Luxor technology wants to make Bitcoin mining easier. That is why the firm rolls a panoply of products (mining pools, hashrate derivatives, data analytics, ASIC brokerage) to help Bitcoin’s miners, large and small, develop their operations.
Aaron Forster, the company’s business director, joined in October 2021, and saw the team growing from about 15 to 85 people in three and a half years.
Forster worked a decade in Canada’s energy sector before coming to Bitcoin’s mining, which is one of the reasons why he is talking about the future of mining in Canada and the US in BTC & Mining Summit on Consensus This year.
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At the event leadup, Forster shared with CoinDesk his thoughts with Bitcoin miners returning to artificial intelligence, the growing sophistication of the mining industry, and how Luxor products activate miners to develop different forms of danger.
This interview has been condemned and edited for clarity.
CoinDesk: Pool pools allow miners to combine their computational resources to have a higher chance of receiving bitcoin block rewards. Can you explain to us how Luxor mining pools work?
Aaron Forster: Mining pools are usually aggregators that reduce the difference -solo mining. If you look at solo mining, very Lottery-esque, that means you can plug your machines and you can hit the block rewards tomorrow-or you can hit it 100 years from now. But you still pay energy at that time. On a small size, it’s not a big deal, as you measure that and create a business around it.
The most common types of mining pools are PPLNs, which means pay-per-lat-n-shares. Usually, this means that the miner will not be paid unless the mining pool hits the block. That is also because of the difference -luck, so it is no different from the solo miner’s situation. However, it creates volatility of income for large industrial miners.
So we see the emergence of what we call a full-pa-per-share, or FPPs, and that’s Luxor operates for our Bitcoin pool. In FPPs, no matter what we see a block or not, we still pay our miners their income based on the number of shares they submitted to the pool. Which provides revenue with the miners, thinking that the hashprice will remain the same. We effectively became an insurance provider.
The problem is that you need a very deep and powerful sheet of balance to support that model, because as we reduce the difference -for miners, this risk is placed on us. So we need to plan for it. But it can be calculated for a long time. We have different partners in that regard, so we can’t carry the full risk from our balance sheet.
Tell me about your ASIC Brokerage business.
We became one of the leading hardware suppliers in the second market. Mainly within North America, but we sent to 35+ countries. We talk to everyone from public companies to private companies, institutions to retail.
We are primarily a broker, which means we match the buyer and seller, mostly in the second market. Sometimes we interact with ASIC manufacturers, and in some cases we take the basic positions, which means we use money from our sheet balance to buy Asics and then sell them in the second market. But most of our volume comes from the matching of buyers and sellers.
Luxor also launched the first contracts of hashrate futures.
We try to push Bitcoin’s mining space. We are a hashrate marketplace, depending on how you look at our mining pools, and we want to take a huge jump and get a hashrate in the Trade world.
We want to create a tool that allows investors to take a position in the hashprice without effectively owning mining equipment. The hashprice is, you know, the time -or -day -to -day income that miners earn, and it changes a lot. For some people about the healing, for others it is speculation. We create a tool for miners sell their hashrate forward and use it as a major collateral or a way to supply growth.
We said, ‘Let’s allow miners to usually sell a forward hashrate, receive upward in Bitcoin, and then they can do that and do whatever they need to do here, whether it’s buying asics or expanding their mining operations.’ This is usually the collateralization of the hashrate. So they are obliged to send us X amount of hashrate each month for the length of the contract. Before that, they would receive a certain amount of Bitcoin upfront.
There is an imbalance in the market between buyers and sellers. We have a lot of consumers, meaning people and institutions who want to earn their Bitcoin. Your lending to your Bitcoin will effectively your interest rate. However, you can also look at it like buying that hashrate into a discount. That is important for institutions or people who do not want physical exposure to bitcoin mining, but wants exposure to the price of hash or hashrate. They can do that synthetically by buying Bitcoin and putting it in our market, effectively lending out, earning a harvest, and buying that hashrate to a discount.
What do you see most as exciting about Bitcoin mining so far?
The acceptance and natural development of our industry in other markets. We cannot ignore the AI HPC transfer. Instead of building these mega mines are huge buildings with Bitcoin’s Bitcoin mining operations, you begin to see big miners who are becoming power infrastructure providers for artificial intelligence.
The use of Bitcoin mining as a stepping stone in a larger, more intensive industry like AI is Kapana -excited to me, because it gives us a little more acceptance, because we will come from a completely different angle. I think the biggest example is the Main Scientific / Coreweave Deal structureHow they combined those two businesses. They are complementary to each other. And really eager.
If you look at our own product roadmap, we have no choice but to follow a similar roadmap to Bitcoin miners. A lot of products we have built for the mining industry are similar to what is required at another level for AI. Mind you, it’s simpler in our industry than AI. We are our first step in the HPC space, and it’s still early days.
