Binance, the world’s largest cryptocurrency exchange, has unveiled a $500 million lending pool for Bitcoin miners, as a combination of energy costs, low Bitcoin prices, and higher-than-ever mining difficulty strains the sector.
The company said its Binance Pool project was designed to provide “secure debt financing services to both public and private blue-chip Bitcoin (BTC) mining and digital asset infrastructure companies globally.”
Borrowers will have access to loans on an 18- to 24-month term, with interest rates ranging from 5% to 10%.
Maple Finance CEO on Facilitating $300M in Loans to Bitcoin Miners
Sidney Powell, co-Founder and CEO of Maple Finance, joins Decrypt's Liam Kelly and Stacy Elliott in our Decrypting Mainnet series at Mainnet 2022 to discuss its unique role in the lending space, why Bitcoin miners are willing to pay up to 20% for a loan, and how it's building the tooling to let any business spin up a crypto credit facility.
They will also have to offer collateral in the form of mining hardware or cryptocurrencies that will have to be deemed “satisfactory to Binance.”
Mining industry under pressure
Binance’s move makes sense in the current industry context, as it has become more and more difficult for miners to turn a profit.
Last month alone, Compute North filed for bankruptcy, Iris Energy sold $100 million in equity to generate cash, Compass Mining shut down its Georgia operations, and one of the largest Bitcoin mining pools, Poolin, froze withdrawals,
Mining difficulty has also just hit an all-time high, meaning miners need even more resources to continue to turn a profit.
The network’s difficulty rose 14% to a new all-time high of 35.6 trillion. This means miners need to go through that many hashes, or guesses, to produce the cryptographic string that earns it the right to add the next block of transactions to the chain.
Soaring energy costs have made Bitcoin’s mining operations significantly more expensive to run, too, especially as the world’s largest cryptocurrency still relies on an energy-intensive proof-of-workproof-of-work (PoW) validation model.
Ethereum’s recent switch to proof-of-stake (PoS), which dramatically lowered the network’s energy usage, looks mighty savvy in the current energy landscape.
Miners have been hit especially hard by the bear market, with mining revenue down almost 60% from the start of the year, according to Blockchain.com. And with Bitcoin sitting at year-lows of $19,615.13, miners are increasingly turning to credit lines to stay afloat and remain profitable, in the hopes of weathering this crypto winter.
Indeed, Binance isn’t the only company getting into lending to miners.
At the start of the month, Maple Finance announced a $300 million lending facility for troubled Bitcoin miners, although at up to 20% interest rates.
Sidney Powell, Maple Finance’s co-founder and CEO, told Decrypt at Messari Mainnet 2022 that miners have little choice when it comes to choosing a lender, as traditional banks have often been skittish about doing business with crypto firms.
