N/a 4 Clean Spark 141 -22 2.99 2.9 N/a 12 Core Scientific 60 47 0.16 13 now, 17 by year end 1,959 41 Hive Blockchain 244 80 (Fy end March 2022) 2.95 4.5 now 3,091 9 Hut8 Mining 408 -73 2.1 3.07 now 8,388 10 Iris Energy Ltd. 158 -420 (FY 2022) 3 3.7 planning for 6 1,398 11 Marathon Digital 1275 -36 11.01 5.7 now, 23 by mid 2023 10,670 12 Northern Data AG 164 287 7.05 8.3 by year end N/a 10 Riot Blockchain 990 -8 5.83 5.6 now, 13.5 by mid 2023 6,775 12 Stronghold 21 -11 0.93 1.5 N/a 5 Total 3922 Up to 93 by mid 2023 38,819 150
  • 9. @OrionX_net Top Proof of Work Coins Mining Rigs Largest Pool Operators Summary Tables
  • 10. @OrionX_net ©2022 OrionX.net ✦ These 6 coins produce about $7 billion of annual economic value (AEV) (down substantially from $42 billion in November 2021) ✦ Bitcoin has almost all the value at $6.2 billion, Dogecoin is the clear #2 as Ethereum has dropped out of the race ✦ Only BTC and DOGE have pools of over $50 million a year (16 such pools, 4 of which are same operator across both coins) Top Six Proof-of- Work Coins ✦ Table 3. The first and second column give the coin name and its cryptographic hash algorithm. The next two columns give the nominal block time and the block subsidy received by a miner each block. The fifth Column gives the recent (11/11/22) price for the coin, and the last two columns provide the hash rate and the units for the hash rate. Only Bitcoin is in the 100s of Exahashes/sec range, and as a result almost all the economic value is in Bitcoin. Coin Symbol Algorithm Market Cap (B$) Price (USD) 11/11/22 Total hash rate Daily value $M Annual production $B Bitcoin BTC SHA-256 333.8 17365 272 EH/s 15.82 5.78 Dogecoin DOGE Scrypt 11.62 0.089 483 TH/s 1.21 0.44 Ethereum Classic ETC Etchash 3.01 21.84 151 TH/s 0.322 0.117 Bitcoin Cash BCH SHA-256 2.00 103.7 1.70 EH/s 0.094 0.034 Litecoin LTC Scrypt 4.37 61.11 568 TH/s 0.110 0.040 Monero XMR RandomX 2.32 127.5 2.70 GH/s 0.055 0.020
  • 11. @OrionX_net ©2022 OrionX.net ✦ These are nine of the fastest Bitcoin mining rigs on the market, from three vendors. ✦ The table shows hashrate, electricity required, and operating profit at 5 cents per kilowatt-hour ✦ This table was produced in May 2022, and at current $20.2 K Bitcoin price, the operating profitability is much lower ✦ Used equipment is now said to be changing hands at much lower prices than posted ones Top Mining Rigs Table 4. The first and second column give the manufacturer and model name for a number of the latest mining rigs. The third, fourth, and fifth columns give suggested unit pricing, the hashrate for Bitcoin’s SHA256 hashing algorithm in Terahashes/second, and the electricity draw in Watts. The operating profitability is estimated for 5 cents per kWH electricity. The operator must cover capital costs and other operating costs as well before deriving a profit. Crypto winter has brought actual prices paid down considerably Manufacturer Model Suggested Price K$ Hashrate TH/s Electricity Watts Daily Operating $ Profitability at 5 cents kWh, BTC $20.2K Bitmain Antminer S19 XP 8.8 140 3010 6.1 Antminer S19 Pro+Hydro 16.2 198 5540 7.08 Antminer S19 Pro 3.9 110 3250 3.73 Antminer S19J Pro 3.4 104 3068 3.53 MicroBT Whatsminer M50S 8.3 128 3328 4.88 Whatsminer M30S+ 3.7 100 3400 2.85 Whatsminer M30S++ 3.8 112 3472 3.6 Canaan Avalon 1246 3.8 85 3421 1.79 Avalon 1246 90T 4 90 3420 2.14
