It’s a shot in the arm for Google Cloud users at risk of cryptocurrency mining attacks. The Google Cybersecurity Action Team (GCAT) has created a threat detection service to shield “poorly configured” accounts that attackers use to mine cryptocurrency.
In a blog post, Google Cloud announced the Virtual Machine Threat Detection (VMTD) release in its Security Command Center (SCC) area. A means of scanning compute engines in Google Cloud, the VMTD successfully detects threats, including crypto-mining malware used inside virtual machines.
Crypto-mining malware attacks, sometimes called “cryptojacking,” are an ongoing nuisance in the industry. While browser-based cryptojacking activity spiked in the 2019 bear market, cloud-based crypto mining continues to beleaguer the space.
Cointelegraph reported in November last year that of 50 analyzed incidents relating to compromised Google Cloud Protocols, 86% were related to crypto mining. The Google “Threat Horizons” report highlighted hackers may seek to hijack GPU space to mine crypto as it is a “cloud resource-intensive for-profit activity.”
Upon receiving the data, the Google Cybersecurity Action Team sought to remedy the situation, building better protections for its virtual machine users.
The result is VMTD, a program that provides agentless memory scanning to help detect threats like crypto-mining malware. As well as delivering protections from coin mining, the VMTD also secures users from data exfiltration and ransomware.
Ransomware attacks flourished in 2021, reaching highs in April 2021. Some commentators suggest that the rise in ransomware attacks went hand in hand with crypto’s meteoric rise; regulators and industry players have made efforts to blunt the malpractice.
Related:Crypto miner in Texas shuts down 99% of operations as winter storm approaches
Regarding crypto-mining malware attacks, Google has made a concerted effort to stem the onslaught of malicious actors taking advantage of unknowing internet users’ CPU power and electricity in order to mine cryptocurrencies. In 2018, over 55% of businesses were reportedly affected worldwide, including Google’s Youtube.
The VMTD will steadily integrate with other parts of Google Cloud over the coming months, benefitting further Google Cloud users.
With Amazon Web Services (AWS) being one of the most popular cloud service providers on the planet, it’s no surprise that Coinbase, a cryptocurrency exchange based in the United States, is attempting to capitalize on its success by developing its own cloud infrastructure solution, Coinbase Cloud.
“We want to be the AWS of crypto,” said Coinbase chief product officer Surojit Chatterjee in an exclusive interview with Forbes. “We are building this whole Coinbase Cloud suite of products that you can think of as crypto computing services to help developers build their applications faster.”
Before becoming Coinbase Cloud, the service was named Bison Trails, a cloud-based staking infrastructure solution that Coinbase bought earlier this year for an undisclosed amount that was rumored to be above $80 million. According to Coinbase, Bison Trails is a non-custodial platform, which means it does not manage clients’ staked assets.
Amazon Web Services (AWS) was once a secondary consideration for Amazon in Seattle, overshadowed by Amazon. Nevertheless, the Amazon subsidiary that debuted almost 20 years ago is the firm’s major profit engine today. AWS earned $13.5 billion in annual operating earnings in 2020 on a revenue base of $45.3 billion, or 63 percent of its parent company’s total.
Related: NFTs could be ‘as big or bigger’ than all crypto on Coinbase, CEO says
Coinbase officials have suggested that they need to become the “Amazon of cryptocurrencies” as soon as possible. or Because the majority of its accolades are for not just being the first major digital currency business to go public but also for doing so by achieving the greatest direct listing in history, its income stream is overly reliant on transaction fees.
This is often the case with line items that are dominated by a single category’s revenue concentration. Facebook, for example, and Google are almost entirely reliant on advertising to make money, therefore their line items generally have this degree of revenue concentration.
However, due to their significant dependence on the market and overall trading volumes, Coinbase and other exchanges may be highly vulnerable. Because trading volumes are closely linked with price swings, such dependence can be a major drawback for crypto platforms like Coinbase or any other exchange.
Coinbase is seeking to boost trading income by providing subscription services that are more resistant to market swings to mitigate this risk. For example, it provides institutional custody services, staking possibilities, a learning portal that gives users crypto as a reward, an e-commerce checkout system, and the ability to issue Visa debit cards to clients. It’s also trying out a subscription plan that would give customers a monthly trading allowance for a set price.
The acquisition of Bison Trails, according to Chatterjee, was a critical step in Coinbase’s transition to a more mature financial system. The platform supports crypto custodians, funds, decentralized apps, and token holders. Some of its customers are Andreessen Horowitz (a16z), New York-based fintech firm Current, and Turner Sports.
As of November 2021, Coinbase Cloud has $30 billion in crypto assets staked on its platform. Coinbase, one of the most popular cryptocurrency platforms, has more than 73 million genuine customers, 10,000 organizations, and 185,000 ecosystem partners in more than 100 countries. According to Coinbase, since its founding, it has handled transactions worth over $700 billion.
