BeePool, the fourth largest Ethereum mining pool, is closing amid China’s crypto crackdown.
The China-based Ethereum mining pool announced on Tuesday it will suspend operations “in response to the latest regulatory policies.”
Effective immediately, the registration of new users and the addition of sub-accounts for existing users will be discontinued, and all mining access servers are expected to stop operating by October 15.
The announcement comes just a day after news broke that SparkPool, the second largest Ethereum mining pool, will suspend operations by the end of the month for similar reasons.
Between them, BeePool and SparkPool account for more than one quarter of Ethereum’s hashrate.
— beepool.org (@beepools) September 28, 2021
Following a lull in its crypto crackdown, late last week it became clear the People’s Bank of China was ramping up a suite of new measures and promoting stronger inter-departmental coordination to suppress crypto activity. The measures aim to cut off payment channels, dispose of relevant websites and mobile applications in accordance with the law.
The mining crackdown has focused for months on Bitcoin mining which saw a major exodus of mining operations from the country. Now, the Chinese government’s focus appears to have shifted to Ethereum.
On Monday the Guangming media outlet reported that authorities in the autonomous region of Inner Mongolia had seized 10,000 Ether mining machines from a warehouse after a tip-off. The miners were consuming 1,104 kWh of electricity.
According to the publication Inner Mongolian authorities have shut down 45 virtual currency mining projects so far, reportedly saving 6.58 billion kilowatt-hours of electricity per year, which the outlets claims is equivalent to two million tons of standard coal.
The mining crackdown has contributed to the ETH price dropping below $3,000 yesterday and it is currently trading at $2,863.71 according to CoinGecko.
BeePool has been operating for four years and the mining pool currently accounts for 6.7% of the Ethereum mining share with over 3,000 blocks mined in the last week.
Related:Alibaba to ban crypto miner sales amid Chinese crackdown
While mining is profitable now, the introduction of fee burning on the Ethereum London hard fork has reduced profits as miners receive fewer rewards for each block.
The next stage in the blockchain’s ongoing upgrade to Eth2 was announced earlier today for October. Miners will be further sidelined by the shift to Proof-Of-Stake.
Following its approval for a Nasdaq listing, Canadian Hive Blockchain Technologies has bought more than 3,000 Bitcoin (BTC) mining rigs to get involved in the Bitcoin mining shift from east to west.
Purchased from Digital Currency Group (DCG) subsidiary Foundry Digital LLC, the 3,019 MicroBT M30S miners acquired as part of the deal are already located at Hive’s facilities in Lachute, Quebec and Grand Falls, New Brunswick. Foundry will be issued cash and 1.5 million warrants of Hive, according to an official announcement.
Hive’s new hash power will join the Foundry USA Pool, which includes Blockcap, Hut8, Bitfarms and Foundry as participants.
Noting the massive migration of mining power from China to the U.S. and Canada, Hive executive chairman Frank Holmes said that the firm’s entry into a North American mining pool furthers the company’s goal of increased transparency and accountability with its partners.
“We are excited to have Hive as a partner for the Foundry USA Pool as we continue playing our part in securing the global bitcoin mining network, ”Foundry CEO Mike Colyer added.
Related: Hive Blockchain Technologies approved for Nasdaq listing
The announcement says that the addition of the new miners would add an aggregate hash power of 264 petahash per second (PH/s), increasing Hive’s overall Bitcoin operating hash rate by 46% to approximately 830 PH/s. Based on the current difficulty and Bitcoin price, the newly enhanced mining setup would generate an additional $80,000 in daily income for Hive.
Hive is known for its green energy-based mining efforts. The company has green energy-powered data center facilities in Canada, Sweden and Iceland. It recently sold its Norwegian operations due to legislative challenges.
PoolTogether is a service that lets users stake cryptocurrency into lottery pools for a chance to win a significant weekly prize pool.
The prize pools are made up of accumulated staking fees, and you can withdraw your full original deposit even if you don’t win.
