Luxor Technology wants to facilitate Bitcoin mining. That is why the company has launched a Panoply of products (mining groups, hashrate derivatives, data analysis, ASIC brokerage) to help Bitcoin miners, large and small, to develop their operations.
Aaron Foster, director of business development of the company, joined in October 2021, and has seen the team grow approximately 15 to 85 people within three and a half years.
Foster worked a decade in the Canadian energy sector before coming to Bitcoin Mining, which is one of the reasons why he will talk about the future of mining in Canada and the US. UU. At the BTC summit and consensus mining this year, from May 14 to 15.
In the period prior to the event, Foster shared his thoughts on Bitcoin miners that resort to artificial intelligence, the growing sophistication of the mining industry and how Luxor products allow the miners to cover various forms of risk.
This interview has been condensed and edited by clarity.
Mining pools allow miners to combine their computational resources to have greater possibilities of receiving bitcoin block rewards. Can you explain how Luxor mining pools work?
Aaron Foster: Mining pools are basically aggregators that reduce the variance of solo mining. When you look at solo mining, it is very in the style of the lottery, which means that you could connect your machines and could reach the block rewards tomorrow, or it could reach it within 100 years. But you are still paying for energy during that time. On a small scale, it is not a big problem, since it scale and creates a business around it.
There is a kind of mining pool called PPLN, which means Pay-Per-Nn-Shares. Basically, that means that the miner is not paid unless that mining pool reaches the block. That is also due to the variation of luck, so it is not different from the situation of that solo mine. However, that creates income volatility for these large industrial miners.
So we are seeing the emergence of what we call payments per action, or FPPS, and that luxor is working for our Bitcoin group. With FPPS, regardless of whether we find a block or not, we are still paying our income their income based on the number of actions they have presented to the pool. That gives the miners’ income certainty, assuming that hashprice is the same. We have effectively converted an insurance provider.
The problem is that it needs a very deep and strong balance to support that model, because although we have reduced the variance for miners, that risk is now put on us. So we have to plan for that. But it can be calculated for a period of time enough. We have different partners in that sense, so that we do not have the total risk of our balance sheet.
Tell me about your ASIC brokerage business.
We have become one of the main hardware suppliers in the secondary market. Mainly within North America, but we have sent more than 35 countries. We deal with everyone, from public companies to private companies, institutions and retailers.
We are mainly a corridor, which means that we agree with the buyer and the seller, mainly in the secondary market. Sometimes we interact with ASIC manufacturers, and in certain cases we take main positions, which means that we use money from our balance sheet to buy ASIC and then resell them in the secondary market. But most of our volume comes from buyers and sellers.
Luxor also launched the first Hashrate futures contracts.
We are trying to boost the Bitcoin mining space. We are a hashrate market, depending on how you see our mining pools, and we wanted to make a great leap and make Hashrate the world of tradfi.
We wanted to create a tool that allows investors to take a position in hashprice without effectively possessing mining equipment. Hashprice is, you know, the income per hour or daily obtained by the miners, and that fluctuates a lot. For some people it is coverage, for others it is speculation. We are creating a tool for miners to sell their hashrate forward and use it as a basic guarantee or a way of financing growth.
We said: “Let the miners basically sell a front hash. Basically it is the collateralization of hashrate. Therefore, they are obliged to send us x amount of hashrate per month for the duration of the contract. Before that, they will receive a certain amount of bitcoin in advance.
There is an imbalance of the market between buyers and vendors. We have many buyers, which means people and institutions that wish to gain performance in their Bitcoin. In what you are lending your bitcoin is effectively your interest rate. However, I could also see it as if you were buying that hashrat yourself with a discount. That is important for institutions or people who do not want physical exposure to Bitcoins mining, but they want exposure to the price of hash or hashrate. They can do it synthetically by buying Bitcoin and placing it in our market, effectively lending it, winning performance and purchases that has yourself with a discount.
What do you think most exciting in Bitcoin Mining at this time?
The acceptance and natural progression of our industry in other markets. We cannot ignore the AI HPC transition. Instead of building these mega mines that are only mass buildings with dense bitcoin mining operations in energy, it is beginning to see large miners becoming suppliers of energy infrastructure to obtain artificial intelligence.
The use of Bitcoin mining as a springboard for a larger and more intensive capital industry, such as AI, is exciting for me, because it gives us a little more acceptance, because we are arriving from a completely different angle. I think the greatest example is the central structure of Coreweave Coreweave’s treatment, how these two businesses have merged. They are complementary to each other. And that is really exciting.
When you look at our own product roadmap, we have no choice but to follow a roadmap similar to Bitcoin miners. Many of the products we build for the mining industry are analogous to what is needed at a different level for AI. Of course, it is much simpler in our industry than in AI. We are our first step in the HPC space, and there is still very early in the first days there.