Bitcoin’s (BTC) rapid recovery above $46,000 has renewed calls for a $100,000 BTC price by the end of 2021, while the effects of China’s crackdown on the mining industry are slowly beginning to fade as the Bitcoin network hash rate shows signs of recovery.
Bitcoin mean hash rate vs. price. Source:Glassnode
One of the side benefits of China’s crackdown is that it has lowered the barriers of entry into the Bitcoin mining space, which has been shown to provide profits in both bull and bear markets.
Bitcoin mining is one of the few ways that investors can acquire BTC without directly purchasing it from the market, and is quickly becoming an industry dominated by big money interests that can afford the electricity costs and upkeep required to run a mining operation.
Here are some options available for the average crypto stacker to acquire more BTC through cloud mining contracts, crypto lending platforms and centralized exchanges (CEX).
Cloud mining contracts
The cloud mining industry has been around since Bitcoin’s early days, and it offers those interested in mining Bitcoin who lack the space, equipment and electricity required an opportunity to outsource their production.
Some of the more well-known companies that offered cloud mining services include Genesis Mining and HashNest, but demand for their services has exceeded their capabilities, resulting in all their Bitcoin mining contracts being sold out.
One of the current mining operators with available contracts is Shamining, a company based in the United Kingdom that has been in operation since 2018, and claims to have data centers worldwide with locations in California, Mexico, Cape Town, South Africa and London, England.
Through this service, users can rent mining equipment and pay for the associated costs of operating the units, while the company handles the physical housing, operation and maintenance. Once operational, generated proceeds can be withdrawn to a Bitcoin wallet specified by the user.
Current rental contracts include two options for GPU miners, which cost around $283 for 23,580 gigahashes per second (GH/s) or $1,066 for 94,340 GH/s, and another option for ASIC miners with a current cost of $2,571 for 235,849 GH/s of mining power.
All contracts indicate that they have profitability that starts at 143%.
Another option that allows users more flexibility regarding the parameters of their mining contract is ECOS, a company that grew out of the Free Economic Zone located in Hrazdan, Armenia, and has been in operation since 2017.
As seen in the graphic above, a 50-month contract for 9 terahashes per second currently costs $1,668 and is projected to result in a profit of 272.82% at a BTC price of $70,000.
It should be noted that all cloud mining services offer warnings about the high risks involved and that no level of profit can be guaranteed. This could be due to a variety of circumstances, including fluctuating electricity prices, Bitcoin price volatility and advances in mining technology that lead to substantial increases in mining difficulty, which renders older equipment obsolete.
Related:Bitcoin mining difficulty jumps a second time as miners settle offshore
Crypto lending services
A more traditional option available for hodlers to acquire more Bitcoin by utilizing their current stack that doesn’t require any further investment, like mining, is through lending services that offer a yield on deposits.
Nexo and Celsius are two of the most well-known lending platforms that allow cryptocurrency users to borrow funds against their crypto holdings or earn rewards for deposits.
At the time of writing, Celsius offers users an annual percentage yield (APY) of 6.2% for Bitcoin deposits, and Nexo offers a standard return of 5% on flexible-term deposits, while fixed-term deposits that go a minimum of one month can earn 6%.
A third option that provides users with a 4% return on BTC deposits is BlockFi, a crypto asset service provider that offers interest accounts and crypto-backed loans and has also recently launched a Bitcoin rewards credit card.
Related:What bear market? Investors throw record cash behind blockchain firms in 2021
Earn BTC from centralized exchanges
Several centralized exchanges also offer Bitcoin holders a return on their BTC deposits, albeit at lower rates than those mentioned above.
Binance, the largest CEX in the crypto ecosystem, offers users an estimated APY of 0.5%, while third-ranked exchange Huobi offers 1.32%.
The best yield offered on a United States-based CEX can be found on Gemini where users can earn 1.65% on their deposits.
KuCoin offers a more free-market approach to BTC lending where lenders can set the parameters of the loan terms, choosing between contract lengths of seven days, 14 days and 28 days while getting to set their own daily interest rates to compete with other lenders on the market.
The lowest rate currently offered on KuCoin is an annual rate of 1.82% on a seven-day contract.
As seen in the data provided, there are multiple ways to increase a Bitcoin stack as opposed to simply buying on the open market, but they are becoming scarcer as time progresses.
With large institutions, energy companies and governments beginning to develop Bitcoin mining infrastructures, smaller market participants are increasingly being squeezed out as cloud mining facilities are unable to keep pace with demand.
Bitcoin lending is increasingly looking like the main way BTC holders will be able to earn a yield paid in BTC in the future, while Bitcoin-backed loans offer a way for hodlers to access the value of their tokens without the need to sell and create a taxable event.
