As mining Bitcoin exponentiates in difficulty, so too does its price per unit, not to mention its energy expenditure. During the last decade, the space of Fintech has experienced a dramatic shift as Cryptocurrencies trailblazed the way to a better form of money. The result is the formation of companies solely concerned with the mining of Bitcoin, notable of which is Bitfury with its aggressive vision of implementing the peer-to-peer economy alongside the legacy one.
Bitfury isn't the only player on the field. Large corporations have been established around the same premise of Bitcoin mining operations, supplemented by other loosely related ventures. What they've essentially constructed is a self-sustaining business model built above fail-safes, rather than the primary venture they've entered the market for. This was an extremely rare sight to behold in the olden days, but it was made possible by the unique setup Bitcoin has presented: An asset that can be obtained either via cash transaction, or through CPU power.
Mining isn't always profitable when it needs to be most. The fluctuations and the gyrations of the market make it near impossible to predict the value of your mining operation, which is a grave mistake that, unfortunately, a ton of startup mining companies seem to make. A business model that confuses its assets with its output production is inevitably going to get behind on paying liabilities off, slacking on its maintenance costs and getting burned out with its electricity bills. If you ever plan on establishing a company, you better have other ventures lined up to at least cover your costs and debts. A company has to have control over the value of what it produces, otherwise it's up to luck at this point.
Your mining operation is your biggest money maker when the times are right, but when the times are bearish, big-time companies collapse. Core Scientific, with over $1 billion in liabilities, filed for bankruptcy after Bitcoin had plummeted. Contrast that with Bitfury and other publicly traded companies of the sort. You simply don't see them falling behind their bills because their other ventures cover for them.
Could we plan ahead?
I recently commented on this post as to how we could avoid having to basically become serial entrepreneurs in order to make succeed a venture of one. It's the reason I'm writing this post, and I would like to expand on my thoughts a bit more. While bitcoin companies are most likely to go bankrupt, starting small could side-step much of that risk. I'm talking a home project manned by one guy in his own basement. There are, in this hypothetical, no liabilities to run away from, no assets to fret over not turning a profit, nobody to answer to and a better margin of profit to celebrate over.
Conclusion
To answer the above question, keep in mind the scenario above. Yes, we could plan ahead, but only if we aren't being constantly chased down by debt sharks. While cost of utility might exceed the value of the bitcoin we mine, we stash them at the end of the day, and when times turn bullish, we profit. In contrast, companies cannot look forward to those bullish times. They have to turn a profit right now, lest they go bankrupt.
Posted Using LeoFinance Beta