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Readers of yesterday's article, The eight most popular types of cryptocurrency transactions are not what you expect, may have noticed an important omission: any discussion on the processing of cryptocurrency transactions (cryptography), what the crypto-cognoscenti calls extraction.
Do not worry: this is the second of a two-part article. In this part, I discuss the most popular mining crypto business models, which are ways to make money with mines.
Crypto like Bitcoins are intentionally created with an automatic and decentralized mechanism that creates Bitcoin from nothing to provide rewards to miners for transaction processing. The result: a thriving business in the mining sector.
Anyone with a high-speed computer rack and access to electricity anywhere in the world can essentially print money simply by running free software.
Six corporate mining models of common cryptocurrencyJason Bloomberg
Crypto Mining business model n. 1: Legal and competitive mining
At the dawn of the crypt, mining was an advantage for small business owners, but soon the mining industry became increasingly competitive, as miners bought powerful and powerful computers while increasing their operations to remain profitable.
The risks seemed low, since the original Bitcoin software would have to take into account the fall in prices, making mine easier, since the number of miners left in the game decreased, thus ensuring that there would always be enough miners to process all transactions.
Then came the crash of Bitcoin, which drastically limited the possibility for miners to churn out crypto while still making a profit. Apparently, the inefficiencies in the mining algorithm, combined with the market pressure on the transaction fees that would have partially compensated the miners, led to a tightening on anyone's ability to extract profit.
The legal encryption that uses electricity at market rates is becoming increasingly unattainable, even in countries like Iceland, which have exceptionally low electricity rates combined with favorable temperatures for data centers full of computer generators of heat.
What, then, are the remaining mining business models? Let's take a closer look.
Crypto Mining business model n. 2: Subsidized mining mining
In Washington state, hydropower generates far more juice than local people can consume, thus attracting a thriving mining encryption activity. "The five large hydroelectric dams in the region, all owned by districts of public utility, generate nearly six times more power than what residents and companies in the region can use" explains Politic journalist Paul Roberts. "Most of the surplus is exported, at high prices, to markets like Seattle or Los Angeles, which allows utilities to sell energy locally well below the cost of production."
By 2015, however, the Washington Bitcoin mining craze had run its course. "The margins have become so thin – and in fact occasionally negative – that the miners have had to spend their money as soon as they have been extracted to pay the bills of power," adds Roberts.
If not in Washington, then, what about Iran? "I come across very interesting cases" notes Mohsen Rajabi, an Iranian blockchain entrepreneur. "I recently installed a rig for a middle-aged customer who was not tech savvy and simply heard of the mining industry and its potential profits." He wanted to start with ten devices installed in his factory because he can legally use extremely economical industrial electricity ".
Crypto Mining business model # 3: stealing electricity
Completely removing the costs of electricity from the equation is an obvious way to improve the profitability of the mining crypto. In the early days of Bitcoin, the college boys put their tools in the dorm room, stealing a little bit of juice from their alma maters.
Today, on the contrary, stealing electricity is a serious business. "One Shanxi Datong [China] the man named Xu Xinghua stole power from the poles near the West Second Plant of the Kouquan railway, which was borrowed from November to December 2017, " relationships Liu Yulin, writing in Chinese for The paper (translation of
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"The coin 'mining machine' and three electric fans were operated for 24 hours," he continues. "Xu Xinghua has extracted a total of 3.2 bitcoins, earning 120,000 yuan [$17,700]and the electricity generated from stolen electricity was 104,000 [$15,340] yuan."
What happened to the thief? "Xu Xinghua was sentenced to three years and six months in prison for committing a theft and was fined for 100,000 yuan [$14,750]"She reports, she also had to reimburse the power company for theft and lose her equipment.
This story is one of many, remarkable only for the fact that the perpetrator was captured and the story appeared in the local newspaper. Many other instances will surely be out there, not yet reported.
Another popular way, even if not intentional, to steal electricity: create a mining operation, take profits and then cease the business.
