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    Mining & Mining Industry News 7 Mins Read

    Mining on the Edge: Bitcoin’s Profit Squeeze

    Welcome to The Protocol, your weekly briefing on the most significant advancements in cryptocurrency technology. I’m Margaux Nijkerk, reporting for CoinDesk.

    This week’s highlights:

    • Bitcoin Mining Industry Grapples with Intensifying Competition as Energy Costs Dominate
    • Liquid Staking for Bitcoin Gains Traction with Lombard’s BARD Token and New Foundation
    • Optimism Enhances OP Stack Sequencing Using Flashbots Technology
    • Hemi Labs Secures $15 Million to Expand Bitcoin’s Capabilities

    Network Developments

    BITCOIN MINING COMPANIES FACE TOUGH MARKET CONDITIONS: The Bitcoin mining sector has historically followed a predictable boom-and-bust cycle tied to the four-year halving event. However, prominent industry leaders stated at the recent SALT conference in Jackson Hole that this dynamic is shifting. The emergence of exchange-traded funds (ETFs), growing electricity demand, and the potential impact of artificial intelligence (AI) on infrastructure are compelling miners to diversify or face obsolescence. Matt Schultz, CEO of Cleanspark, commented, “The conversation has moved from hash rate to monetizing megawatts.” For years, mining businesses relied primarily on Bitcoin production for revenue and experienced cycles of prosperity and hardship linked to the halving. Now, industry executives believe this pattern is changing. Schultz explained that the four-year cycle is effectively disrupted by Bitcoin’s increasing importance as a strategic asset, fueled by ETFs and strategic treasury allocations. The increasing adoption is creating significant demand. Recent ETF activity, for example, has consumed far more Bitcoin than has been mined this year. Cleanspark, which currently manages 800 megawatts of energy infrastructure with an additional 1.2 gigawatts under development, is now exploring opportunities beyond proof-of-work mining. Schultz highlighted that their speed in deploying electricity infrastructure has created opportunities to monetize power in ways that extend beyond only Bitcoin mining. With 33 locations, they now have considerably more flexibility than before. Patrick Fleury, CFO of Terawulf, echoed the sentiment, acknowledging the growing pressure on miner profits. He stated bluntly, “Bitcoin mining is an incredibly difficult business.” He provided a straightforward breakdown of mining economics: With electricity costing five cents per kilowatt hour, mining a single Bitcoin currently costs around $60,000. Assuming a Bitcoin price of $115,000, power costs account for half of the revenue. After accounting for corporate overhead and other operating expenses, profit margins become very tight. Fleury emphasized that securing ultra-low-cost power is paramount for mining profitability. — Helene Braun Read More.

    BITCOIN LIQUID STAKING GAINING POPULARITY: Throughout its history, Bitcoin has primarily been promoted as a digital store of value, an asset to hold. This has resulted in vast amounts of BTC remaining unused in wallets, isolated from the yield-generating strategies and composability of decentralized finance (DeFi). Liquid staking tokens are poised to change this, positioning Bitcoin as both a store of value and a productive asset within on-chain capital markets. Liquid staking allows users to pledge their cryptocurrency to support network security, receiving a liquid, tradable token representing their staked assets. This token can then be used across DeFi while the original tokens continue to earn staking rewards. Lombard Finance has emerged as a leading project in Bitcoin liquid staking. Their primary offering, LBTC, is a yield-bearing token backed 1:1 by BTC. When BTC is deposited into the Lombard protocol, the underlying coins are staked, primarily through Babylon, a protocol that enables trustless, self-custodial bitcoin staking. In return, users receive LBTC, which can be used in lending, borrowing, and liquidity provision across platforms such as Aave, Morpho, Pendle, and Ether.fi, while their Bitcoin continues to earn staking rewards. This dual functionality is a key advantage. Holders can maintain their exposure to Bitcoin while simultaneously using LBTC across DeFi. Designed for interoperability, LBTC operates across Ethereum, Base, BNB Chain, and other networks, mitigating liquidity fragmentation and allowing Bitcoin to fully participate in the multi-chain DeFi landscape. — Jamie Crawley Read More.

