Intel Corp.’s new Bitcoin mining chip might be the market’s first serious challenger to Chinese rig makers, who have dominated the market for years. The chip-making behemoth from Santa Clara, California, launched its crypto mining endeavour earlier this month, as well as the first-generation BonanzaMine chip in January. The first batch of the chips will be sent later this year to Block Inc, Jack Dorsey’s digital payment startup, and two mining companies, Griid Infrastructure and Argo Blockchain.
Because of the unique technologies they utilise to build their high-performing chips, Chinese firms Bitmain and MicroBT have a lion’s share of the Bitcoin mining hardware industry. Few competitors appear to have been able to match the performance of the chip.
Bitcoin mining, which involves utilising computers to secure the cryptocurrency’s network in exchange for Bitcoin, has become a lucrative business as the price of Bitcoin has risen in recent years, benefitting rig producers in the process. In 2021, the mining industry brought in US$15 billion, more than doubling its revenue from the previous year.
Given Intel’s near proximity to the miners in North America, industry members believe the company’s involvement will reduce Chinese manufacturers’ pricing strength and provide better maintenance services. When China outlawed crypto mining in May, the region dethroned China as the world’s Bitcoin mining capital.
“Having a US-based manufacturer with the size, scale, and legitimacy of Intel is excellent for the entire crypto sector,” said Dave Perrill, CEO of Eden Prairie, Minnesota-based Compute North, which supplies data centres for Bitcoin miners to run their equipment. “Competition is beneficial.”
The existing price strategy and purchase terms, which are determined by the leading manufacturers, burden their buyers with various financial risks and operational costs, are one of the main reasons for miners to welcome a competitor like Intel. Intel will offer a fixed pricing, which will provide more predictability.
Pre-orders of the current models are available from the makers before the inventory is available. According to Nick Hansen, CEO of Seattle-based mining pool and hardware brokerage company Luxor, purchasers will not know the exact price until the makers send the machines and they are given a price range. Pre-ordered machine prices are revised every day within that range, based on internal pricing models used by the manufacturers. The spot price of bitcoin and the payback period, or the amount of time it takes to break even, are important considerations in these models, according to Hansen.
Internal pricing algorithms may put a strain on Bitcoin miners’ cash flow and increase the danger of a shake-out during downturn markets, as the pricing models place a high value on the Bitcoin price. Perrill stated, “Our customers want certainty.” “They want to know that, given the volatility of the Bitcoin market, the cost of Bitcoin mining rigs will not change by 50% next week.”
Another reason Chinese manufacturers don’t sell machines at a fixed price is that they don’t have much control over their suppliers’ pricing, which means they have less control over the final price of the mining machines, according to Tong Lai, the head of lending at Singapore-based Babel Finance, which offers Bitcoin miners financing.