The blockchain fund manager that’s backed Canaan Creative, Binance, and Coinbase, Fundamental Labs, will invest $44 million in top-of-the-line Bitcoin miners.
The Shanghai-headquartered company is looking to operate 20,000 to 30,000 units of new mining equipment starting June to enjoy the low-cost hydropower electricity during the rainy summer.
“Mining is the fundamental block to support the whole crypto ecosystem. That’s why we invest in mining farms, equipment and pools and participate in mining ourselves,” Fundamental Labs managing partner Howard Yuan said.
However, unlike what many retail miners have been doing—purchasing used miners before summer—Yuan’s company is investing in the most powerful and latest equipment on the market like Bitmain’s AntMiner S17 to maximize its mining scale.
The unit price of these mining models created by manufacturers like MicroBT, Bitmain, and InnoSilicon ranges between $1,500 and $2,000 apiece. Over the next two months, these will be ready for shipment in bulk.
“We don’t buy old machines since our focus is to participate in mining for the long term. And second-hand equipment like AntMiner S9 won’t be useful once the summer season ends,” Yuan noted.
The capital for the investment came from a 300 million yuan ($44 million) mining fund closed by Fundamental Labs. It is the first phase of the goal to secure one billion yuan ($150 million) in 2019 for further deployment in crypto mining.
Per Yuan, the company launched in 2016 with approximately $30 million of its proprietary capital and has since expanded the overall portfolio to more than $500 million via five series of funds. Holdings include an equity investment in Coinbase and the BNB token of Binance.
The company refused to name its limited partners, saying they are from traditional sectors and family offices in China.
Since it is utilizing new products, Yuan thinks Fundamental will be less risk-averse compared to individual miners when facing the price volatility of Bitcoin.
“We think crypto mining will become more institutionalized in the future. It’s crypto capitalism. Retail miners will be gradually squeezed out because of challenges like price volatility and increasing computing difficulties,” he said.
The new capital injection into the cryptocurrency mining space with sophisticated equipment will likely provide more boost to the total hash rate of Bitcoin over the next months.
While the new products of Bitmain and InnoSilicon, such as AntMiner S17 and T3, can compute up to 45 to 50 TH/s, Shenzhen-headquartered MicroBT claims its new M20S can reach as much as 70TH/s.
Fundamental Labs’ plan could increase the total hash rate of the Bitcoin network by at least 1,000 quadrillion hashes per second (PH/s). That would account for around 2% of Bitcoin’s current total hash rate of about 50,000 PH/s.
The Bitcoin network’s overall computing power hit a six-month high above 58,000 PH/s on May 2. Chinese mining farm operators estimated that figure will climb to 70,000 PH/s in the summer.
According to Yuan, with the plan to secure $150 million for its 2019 mining fund, the company will continue to build up and maintain a mining scale which consumes roughly 200,000 kilowatts per hour (kWh).
Considering that the firm only considers new mining equipment, which usually consumes two to three kWh apiece, it, therefore, plans to scale up its facility to run a total of 60,000 to 100,000 units of new equipment throughout the year. It could translate to around 3,000 PH/s to 5,000 PH/s hash rate boost to the Bitcoin network.
Yuan said after the summer season, his company will concentrate on other Chinese provinces such as Xinjiang, which possesses more fossil fuel power stations, and central Asian nations such as Kazakhstan.