This is the story of one of Washington's mining companies. "The American bitcoin mining company Giga Watt has declared bankruptcy with millions still owed to creditors" writes Yogita Khatri for Coindesk. "Creditors include the utility service provider in his Douglas County [Washington] base, with a credit of over $ 310,000, and Neppel Electric electricity supplier, which is almost half a million dollars. "
A silver coating: there may be a possibility that these rigid utilities end up recovering some of their money, as Giga Watt has raised about $ 22 million in its ICO – and it is possible that the scammers were not able to spend or segregate all proceeds before bankruptcy turns them off.
Crypto Mining business model # 4: Cryptojacking
Illicit cryptomining, known colloquially as cryptojacking, has outdone ransomware as the most popular form of companies that target cybercrime. Cryptojacking means to introduce cryptographic mining software on the target victim's computer without their knowledge, thus generating encryption for the hacker while stealing processor cycles and electricity from the victim.
The problem of encryption, in fact, is much worse than when I wrote my article Top Cyberthreat of 2018: Illicit Cryptomining in March 2018 – just as I warned. "Despite the volatility of the value of various cryptocurrencies, the trend of illegal cryptocurrency activities between cryptocurrencies among cybercriminals shows no signs of diminution". second David Liebenberg, senior threat analyst at Cisco Talos.
One of the reasons the cryptojacking problem is getting worse is because malware is getting better. One of these packages: Rocke. "Talos assesses with confidence that Rocke will continue to exploit the Git repositories to download and perform illicit mining on victim machines," continues Liebenberg.
Git repositories are where most of today's business software developers store and manage their source code, but these repositories are not the sole goal of Rocke's creators. "Interestingly, they are expanding their tool set to include browser-based miners, hard-to-find trojans and Cobalt Strike malware. [malware that leverages Cobalt Strike penetration testing software]".
Crypto Mining's business model # 5: Evading Sanctions
Evade penalties was one of the types of cryptographic transaction that I discussed in yesterday's article – but it is also a primary mining business model.
For this story, I will first address a pair of Iranian Bitcoin miners. "At the time when we bought the mining device, the US dollar rate in Iran was still quite high, so we thought we would earn about $ 90 to $ 100 a month" explains Ali Hosseini, an Iranian miner. "The cost of electricity is relatively low in Iran, so mathematics seemed vital."
Hosseini's cousin also spoke. "Bitcoin exchange rates and prices have declined and our profits have been cut, but we are still not witnessing losses," said Pedram Ghasemi, another Iranian miner. "According to my calculations, the US dollar must fall below 110,000 rials [about $2.60] and Bitcoin must be $ 2,000 for us to really lose. "
I can not mention Iran without even discussing North Korea. Priscilla Moriuchi, a former National Security Agency official and now director of strategic threat development at Recorded Future, estimates that North Korea may have earned up to $ 200 million in 2017 in the mining crypt.
How, then, will North Korea turn that cryptocurrency into a strong currency? "North Korea has such extensive criminal networks that have been consolidated for decades to facilitate illegal activities," Moriuchi He says. "If Pyongyang were able to cash in physical currency, it would be relatively easy for them to transfer that currency to North Korea and buy things with physical currency, I bet these coins are turned into something – money or tangible assets – that are supporting nuclear and ballistic missile program of North Korea ".
Crypto Mining Business Model # 6: Mining at a Loss
The last business model on my list is contrary to common sense: the mining industry at a loss. It is certainly not a rational business model on its face, of course – unless you make sure that cryptographic transactions can be completed it is your primary motivation.
In yesterday's article I explained how cryptography is essential for the operation of Darknet. The massive trade unions of organized crime therefore depend on the success of the exchange of crypts to shift their smuggling.
If the value of Bitcoin or any other cryptography falls to the point that no one could make money by digging it, then such unions would probably come to fill the void – digging at a loss to keep the cryptography running.
For all the cryptic fanatics out there, then, there's a reason to cheer up: there's no way that cryptographic values will ever drop enough to stop mining. Organized crime would not allow this to happen.
Intellyx publishes the Cortex biweekly newsletter, advises companies on their digital transformation initiatives and helps sellers communicate their stories of agility. At the time of writing, none of the organizations mentioned in this article are Intellyx customers. The author does not own, nor does he intend to possess, cryptocurrencies or other cryptographers, neither long nor short. Credit image: Jason Bloomberg.