Since the advent of decentralized finance (DeFi), a number of peer-to-peer financial products have been built, enabling users to lend cryptocurrencies to other users and stake funds in liquidity pools to enable trading. But here’s one that might not make a lot of sense on the surface.
PoolTogether is a lottery in which anyone who purchases a ticket has a chance to win a stash of crypto—but even if you lose the drawing, you don’t lose any of the money you spent to enter. In fact, your tickets just keep rolling into the next drawing again and again. Aside from paying for transaction fees to enter, you literally can’t lose your money. But you could win. Maybe.
It’s essentially a mash-up of traditional lottery systems and crypto staking, with users sacrificing a smaller amount of potential yield in favor of a potential jackpot. Here’s how it works.
What is PoolTogether?
PoolTogether is an Ethereum-based lottery platform that lets users deposit cryptocurrency into pools to buy tickets. Each pool holds a weekly drawing that awards a prize pool to up to five winners, but your tickets do not expire following the drawing. Instead, the tickets roll over to the next drawing, the next one after that, and so on and so forth until you win or withdraw your funds from the pool.
In this sense, it’s a no-loss lottery: you might not win, but you can’t lose. PoolTogether also describes it as a “prize savings” approach, as you could potentially be rewarded for holding onto your crypto funds rather than spending them elsewhere.
How does PoolTogether work?
Many cryptocurrencies offer a staking feature that allows users to lock up their funds within the network to provide liquidity, and they are rewarded with an interest-like staking reward for doing so. PoolTogether takes that premise and executes it on a large scale as a lottery. When users deposit funds into the pools, they are staked via the DeFi platform Compound and the interest that is generated is used for the lottery rewards.
Staking rewards vary by coin, but with so many users playing and keeping their funds pooled long-term, it adds up to large jackpot sums. Automated smart contracts select the winners and keep everyone else enrolled in the latest weekly drawings without any manual action needed.
Did you know?
In one headline-making example, a PoolTogether user deposited $74 worth of DAI into a pool in March 2020 and won nearly $40,000 just over a year later.
What’s so special about it?
Just as DeFi has revolutionized other traditional financial services, PoolTogether is putting a fresh spin on the traditional lottery. But the worst part of playing the lottery—the gradually building sum of money spent on single-use tickets—is taken out of the equation.
You’ll pay transaction fees to enter and exit the pools, but your money remains yours and you’ll be continually entered in the weekly drawings so long as you keep your money in the pool.
How to get started with PoolTogether
You don’t need an account to play: simply go to the PoolTogether website and connect a cryptocurrency wallet. PoolTogether supports an array of popular options, including MetaMask, Coinbase Wallet, Trezor, Ledger, and Trust Wallet.
Go to the Pools listing and click the Deposit button to add the specified coins. As of this writing, PoolTogether offers several different pools—including for USD Coin (USDC), DAI, SushiSwap (SUSHI), Compound (COMP), and Uniswap (UNI)—each with its own weekly prize awarded to the winner(s).
Once you input how much of the selected cryptocurrency you wish to deposit, you will need to approve the transaction with your wallet and pay the transaction fee in ETH. PoolTogether requires users to keep their funds locked in a pool for at least 10 days, otherwise there’s a fee for withdrawing them early.
What are the downsides?
As of this writing, there are no apparent risks: your money is safe, PoolTogether has been functioning successfully for a long time, and it’s not a scam. There are a few downsides to keep in mind, however. Transaction fees can be costly due to demand on the Ethereum network, and if you’re only putting a few dollars worth of crypto into a pool, it might actually cost you more to pay the transaction fee.
Also, there’s an opportunity cost in locking your cryptocurrency into a pool and leaving it there. You could stake those funds or provide liquidity via a decentralized exchange and earn a small amount of yield, but instead, you’re pooling them in the hopes of winning a big jackpot. Lastly, your chances of winning grow significantly the more tickets you buy, so it potentially helps the rich get richer. Still, anyone who plays can potentially win.
Did you know?
As of this writing, PoolTogether has more than $195 million worth of cryptocurrency locked within its pools and awards more than $100,000 per week in prizes.