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The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
After a tumultuous 2020 that continued into Bitcoin (BTC) setting new all-time highs in 2021, Bitcoin miners are facing a bittersweet scenario — profits have skyrocketed, but multiple issues prevent them from buying more devices and boosting Bitcoin’s hash rate.
According to the founder of major mining pool BTC.Top, Jiang Zhuoer, global electronics supply chain issues are having their effect on the mining industry as well. Speaking with Cointelegraph, he said:
“There is definitely a shortage of equipment right now because, since the coronavirus epidemic, the global supply chain has been interrupted and is now in the process of gradually recovering. But the demand for chips has greatly increased, so now all industries are short of chips, whether it is Bitcoin mining or other industries, such as consumer electronics or even the automotive industry.”
Recently, car manufacturing giant General Motors shut down some of its plants due to the inability to source chips. Other carmakers have seen similar shutdowns in recent months as well.
The shortage of mining devices can be easily seen in Bitcoin’s hash rate. Since the halving in May 2020, Bitcoin’s hash rate has increased from about 92 million terahashes per second to its current reading of 166 million, an 80% increase. Bitcoin’s price, on the other hand, increased from $9,000 to over $46,000, a gain of over 400%.
Bitcoin’s hash rate has a relatively straightforward correlation with price. Barring new technological advances, increases in price should be closely mirrored by increases in hash rate. While the rate of new devices coming online should lag behind the price in bull markets, the hash rate has remained relatively stagnant in the past few months.
Source:Coinmetrics
This means that current miners are seeing much higher revenue for individual devices, which, added to the shortage, results in inflated unit prices for ASIC miners. According to ASICMinerValue, obtaining a Bitmain S19 Pro right now costs about $9,000, while its official price is less than $4,000.
According to Jiang, the mining industry also saw major issues in 2020 due to Bitmain’s internal power struggle. “The indefinite delay of the Ant mining machine S19 in June, July and August 2020 caused us a lot of difficulties. We underwrote our customers according to the shipment period and used our own machines to make up the revenue to our customers,” Jiang said. With the Bitmain saga being resolved in favor of Micree Zhan, there should be no more specific issues with purchasing the company’s miners.
Bitcoin ASICs hitting fundamental performance limits
Despite the variety of issues, 2020 was also a pivotal year for the Bitcoin mining industry due to the release of new-generation ASIC devices with improved energy efficiency. The industry leaders were the Bitmain Antminer S19 Pro and MicroBT Whatsminer M30S+ series. Publicly listed manufacturer Canaan also released new miners such as the AvalonMiner 1166 Pro and the liquid-cooled A1066I unit.
The new miners offered significant efficiency gains, primarily due to their more advanced chip lithography. The S19 Pro uses 7-nanometer chips, while the M30S+ uses 8-nm lithography. The measurement indicates the distance between two ends of a transistor on a chip — at these values, it is just a dozen atoms wide. Lowering the distance helps increase computing performance and reduce power consumption.
Jiang explained that the Bitcoin mining industry is currently experimenting with TSMC’s 5-nm process, while the chip manufacturer is already researching 3-nm lithography. A reduction from 5 to 3 nm would be a major achievement for the computing industry, as it would allow to pack roughly 60% more transistors in the same chip. But according to Jiang, the latest advancements in chip technology are hitting some fundamental physical limits:
“The smaller the nanometer [distance], the less significant the increase in power efficiency, because when the nanometers decrease to a certain level, it will involve quantum problems. […] The quantum [tunneling] effect will cause electrons to jump around between different diodes, therefore, the electron leakage ratio will rise.”
The practical result is that newer chips will have better computing performance but are unlikely to carry as strong improvements in energy efficiency, Jiang said. “Bitcoin mining actually does not require high computing; it requires a better power efficiency — that is, the less power you consume with the same hash power, the better,” he added.
Other types of performance improvements like liquid cooling can be useful but do not radically alter the miner’s efficiency. Jiang explained:
“Liquid cooling can only improve the mining efficiency by a certain degree. For example, a machine with 100 watts per terahash power efficiency, if you use an air-cooling system, after a period of time, due to dust or inappropriate cleaning, the machine’s power efficiency will decrease to 105 watts-terahash, while the liquid cooling system can allow you to increase the efficiency to about 95 watts-terahash. That’s only a 5% improvement — this difference is not significant.”
Is now a good time to enter the mining industry?
The vastly inflated revenue for miners comes as the global electronics industry is under intense pressure. Normally, new devices would quickly fill the gap and bring down the average revenue to mean values. The current chip shortages mean that this outcome may take longer than usual to occur, but existing devices are still being sold at a significant-enough premium to make prospective buyers consider their actions twice. For example, the S19 Pro currently has a return-on-investment period of eight months based on the electricity price of $0.04 per kilowatt-hour. However, if its revenue were to collapse to the still-high levels of December 2020, the miner would need to work for up to 40 months to pay itself back.