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Readers of yesterday's article, The eight most popular types of cryptocurrency transactions are not what you expect, may have noticed an important omission: any discussion on the processing of cryptocurrency transactions (cryptography), what the crypto-cognoscenti calls extraction.
Do not worry: this is the second of a two-part article. In this part, I discuss the most popular mining crypto business models, which are ways to make money with mines.
Crypto like Bitcoins are intentionally created with an automatic and decentralized mechanism that creates Bitcoin from nothing to provide rewards to miners for transaction processing. The result: a thriving business in the mining sector.
Anyone with a high-speed computer rack and access to electricity anywhere in the world can essentially print money simply by running free software.
Six corporate mining models of common cryptocurrencyJason Bloomberg
Crypto Mining business model n. 1: Legal and competitive mining
At the dawn of the crypt, mining was an advantage for small business owners, but soon the mining industry became increasingly competitive, as miners bought powerful and powerful computers while increasing their operations to remain profitable.
The risks seemed low, since the original Bitcoin software would have to take into account the fall in prices, making mine easier, since the number of miners left in the game decreased, thus ensuring that there would always be enough miners to process all transactions.
Then came the crash of Bitcoin, which drastically limited the possibility for miners to churn out crypto while still making a profit. Apparently, the inefficiencies in the mining algorithm, combined with the market pressure on the transaction fees that would have partially compensated the miners, led to a tightening on anyone's ability to extract profit.
The legal encryption that uses electricity at market rates is becoming increasingly unattainable, even in countries like Iceland, which have exceptionally low electricity rates combined with favorable temperatures for data centers full of computer generators of heat.
What, then, are the remaining mining business models? Let's take a closer look.
Crypto Mining business model n. 2: Subsidized mining mining
In Washington state, hydropower generates far more juice than local people can consume, thus attracting a thriving mining encryption activity. "The five large hydroelectric dams in the region, all owned by districts of public utility, generate about six times the power that residents and businesses in the region can benefit from," he explains. Politic journalist Paul Roberts. "Most of the surplus is exported, at high prices, to markets like Seattle or Los Angeles, which allows utilities to sell energy locally well below the cost of production."
By 2015, however, the Washington Bitcoin mining craze had run its course. "The margins have become so thin – and in fact occasionally negative – that the miners have had to spend their money as soon as they have been extracted to pay the bills of power," adds Roberts.
If not in Washington, then, what about Iran? "I come across very interesting cases," notes Mohsen Rajabi, an Iranian blockchain entrepreneur. "I recently installed a rig for a middle-aged customer who was not tech savvy and simply heard of the mining industry and its potential profits." He wanted to start with ten devices installed in his factory because he can legally use extremely economical industrial electricity ".
Crypto Mining business model # 3: stealing electricity
Completely removing the costs of electricity from the equation is an obvious way to improve the profitability of the mining crypto. In the early days of Bitcoin, the college boys put their tools in the dorm room, stealing a little bit of juice from their alma maters.
Today, on the contrary, stealing electricity is a serious business. "One Shanxi Datong [China] The man named Xu Xinghua stole power from the poles near the West Second Plant of the Kouquan railway, which was borrowed from November to December 2017, "reports Liu Yulin, writing in Chinese for The paper (translation of
"The coin 'mining machine' and three electric fans were operated for 24 hours," he continues. "Xu Xinghua has extracted a total of 3.2 bitcoins, earning 120,000 yuan [$17,700]and the electricity generated from stolen electricity was 104,000 [$15,340] yuan."
What happened to the thief? "Xu Xinghua was sentenced to three years and six months in prison for committing a theft and was fined for 100,000 yuan [$14,750]"She reports, she also had to reimburse the power company for theft and lose her equipment.
This story is one of many, remarkable only for the fact that the perpetrator was captured and the story appeared in the local newspaper. Many other instances will surely be out there, not yet reported.
Another popular way, even if not intentional, to steal electricity: create a mining operation, take profits and then cease the business.