    OPTIMISM AND FLASHBOTS COLLABORATE: Optimism is partnering with Flashbots to overhaul transaction processing within its OP Stack ecosystem, aiming to accelerate and customize operations across leading Ethereum layer-2 networks. The focus of this collaboration is sequencing – the process of determining transaction confirmation speed, prioritization, and user costs. Optimism states that Flashbots’ infrastructure, which is already responsible for building more than 90% of Ethereum’s blocks, will now bring near-instant confirmations and user-friendly transaction ordering to all chains in the Superchain. This is significant because the OP Stack supports over 60% of all Ethereum layer-2 activity, according to the Optimism team. This includes prominent layer-2 chains like Base, Unichain, World Chain, Ink, and Soneium. Previously, advanced sequencing capabilities, such as ultra-fast settlement, frontrunning protection, and custom compliance rules, were only accessible to the largest chains with dedicated in-house resources. With Flashbots’ integration, these features will be readily available through tools for any project built on Optimism’s OP Stack. — Margaux Nijkerk Read More.

    HEMI LABS RAISES $15 MILLION: Hemi Labs, the Bitcoin programmability network founded by Jeff Garzik, has secured $15 million in funding to accelerate development and expand its ecosystem. Notable participants in the funding round included YZi Labs (formerly Binance Labs), Republic Digital, HyperChain Capital, Breyer Capital, Big Brain Holdings, and Crypto.com, as stated in a press release. The company intends to use the funds to support applications for borrowing, lending, and trading on Bitcoin, as well as to further develop its Hemi Virtual Machine (hVM). The hVM is a layer that incorporates a Bitcoin node within an Ethereum Virtual Machine, which is a decentralized system capable of executing smart contracts and processing transactions on Ethereum. — Jamie Crawley Read More.

    In Other News

    • Aave Labs has unveiled Horizon, a new platform tailored for institutional borrowers seeking access to stablecoins using tokenized real-world assets (RWAs) like U.S. Treasuries as collateral. Initially, institutions will be able to borrow Circle’s USDC, Ripple’s RLUSD, and Aave’s GHO against a range of tokenized assets, including Superstate’s short-duration U.S. Treasury and crypto carry funds, Circle’s yield fund, and Centrifuge’s tokenized Janus Henderson products. The platform aims to provide qualified investors with short-term financing options for their RWA holdings, enabling them to implement diverse yield strategies. — Kristzian Sandor Read More.
    • Google Cloud is advancing its plans to launch its own layer-1 blockchain, positioning the network as neutral infrastructure for global finance amidst increasing competition from fintech companies developing their own distributed ledgers. In a LinkedIn post published on Tuesday, Rich Widmann, Google’s head of Web3 strategy, revealed more details about the project, known as the Google Cloud Universal Ledger (GCUL). He described the platform as a high-performance, credibly neutral blockchain designed for institutional use, supporting Python-based smart contracts to enhance accessibility for developers and financial engineers. Widmann stated that any financial institution can build with GCUL, arguing that Google’s neutral infrastructure removes the barriers that might prevent companies like Tether from adopting Circle’s blockchain or payment firms like Adyen from utilizing Stripe’s. — Siamak Masnavi Read More.

    Regulatory and Policy

    • Crypto industry lobbyists in Washington are drawing a firm line on the market structure bill progressing through the U.S. Senate. They maintain that they cannot support legislation that fails to fully protect software developers from liability for misuse of their technology by malicious actors. The industry presented its case to the Senate’s Banking and Agriculture committees “with one voice,” submitting a letter signed by Coinbase, Kraken, Ripple, a16z, Uniswap Labs, and over one hundred other crypto businesses and organizations, including virtually all major U.S. lobbying groups. This unified front occurs as the Senate prepares to resume work, likely reigniting extensive negotiations on the legislative language, which represents the industry’s top U.S. priority. — Jesse Hamilton Read More.
    • The U.S. Commodity Futures Trading Commission (CFTC) is set to operate with only one commissioner when Democrat Kristin Johnson departs next week. The sole nominee awaiting confirmation to join the regulator is Brian Quintenz, nominated by former President Donald Trump. As of September 3, the five-member commission will be reduced to one, coinciding with Johnson’s departure. In her farewell statement, Johnson emphasized the importance of maintaining financial stability and protecting the broader economy while advancing an agenda focused on growth, encouraging the agency to adhere to fundamental principles as new technologies emerge. — Jesse Hamilton Read More.

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