What is the POOL token?
Launched in February 2021, POOL is a governance token that allows holders to vote on proposals to help shape the future of PoolTogether. Users may be able to vote on how prizes are awarded, which pools the site operates, and changing the future distribution of POOL to users. The site airdropped POOL tokens to early users at launch, plus POOL is distributed to PoolTogether users on an ongoing basis.
Where can you buy POOL?
Aside from earning POOL by using PoolTogether, you can also purchase POOL from a handful of exchanges. It’s not widely available, but you can swap Ethereum-based tokens for it on the popular decentralized exchange Uniswap, as well as buy it on exchanges like Gate.io and 1inch.
Here’s an example of how you can purchase POOL on Uniswap. You will need to swap ETH or another Ethereum-based token for it. Simply choose the amount of POOL that you want to buy, and the site will use the current exchange rate to tell you how much you will need to spend. Click swap, approve the purchase within your wallet and pay the transaction fee, and you should be set.
With the launch of POOL, PoolTogether opened up future governance of the site to the community, enabling token holders to vote on its development and evolution. PoolTogether has enlisted partners such as popular DEX SushiSwap and blockchain platform The Graph to create new integrations and pools, and held an auditing content to help verify that its code is safe.
Growing Ethereum transaction fees are one potential concern at the moment, as they can vary wildly and be very significant. During a few-hour span while writing this article, we observed fees ranging between $5 and $35 per transaction—and that was for an intended transaction adding just $5 worth of DAI into a pool.
The upcoming London network upgrade for Ethereum should help stabilize the fees, and the eventual Ethereum 2.0 upgrade could dramatically lower fees as the network scales to support more activity.
PoolTogether also launched a pool for Ethereum sidechain Polygon (MATIC) in April 2021 that has much cheaper fees than the Ethereum mainnet pools, and that could be a sign of further change to come for the platform.
No-loss lotteries appear to have found a snug product-market fit.
Just a few days after the airdrop of their governance token, POOL, the self-styled “savings game” PoolTogether has cracked $50 million in total value locked with ease, currently sitting above $51 million spread between DAI, USDC, UNI, and COMP lottery pools.
PoolTogether aptly ‘pools’ user funds and deposits them into decentralized finance savings protocols, using the interest as prizes for randomly-selected winners and returning the initial funds to buyers — thus creating a “no-loss” lottery.
While the project stalled below $10 million in total value locked for months, growth has been explosive ever since the POOL governance token airdrop on February 17. According to a Tweet from the team, a day ago the project had $34 million in TVL — it has since grown 33%.
$34 million deposited!
~$47,000 in no loss prizes being awarded this week! https://t.co/wYA1wO1NHY pic.twitter.com/lfpgu7bWZN
— PoolTogether (@PoolTogether_) February 19, 2021
PoolTogether founder Leighton Cusack points to the distribution model for POOL as a partial explainer for the protocol’s growth.
“As part of the initial decentralization, 5% of total POOL supply (500,000 tokens) were allocated to be distributed automatically to all no loss prize pool depositors over the next 14 week,” he said in an interview with Cointelegraph.
The distribution program, one which is conceptually similar to liquidity mining, is part of a larger effort to “get the token into the hands of users.” Cusack says that of the 1.5 million tokens airdropped on the 17th, (15% of the total supply), 600,000 have been claimed.
Another reason for the growth is entirely organic, however: the more depositors, the more appealing the prize pool.
“The prizes are MUCH larger than they have ever been. Right now the protocol is on track to aw1ard over $60,000 in prizes in the next 7 days. So the higher prizes is attracting more people to deposit,” he said.
The next step for the protocol will be to build on the promising growth. Cusack says that integrating with more savings protocols and moving to a layer-2 in an effort to duck Ethereum’s rising gas fees are priorities, but ultimately those decisions are now out of his hands.
“Since the protocol is now decentralized though, it’s really up to members of the community to drive that process. There is a strong community around the protocol already and if you anyone wants to get involved just hop into the Discord.”