Exclusive: Genesis Mining on Future of Crypto Mining, Green Energy and Why Blockchain Isn’t for All

Avi Rosten

Genesis Mining are the world’s largest cloud cryptocurrency mining company. Founded in 2013, the platform has established itself as one of the leading platforms for buying hashpower.

With more and more miners getting in on the act, however, mining difficulty rising, and critics outside the industry slamming its soaring environmental impact, many within the industry feel that mining isn’t quite what it used to be.

To find out more about these issues and how blockhain can be employed by companies, I spoke with Paulo Fiorio - marketing manager at Genesis Mining - at the CryptoCompare MJAC London Blockchain Summit last week, where he participated in a panel discussion on the centrality of blockchain to business.

Avi Rosten: With respect to the main question of the panel, do you think businesses who don’t use blockchain are at risk in the future?

Paulo FiorioWell blockchain is not for every business, it depends on their business model - for most businesses it doesn’t make any sense, to develop a blockchain is very expensive, for some businesses you just need a light database.

For example, with IBM and Maersk, they saw that with a shipment of flowers from Kenya to Rotterdam there were 30 organisations involved and 200 communications - you have all these people that need some help communicating,

If you have a blockchain you have a timestamp of when the transactions take place - in this case it would make sense.

AR: What would be an example for you of where blockchain doesn’t make sense?

PF: A hotel for example - you have a database of customers, sales - the only people who are using that are your employees so if you trust your employees you only need a database for that. A simple business doesn’t need it

But if you are dealing for example with a supply chain for dealing cars, you have many manufacturers that are providing the parts of a car, then it’s interesting…

AR: The first question I always ask ICOs is “why does this need blockchain?” Do you feel that question isn’t asked enough in the crypto and blockchain industry? Can it often just be a way of getting investment?

PF: Yes, people aren’t answering this question enough.

In the last few years there are a few key words that get people’s attention - ‘artificial intelligence,’ ‘internet of things.' In the 90s it was the internet, then a few years ago it was ‘big data’ - without questioning the application of that…

AR: Moving on to mining, does the transition need to happen away from Proof of Work: what about the environmental costs associated with mining?

PF: Most of the data centres are close to dams, gas pipelines - these places, if they weren’t data centers - they wouldn’t be selling the data to anyone - it was just a waste of energy.

In China they have huge dams and they are not selling the energy to anyone else, with the data centres going there they are creating jobs and stimulating the economy.

AR: So are you saying you see the future of mining as where there is surplus energy, where it’s underutilised?

PF: This is happening right now, the companies are going for these places - places with cheap electricity - they are getting this cheap electricity because no one was buying it…It’s a way to improve the local economy.

AR: A lot of people outside the crypto world are very concerned about the environmental impact of crypto…

PF: We are using green electricity. For example - in Iceland we are using geothermal energy: we go there for green energy and create jobs, energy which wasn’t being used. More and more companies are going for green energy as fossil energy is getting more and more expensive.

AR: What about the profitability of mining, if the bitcoin price drops so that it’s no longer very profitable - will it damage your business model?

PFIt can happen, but the price will bump again.

It’s a system that will regulate itself. Let’s say it reaches a certain price, miners will shut off their machines until the price reaches a profitable price again.

One of things we always focus on is keeping the costs very low, we go to places that have really cheap electricity, we saw competitors in the past that had data centres in the US in places that were very expensive and it broke them when the price dropped.

AR: Was it hard to find a place that was both cost efficient and green?

PFNo, there are so many places, every week I get 2 or 3 people telling me “you should come to Chile, Guatemala”…it’s always good for the people, it creates jobs and teaches people about cryptocurrency and blockchain.

CME Looks to Double Bitcoin Futures Limit, but Is This Wise?

The Chicago Mercantile Exchange (CME) has a new request for its regulator, as it looks to double open position limits on bitcoin futures contracts in the face of significant interest.

Nasdaq reports that the CME has already petitioned its regulatory body, the Commodity Futures Trading Commission (CTFC), asking for an increase from 1000 contracts per spot month to 2000 per investor. Each contract represents five BTC, so essentially, at its peak,  a single investor's total position may edge towards a monumental 10,000 BTC.

This is in direct response to the contract's recent growth which is currently depicting record levels of activity, citing $370 million being traded per day. A spokesperson for the CME noted that the idea to increase limits was proposed on the continued maturity of the market:

Based on the significant growth and acceptance of our financially-settled CME Bitcoin futures markets, as well as our analysis of the underlying bitcoin market.

However, as Nasdaq writes the increase in the upper limit of positions is somewhat superfluous. As of July, the number of open interest contracts reached an all-time high of just 6100; given this, it seems the CME may be future-proofing.

Open to Manipulation?

However, concerns remain about the limit increase, as without them, the potential for manipulation rises; often to the detriment to the underlying asset. Although, as per the CTFC website, the threat of manipulation from bitcoin futures contracts is "low":

In general, position limits are not needed for markets where the threat of market manipulation is non-existent or very low.

Instead, Nasdaq posited that this might point to a lessening on the CTFC's strict rule of bitcoin; as well as a maturing of the market in general.

Nevertheless, some believe the CME's bitcoin futures contracts do pose a significant threat to the price of BTC; with some suggesting that blatant manipulation continues unchecked within the market.

As reported, there seems to be a correlation between the expiry dates of CME bitcoin futures contracts and a lull in the price point of BTC. In several instances, a significant drop in bitcoin's price has coincided with a closure from the CME. The most recent example of this occurred on Labor Day, September 2, when bitcoin rose an extraordinary 8% shortly after the CME shut.

Crypto analyst, Alex Kruger, highlighted this, noting the large gaps which formed on the CME chart, from the price discrepancy before and after closing.

This has become a pretty accepted practice within the market. Kruger has even gone to the lengths of compiling statistics each time this phenomenon transpired:

On these occasions, bitcoin cited an average 4.6% price discrepancy following the close of the CME.

Whether this is a coincidence or the market is indeed being actively manipulated is as yet unclear. Either way, with the increase of these limits it might be only a matter of time until we know for sure.

Featured Image Credit: Photo via Pixabay.com