  • 12. @OrionX_net ©2022 OrionX.net ✦ Top 12 Bitcoin Mining Operators of 16 pools ✦ We also list the host country ✦ These top pools are responsible for over 98% of the value creation ✦ US now has 4, Germany, Japan 1 each in top 12 Largest Pool Operators ✦ Table 5. The top 15 Bitcoin and Dogecoin pools, across 11 operators. The cutoff is $40 million annual production per pool. Collectively they produce $7.6 billion out of total of $7.9 billion for both coins. The Bitcoin value here is higher than shown in Table 3 since during the past 3 months blocks are shorter than the nominal 10 minutes. Pool Country Bitcoin ($M) Doge ($M) Total Annual Rate $M Foundry USA US 1,556 0 1,556 AntPool Global 1,070 72 1,142 F2Pool Global 979 50 1,029 Binance pool US 713 0 713 ViaBTC Germany 559 136 695 Poolin US 408 0 408 Braiins Pool Global 310 0 310 Luxor US 224 0 224 Btcdotcom Global 166 0 166 Unknown Global 128 0 128 SBI crypto Japan 84 0 84 Litecoinpool Global 0 70 70 Top 12 pool operators 6,197 328 6,525 All Mining 6,238 440 6,678
  • 13. @OrionX_net ©2022 OrionX.net CryptoSuper Mining Trends ✦ Bitcoin dominance for mining (minting) now clearly established as Ethereum departs the field ✦ Ever faster mining hardware, including liquid cooling; new highs in global hashrate, rising as the fourth power of time currently ✦ North American dominance, public companies as major players may increase to ¼ of all Bitcoin production in 2023 ✦ Consolidation also expected in industry due to crypto winter of 2022 low price pressures and some expanded too quickly – Exchanges have no direct impact, but there is contagion risk to crypto prices and thus mining from failures of Celsius and FTX ✦ The electrical input has trended toward increasingly green, some public companies have set carbon neutrality goals ✦ Will Dogecoin be #2 on our next list in June 2023 or some other coin?
  • 15. @OrionX_net ©2022 OrionX.net Top Bitcoin Mining Pools: Share of blocks won by pool, over three months prior to and including 10/25/22. Data, chart from explorer.btc.com Top 6 pools account for 85% of the blocks won and added to the blockchain. Pools act as brokers effectively, which mining companies and individuals join with their hashrate and share in the achieved rewards proportionally
  • 16. @OrionX_net ©2022 OrionX.net Top Dogecoin Mining Pools: Data covers 999 blocks prior to 10/25/22. Data, chart from mininpoolstats.stream Top 3 pools account for 63% of won blocks
  • 18. @OrionX_net ©2021 OrionX.net References ✦ Overall: coinmarketcap.com, coinwarz.com, cryptoslate.com ✦ BTC: btc.com, blockchain.com ✦ Others: miningpoolstats.stream ✦ Cryptocurrency topics: orionx.net/blog ✦ Eighth CryptoSuper500 List, OrionX, May 2022, https://orionx.net/research-reports/ ✦ Cambridge Bitcoin Electricity Consumption Index: https://ccaf.io/cbeci/index ✦ Bitcoin Mining Council: https://bitcoinminingcouncil.com, endthefud.org, ✦ Mining rigs: asicminervalue.com ✦ Reusable proof of work article by Hal Finney: https://nakamotoinstitute.org/finney/rpow/index.html ✦ Bitcoin’s Fundamental Value, in The Capital, on Medium, S. Perrenod 2022, https://medium.com/the- capital/bitcoins-fundamental-value-derives-from-scarcity-security-then-utility-9e7d49bbd078