In the three years that the miner could potentially require to turn a profit, new devices could make the S19 partially obsolete, prolonging the payback period even further. Still, according to Jiang, the mining industry could be heading for consolidation around state-of-the-art devices, with only marginal improvements over previous generations. This would improve the lifetime expectation for mining devices, ensuring the stability of any investment made now or in the future. ASICs have already stabilized to a significant extent, as the five-year-old Bitmain S9, for example, only became completely unprofitable after the 2020 halving but is now once again generating a reasonable profit of $3 per day, assuming electricity prices of $0.04 kWh.
“Unless you buy a very expensive mine at the peak of the bull market, it’s hard not to make profits,” Jiang concluded.
Are miners better hodlers?
Jiang believes that the economics of mining makes it a superior method to acquire Bitcoin and hold it through the entirety of a rally. According to him, most Bitcoin miners kept their BTC all the way to $20,000 in 2017, while regular holders had a much lower chance of holding through to the top.
Jiang didn’t wish to elaborate on the data source of this conviction, which goes against the general wisdom that miners immediately sell the Bitcoin they mine. An analysis by Coinmetrics shows a nuanced picture: Miners hold a very significant portion of the Bitcoin supply, most of which was acquired in the early years of its existence. Partially confirming Jiang’s thesis, during the 2017 bull market, the miners seem to have accelerated their selling only around October, closely timing the top at the time.
A sizable increase in the miners’ Bitcoin holdings can be observed toward the end of 2019, suggesting that they began holding a larger proportion of their proceeds. Still, the relative prevalence of miner holdings has been on a steady decline throughout Bitcoin’s history, indicating that most of the BTC they mine ends up sold on the wider market.
According to Jiang, though, miners can be less influenced by loss aversion: the natural human tendency of avoiding more profitable outcomes if they also carry higher risk.
He explained that the mechanics of mining make it psychologically easier to hold through volatile markets:
“The first reason is that the mining machine is like a golden goose that can lay golden eggs in the bull market, so no miners would sell this golden goose […] The second reason is the process of selling mining machines is much more complicated than selling Bitcoin on exchanges.”
The case for acquiring Bitcoin exposure through mining remains nuanced. In most cases, breaking even on the investment requires waiting for a year or more, depending on the initial entry point. Compared to buying Bitcoin outright, miners may lose out on major price gains immediately after, but this is compensated by higher resilience during market downturns. The mining device can pay itself off even if the price of Bitcoin takes exceedingly long to return to its previous highs.
Bitcoin mining is not just for professionals
Being a successful miner is similar to running a business. After an initial setup cost, the venture can turn a steady profit but requires maintenance and oversight. Not everyone has access to the conditions required to set up a successful mining farm, the most important of which is the location — cheap electricity is a must for miners.
It is still possible to purchase ASICs from retail shops and mine at home, provided that the home electricity price is below $0.10 kWh. Such figures can usually be found only in developing countries that have ample natural resources.
Some mining pools and companies offer a variety of ways for others to use their facilities — for a fee. The primary methods are colocation and cloud mining, which differ significantly in terms of their structure. Colocation services merely charge a fee for electricity and maintenance, while the devices are provided by the client. Cloud mining services are, in general, much different and riskier than self-hosted mining. Usually, the contracts last a predefined amount of time and carry significant maintenance costs. This gives a limited amount of time to recoup the initial investment, making it more of a bet on the price of crypto with somewhat limited upside. Overall, the opacity of the mechanism often raises questions from regulators about the legitimacy of some cloud mining operations.
Jiang’s company recently launched a service called “joint mining,” which changes the business model of cloud mining to make it closer to real mining:
“For example, a customer spends 10,000 yuan [$1,540] to buy a mining machine to dig a mine. When he receives 10,000 yuan of Bitcoin from the mining machine, after his investment returns the capital, we start to charge service fees. The Bitcoin produced afterwards is net profit. We collect 20% of the net profit — that is, 20% of the Bitcoin produced later. If the customer doesn’t get back the money in the end, we won’t charge.”
The BTC.top platform is thus closer to an assisted colocation service than classical cloud mining, with the company also allowing clients to “withdraw” their miners and have them delivered to a destination of their choosing.
As the Bitcoin mining industry stabilizes and matures, the companies involved in the business may become important diversification tools for investors. The unique risk and reward profile of mining is similar to gold mining companies, which are traditionally included in many exchange-traded funds for gold exposure. Jiang concluded with another parallel between Bitcoin and gold:
“The bull market of Bitcoin has increased more than I expected, so I expect that the top of this bull market may not be $100,000 as I expected, but may reach $200,000 or even $300,000, making Bitcoin exceed the total market value of gold.”
