First were the lending platforms. Then the exchanges. Could mining pools be the next to go insolvent?
That’s what has Bitcoiners concerned after Poolin – a Beijing-based Bitcoin mining pool that’s responsible for 10% of the overall Bitcoin network hash rate – announced a freeze on user withdrawals on Monday.
Mining pools are groups of miners that unite their efforts around one network node to mine as much Bitcoin as possible. The miners then share the spoils—but only if the pool operator has the will and means to distribute them.
Poolin said it was “facing some liquidity issues” due to rising demand for withdrawals, and announced a number of measures in order to stabilize its operations. These included pausing withdrawals from its Pool Account, and temporarily suspending its BTC and ETH balance payouts.
“The daily mined coins after September 6th will be normally paid out per day,” pool operators later clarified, adding that coins besides the top two cryptocurrencies were not affected.
Many crypto companies offering lending and exchange services either froze withdrawals or went insolvent in June and July as the crypto market tanked. Miners too faced turbulence as some of the industry’s largest players were forced to sell the vast majority of their coins.
Conversely, mining pools appeared mostly safe from liquidity issued until this month. To compensate, Poolin has now introduced a zero-fee offer to all of its BTC and ETH miners, alongside “other coins that may take ETH hashrate after its transition to proof of stake.”
The offer lasts from September 8 to December 7 for normal users, but can extend to one year for clients holding over 1 BTC or 5 ETH in their pool accounts.
Fees are usually how mining pools generate consistent revenue. Low or zero-fees, however, can incentivize miners from other pools to redirect hash rate toward a different pool. This leads to more mined coins, and thus, more liquidity.
Poolin announced today that it was deactivating its Pool Account and Poolin Wallet as payout withdrawal options for miners. The Pool Account now only supports the withdrawal and storage of current assets, while new assets can not be deposited into it.