Loka Mining CEO Unveils 'Hashrate Forward Contracts' to Help Miners Finance Growth Amid Economic Hardship

As Bitcoin miners continue to capitulate due to high costs and decreased block rewards, Andy Fajar Handika, CEO and co-founder of Loka Mining

Due to high costs and decreased block rewards, Bitcoin miners are capitulating. However, Andy Fajar Handika, CEO and co-founder of Loka Mining, a decentralized mining pool operator, claims to have discovered a method to sell future hashrate in exchange for short-term loans and growth.

Handika introduces the concept of forward hashrate contracts in an interview with Cointelegraph, allowing miners to sell their future hashrate for fiat-denominated loans from creditors. This could keep the capital-intensive business afloat.

According to Handika, these proposed hashrate forward contracts enable smaller mining operations to obtain growth financing and pay for current operations by utilizing the future Bitcoin hashrate.

Handika highlighted the advantage of these tokenized contracts, which Loka Mining now provides in 3-month, 6-month, and 1-year terms:

Handika also claims that creditors benefit from the tokenized arrangement because the hashrate forward contract can be re-used by the creditors as collateral for other loans, much like asset restaking.

This technique provides a different option to the traditional fundraising methods used by large mining companies, such as using initial public offerings or issuing corporate debt to expand their mining operations.

Smaller mining companies or individual miners are unable to do so and can typically only finance growth by selling their Bitcoin ( BTC ) holdings or using their Bitcoin as collateral for loans on decentralized finance (DeFi) protocols.

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Related: Bitcoin miner Rhodium files for bankruptcy in Texas court

According to Handika, these DeFi techniques are highly risky due to the possibility of sudden downturns in the Bitcoin price, as evidenced by the “black swan” event that caused Bitcoin’s price to drop from roughly $59,000 to lows of approximately $49,500 on Aug. 5, 2024.

Bitcoin mining industry faces economic difficultiesA recent report by cloud mining firm BitFuFu revealed that mining expenses surged by 168% over the past 12 months. These increased costs, combined with the decreased block subsidy, have placed a considerable economic strain on Bitcoin mining companies.

Mining companies’ debt-to-equity ratios. Source: The Miner Mag.

This new post-halving reality has stressed many mining companies to the brink as Bitcoin miners look to diversify their operations to artificial intelligence and high-performance computing to make up for the shortfall in profits.

A recent JPMorgan report also highlighted the current困境 of the mining industry. The report found that mining companies flush with cash, such as CleanSpark and Riot Platforms, acquired companies that could no longer compete as the industry continues to consolidate.

Magazine: Bitcoin miners steamrolled after electricity thefts, exchange ‘closure’ scam: Asia Express

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