During the 2020-2022 cryptocurrency bull market, tokenized Bitcoin hashrate products gained immense popularity. Several hashrate tokens were launched during this period with the aim of providing an easy and profitable way of gaining exposure to the mining industry. However, these tokens continue to prove their immaturity and fall short of delivering their promised benefits.
Poolin’s Hashrate Token: In mid-January 2021, Poolin launched its pBTC35A hashrate token, which was designed to represent 1 terahash per second (TH/s) of mining equipment that had a power efficiency of 35 Joules per TH (J/TH). However, the token’s value plummeted by 60% over the summer due to China’s ban on Bitcoin mining. Despite efforts to recover losses, the market for Poolin’s pBTC35A is still sour, with over 96% of its value lost in the past year.
Binance’s Hashrate Token: Binance, the world’s largest cryptocurrency exchange, launched a BTC-backed tokenized hashrate derivative in 2021. Supported by BTC.TOP and Genesis Mining, the Bitcoin Standard Hashrate Token (BTCST) was intended to represent 0.1 TH/s at an efficiency of 60 J/TH. However, the token remained disjointed from the real hashrate market, and Binance no longer maintains a market for its own hashrate token.
Blockstream’s Hashrate Token: Blockstream, a well-known Bitcoin brand, launched a hashrate token in March 2021, which was only offered to non-U.S. qualified investors. The Blockstream Mining Note (BMN) token entitles the holder to BTC mined by up to 2,000 TH/s of hashrate. BMN appears to be the most stable of all its competitor derivative products, with multiple tranches sold to investors and the asset traded on multiple marketplaces.
The Future of Hashrate Derivatives: Despite the many failures and disruptions for tokenized hashrate products, the financialization of Bitcoin mining will continue. While other hashrate products have failed in the past, other miners are attempting to improve on these failed products. Luxor Technologies launched an over-the-counter hashrate derivatives marketplace in October 2022. Ultimately, the muddled success of hashrate tokens will have very little effect on the long-term success and financialization of Bitcoin mining, as experimentation is necessary and often messy.
Conclusion: Tokenized Bitcoin hashrate products were a prominent novelty during the cryptocurrency bull market, but their lack of maturity and failure to deliver promised benefits have left much to be desired. While Poolin and Binance’s hashrate tokens have experienced significant losses, Blockstream’s BMN has fared better. Despite the failures of these tokens, the financialization of Bitcoin mining will continue, with miners attempting to improve on these products. Ultimately, the experimentation of hashrate tokens will have little effect on the long-term success and financialization of Bitcoin mining.