Layer1, an American start-up has raised $50 million in investments from billionaire Peter Thiel. The company intends to build a hub for Bitcoin mining in Texas, moreover, Layer1 plans to create it as an integrated hub.
Layer1 has acquired dozens of acres in West Texas. The move could make Texas a key state for Bitcoin mining, which is currently dominated by China.
San Franciso, USA-based Layer1 could provide some serious competition to Bitmain, a Chinese company. Established in 2018, Layer1 is a start-up engaged in the Bitcoin infrastructure space. The funding received from Peter Thiel, the well-known American entrepreneur and venture capitalist could strengthen their position in the Bitcoin mining space.
Bitmain, headquartered in Beijing, China was founded in 2013, and the company designs and manufactures high-performance chips and software. The company dominates Bitcoin mining with its large-scale operations in China and estimates say China accounts for 60% of Bitcoin production.
Layer1 plans to build an all-in-one Bitcoin mining hub, which could dent the dominance of Bitmain. The planned hub in Texas will have all the necessary computing infrastructure, moreover, Layer1 will take care of the production and supply of electricity.
This move from Layer1 also addresses two key questions in the Bitcoin mining space. These questions concern the energy requirements and the growing trend of centralization in Bitcoin mining.
Energy requirements and centralization – how Layer1 could change these
Bitcoin mining requires a high amount of electricity and global electricity consumption for this surpasses many countries’ electricity consumption. The mining process involves the computation-intensive “Proof of Work” (POW) consensus algorithm.
Running powerful computers for long periods raises electricity consumption. The cooling of the computing infrastructure is another key aspect here, therefore, many Bitcoin mining companies choose countries with cold weather for their operations.
However, rising electricity consumption has made many countries wary of Bitcoin mining. E.g., Iceland plans to curb Bitcoin mining by raising the electricity costs of the Bitcoin miners.
Layer1 plans Bitcoin mining in Texas, which is not a cold place. However, Layer1 has proprietary technology for cooling the chips used for Bitcoin mining. This can reduce electricity consumption, moreover, Layer1 will take advantage of the huge potential for producing solar and wind energy in West Texas. This move towards the renewable energy basket is welcome!
The proposed move by Layer1 might also partly address the growing trend of centralization of Bitcoin mining. Bitcoin was designed for decentralization, however, organized mining pools have diluted this.
Since China supplies cheap electricity to Bitcoin mining companies, many of them have made the country the base of their operations. This poses a noticeable threat of centralization in the Bitcoin mining landscape since the majority of Bitcoin mining takes place in China.
While the move by Layer1 to start a giant hub for Bitcoin mining in Texas will not completely turn back the centralization, it will move a lot of Bitcoin mining to the USA. That partially counterbalances the centralization of Bitcoin mining.
Better days ahead for Bitcoin mining?
Using cheap energy from the renewable basket could help to address the concerns of environment activists regarding Bitcoin mining. Moreover, Bitcoin mining in Texas could counterbalance the growing trend of centralization. Will we see better days for Bitcoin mining? We need to wait and watch.