Bitcoin miners combat falling profits with alternative revenue streams

Miners are central to Bitcoin’s value proposition. If miners stopped showing up for work tomorrow, the network would grind to a halt. Fortunately for those who recognize the power of the blockchain and appreciate Bitcoin in particular, it was designed by a true genius, Satoshi Nakamoto. The incentive structure is such that miners keep showing up for work and the lights keep on.

In this sense, miners’ profitability (known as “hashprice”) is declining. Although miners work very hard to obtain ASIC markets with low energy and time costs to maximize capital allocation and ensure optimal profitability, revenues have fallen as the hashprice has decreased.

Earlier this year, following the fourth halving, a report indicated that only five mining companies were profitable due to a combination of rising energy costs, lower transaction fees, and the reduction of the block reward. Miners now have to work harder than ever to reduce their operating costs, primarily by finding cheap energy, but also by obtaining efficient rigs. In any case, the need to access other sources of income is clear.

Bitcoin miners are diversifying

There are multiple options for those interested in mitigating the effects of declining mining profitability. One of them is exSaturdaya master extension layer for Bitcoin that allows miners and mining pools to stake their bitcoins to earn $XSAT tokens. Conceived as a coupling layer that exists between the Bitcoin blockchain and its various Layer 2 networks, the scaling solution has already partnered with several established mining pools to pioneer this “Layer 1.5” concept.

Much like Bitcoin itself, exSat seeks to use miners and mining pools to ensure data integrity across the network. They do this by acting as synchronizing nodes, sending block headers and block data to the coupling layer in exchange for rewards.

As explained in the exSat whitepaper, synchronizers “receive 10% of the block token incentive for being the first to submit verified BTC block data,” and the reward increases to 50% “if the synchronizer is also the miner of the bitcoin block.”

This model is designed to align the interests of Bitcoin miners with the exSat network, encouraging contributions to both ecosystems simultaneously.

It is also possible to become a data validator node, with a minimum stake threshold of 100 BTC. Validator nodes enjoy the flexibility to set their desired fee percentage, among other benefits. Major cryptocurrency exchange Bitget recently announced that it had become an exSat validator, the second industry heavyweight to do so after global mining pool SpiderPool.

The promise of DePINs

Another method miners use to generate income in times of declining profits is to connect to a decentralized physical infrastructure network, a FromPINTypically, PINs work by harnessing the computing power of a vast network of users and then supplying it to companies developing GPU-intensive AI solutions.

While miners are not currently repurposing their rigs en masse to profit from dePIN, some have begun to make their capacity available through dePIN marketplaces. Doug Petkanics, CEO of Livepeer says PINs are a potential lifeline for struggling Bitcoin miners. This is especially true given the growing demand for GPU processing power, which is needed to power applications like ChatGPT.

While it is impossible to predict what the landscape will look like for Bitcoin miners in a year, let alone five, it is encouraging that alternative means of generating income are emerging. Hopefully this trend will continue.