This is the story of one of Washington's mining companies. "The American bitcoin mining company Giga Watt has declared bankruptcy with millions still owed to creditors," writes Yogita Khatri for Coindesk. "Creditors include the utility service provider in his Douglas County [Washington] base, with a credit of over $ 310,000, and Neppel Electric electricity supplier, which is almost half a million dollars. "
A silver coating: there may be a possibility that these rigid utilities end up recovering some of their money, as Giga Watt has raised about $ 22 million in its ICO – and it is possible that the scammers were not able to spend or segregate all proceeds before bankruptcy turns them off.
Crypto Mining business model # 4: Cryptojacking
Illicit cryptomining, known colloquially as cryptojacking, has outdone ransomware as the most popular form of companies that target cybercrime. Cryptojacking means to introduce cryptographic mining software on the target victim's computer without their knowledge, thus generating encryption for the hacker while stealing processor cycles and electricity from the victim.
The problem of encryption, in fact, is much worse than when I wrote my article Top Cyberthreat of 2018: Illicit Cryptomining in March 2018 – just as I warned. "Despite the volatility of the value of various cryptocurrencies, the trend of illegal cryptocurrency activities from cryptocurrencies among cybercriminals shows no sign of abating," according to David Liebenberg, senior analyst at Cisco Talos.
One of the reasons the cryptojacking problem is getting worse is because malware is getting better. One of these packages: Rocke. "Talos assesses with confidence that Rocke will continue to exploit the Git repositories to download and perform illicit mining on victim machines," continues Liebenberg.
Git repositories are where most of today's business software developers store and manage their source code, but these repositories are not the sole goal of Rocke's creators. "Interestingly, they are expanding their tool set to include browser-based miners, hard-to-find trojans and Cobalt Strike malware. [malware that leverages Cobalt Strike penetration testing software]".
Crypto Mining's business model # 5: Evading Sanctions
Evade penalties was one of the types of cryptographic transaction that I discussed in yesterday's article – but it is also a primary mining business model.
For this story, I will first address a pair of Iranian Bitcoin miners. "At the time when we bought the mining device, the US dollar rate in Iran was still quite high, so we thought we would earn about $ 90 to $ 100 a month," says Iranian miner Ali Hosseini. "The cost of electricity is relatively low in Iran, so mathematics seemed vital."
Hosseini's cousin also spoke. "Bitcoin exchange rates and prices have declined and our profits have been cut, but we are still not witnessing losses," said Pedram Ghasemi, another Iranian miner. "According to my calculations, the US dollar must fall below 110,000 rials [about $2.60] and Bitcoin must be $ 2,000 for us to really lose. "
I can not mention Iran without even discussing North Korea. Priscilla Moriuchi, a former National Security Agency official and now director of strategic threat development at Recorded Future, estimates that North Korea may have earned up to $ 200 million in 2017 in the mining crypt.
How, then, will North Korea turn that cryptocurrency into a strong currency? "North Korea has such extensive criminal networks since decades to facilitate illegal activities," says Moriuchi. "If Pyongyang were able to cash in physical currency, it would be relatively easy for them to transfer that currency to North Korea and buy things with physical currency, I bet these coins are turned into something – money or tangible assets – that are supporting nuclear and ballistic missile program of North Korea ".
Crypto Mining Business Model # 6: Mining at a Loss
The last business model on my list is contrary to common sense: the mining industry at a loss. It is certainly not a rational business model on its face, of course – unless you make sure that cryptographic transactions can be completed it is your primary motivation.
In yesterday's article I explained how cryptography is essential for the operation of Darknet. The massive trade unions of organized crime therefore depend on the success of the exchange of crypts to shift their smuggling.
If the value of Bitcoin or any other cryptography falls to the point that no one could make money by digging it, then such unions would probably come to fill the void – digging at a loss to keep the cryptography running.
For all the cryptic fanatics out there, then, there's a reason to cheer up: there's no way that cryptographic values will ever drop enough to stop mining. Organized crime would not allow this to happen.
Intellyx publishes the Cortex biweekly newsletter, advises companies on their digital transformation initiatives and helps sellers communicate their stories of agility. At the time of writing, none of the organizations mentioned in this article are Intellyx customers. The author does not own, nor does he intend to possess, cryptocurrencies or other cryptographers, neither long nor short. Credit image: Jason Bloomberg.
