Proof-of-Work (PoW) is a consensus algorithm commonly used by notable blockchains such as Bitcoin. It requires participants known as ‘miners’ to solve complex and computationally demanding mathematical puzzles to add a new block of transactions to the blockchain. Whichever miner solves the puzzle first wins the right to add the new block and is rewarded with cryptocurrency.
This consensus mechanism serves two main purposes. It confirms transactions are legitimate (preventing fraud), and it maintains security by making it very expensive, to a nearly insurmountable degree, to attack the network.
Vanguard Bets Big Mining
Despite the proliferation of novel consensus mechanisms over the years (PoS, DPoS, PoT, PoH, etc.) Bitcoin has managed to reign supreme in the digital asset market while using PoW, as its approach allows for BTC to be viewed as a commodity, rather than a security. This is important because, as the sector matures and regulatory clarity is slowly being provided, we are now seeing institutional investing firms become more comfortable building exposure to Bitcoin and companies specializing in PoW mining operations.
This most recent example of which comes from Vanguard Group, with the company recently increasing holdings of both Riot Platforms (NASDAQ: RIOT) and Marathon Digital (NASDAQ: MARA). This increase in holdings now sees Vanguard Group own a roughly 10% stake in each company through its basket of index funds, representing roughly $600,000,000 in cumulative value.
The decision by Vanguard Group to increase its holdings is an interesting decision that may point to a continued shift in sentiment towards Bitcoin as, much like Blackrock CEO, Larry Fink, representatives of Vanguard Group have spoken poorly of digital assets in the past.
HIVE Rebrands With Eye on Artificial Intelligence
RIOT Blockchain and Marathon Digital are not the only publicly traded companies specializing in PoW mining. There is/was also HIVE Blockchain, which announced a shift in its operational focus, along with a re-branding that saw the company become known as HIVE Digital Technologies. It has now been announced that as of July 12th, trading of HIVE Digital Technologies has officially debuted for trading on NASDAQ.
At the time of its announced operational transition, President and CEO Aydin Kilic, took the time to explain the company’s rational behind the move. He stated,
“Our name change and strategic pivot indicates our progressive trajectory as a company. High performance computing, driven in large part by GPU processing power, is growing incredibly fast today thanks to this impressive new generation of consumer and enterprise AI tools. Training these tools, from ChatGPT to Midjourney, require high-end GPU compute.
As businesses adapt to the new AI world, we believe they will seek companies like HIVE to develop their own AI tools, to give them a competitive edge in this new era of digital information. HIVE Cloud will aim to provide AI compute for enterprises where privacy and ownership of data are key considerations. ”
Based on current capabilities and expected demand, the company anticipates a 10x growth in its high-performance-computing segment over the next year, propelled primarily by demand for ChatGPT, medical research, machine learning, and rendering.
Sentiment Shift
The use of flared gas in Proof-of-Work (PoW) mining operations is increasingly being seen as a means of actually helping the environment. Flared gas, a by-product of petroleum extraction, is typically wasted by being vented into the atmosphere or burned off (flared). This not only contributes to environmental pollution but also wastes a potential energy source.
Some companies are capitalizing on this waste, using it to power mobile Bitcoin mining units right at the source of the gas. This process converts the otherwise wasted gas into electricity for powering the energy-intensive PoW process, thereby making it a more environmentally friendly operation.
Interestingly, there has been a notable shift in sentiment among mainstream media outlets in the weeks that have followed a spat of ETF-like filings by institutional investing firms. Prior to these filings, it was not uncommon to see outlets like the New York Times running hit pieces on Bitcoin and its PoW consensus mechanism. Now, one need not search long to find articles sharing benefits such as reducing flared gas, the ability to return power to energy-strapped grids, and more.
Overall, there is a clear sentiment shift towards a process that many Bitcoin advocates liken to ‘monetizing energy’. With this being the case, it is not surprising to see companies like Vanguard increasing its exposure to the sector – even if it is non-direct, and through index funds.
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