What is offline mining? Why do miners want to dig out of the net?

  • By bitcoincasts
  • January 11, 2023

It is reported that what is offline mining? Why do miners want to dig out of the net? Off-grid mining occurs at sites that are not connected to the energy network that provides electricity for most people and enterprises. The name is self-evident, but this approach may be one of the less explored areas in an industry that has been largely misunderstood. So what is off-grid mining, what kind of energy it provides for Bitcoin miners, and why should miners use off-grid energy?

Off-grid energy

In general, off-grid power (or sometimes referred to as "off-grid" power) refers to power consumers produced by sources that are not managed by the grid (power authorities that provide electricity for most residential and commercial purposes).

Off-grid power usually comes from:

Solar panels

Wind power generator

Hydraulic turbine

Natural gas/biogas

Off-network Bitcoin exploitation of natural gas

Bitcoin miners may use some of the above power sources to consume electricity without directly entering the grid.

The most common form of off-grid mining is through natural gas. For example, companies such as Upstream Data, Great American Mining, JAI Energy and Crusoe Energy Systems have hosted diggers at oil drilling sites in the United States and Canada. These facilities use natural gas, a by-product of oil drilling, to power their ASICs. This gas is usually burned ("burning" in the words of oil and natural gas), because there is no economic and effective way to transport or consume it.

However, Bitcoin mining provides these oil and gas producers with a way to monetize this originally stranded energy.

The only reason that Bitcoin miners want this stranded energy is that it is cheaper than alternatives. Because natural gas is a by-product of drilling (and because producers have few ways to monetize it), natural gas is ridiculously cheap compared with the resources they get from the grid.

However, this does not mean that this method has no shortcomings. Generally, the normal operation time of these operations is less than that of industrial peers (slightly less than or about 80%). This is because gas does not always flow at a constant speed. When a well dries up, a new well needs to be drilled first, and then the new gas can reach the surface. (That is, if the electricity purchased is far lower than the industrial price, these operations are still more profitable than purchasing discounted energy from the grid).

In the United States and other countries rich in natural gas resources, natural gas exploitation is still a largely untapped opportunity. For example, the recent Bitcoin mining report of Cambridge University estimates that more than 160 TWH of natural gas is burned every year in the United States alone, which is enough to provide one year (or more) of power for the Bitcoin network.

As more and more oil and gas producers begin to understand Bitcoin and it will provide them with a way to monetize the stranded natural gas, we expect that the off-grid mining of natural gas will continue to erode the market share of the hash rate in the next few years.

Solar off-grid bitcoin mining

Solar Bitcoin mining is another off-grid solution, although it is less attractive than using stranded natural gas to mine Bitcoin. In pounds, each input of solar energy provides less electricity than natural gas, and changes more (the sun only shines for so many hours every day, some days less than other days). Nevertheless, as Blake King explained in the Compass podcast, Bitcoin mining can provide a way for solar farms to monetize their operations without relying on the huge subsidies they provide in the United States and other jurisdictions.

Daniel Frumkin has recently in-depth studied the economics of solar mining. He wrote an article on this topic for Braiins' blog, and more or less concluded that if operators rely on solar energy as the main energy, it is meaningless to conduct mining business on solar energy. However, if solar energy producers want to use excess energy to power the deployment of drilling platforms, it may be profitable - but only if the price of Bitcoin continues to rise, and solar energy operators hold their mining collections.

"It's really a panacea to find that you can load the load directly on your node and have a buyer. I know that many renewable energy companies are negotiating with miners on potential joint positioning or different off-take plans, but these are early stages," Blake King told Luxor Technologies.

Mining with water ionization network

Most of the hydroelectric power generation in China has been connected to the power grid (for example, the dam in Sichuan Province, China, until recently, it also supplied power for most of China's mining industry in the rainy season).

Nevertheless, some hydroelectric dams have been decommissioned because of the lack of reliable consumers or means of delivering the energy they generate. Although rare, these coveted power supplies can provide cheap and rich energy for industrial-scale bitcoin miners.

Why do miners want to dig out of the net?

There are two answers to this question, and they are quite simple: cost and sovereignty.

For example, miners connected to gas wells usually burn natural gas, otherwise the natural gas will be wasted due to combustion; In other words, if the website operates normally, their energy cost is almost zero, and their profit margin is higher than that of grid-connected miners.

As we have recently seen in China, Canada and Kazakhstan, the regulatory pressure of off-grid mining also provides miners with a certain degree of separation from the government. The government may even own and operate energy infrastructure in some jurisdictions.

Grid-connected miners use the same power supply as enterprises and residents in specific areas. Like other people connected to the power grid, miners are affected by pricing and consumption cuts during peak hours. In some places, with the increase in the review of energy demand in Bitcoin, they may become the first consumers to cut off the power line.

If the government wants to suppress mining, the grid drawing participants will be the most likely to be the target and neutralized first, while the off-grid miners will be more difficult to smell (and in some cases, their energy may be protected due to grounding).

In general, the above content introduces in detail what is offline mining and the reason why miners want to offline mining. I believe you will understand after reading it. In short, off-grid mining refers to energy from sources not managed by the grid, and the most common form of off-grid mining is through natural gas.