Layer 1 Technologies, a Bitcoin (BTC) mining firm that is backed by PayPal Co-Founder Peter Thiel, has announced that mining operations have begun in its West Texas facility. Layer 1 Technologies aims to expand its farm until it controls 2% of the global mining hash rate by the end of this year, and then 30% by the end of 2021. Layer 1 Technologies says its primary goal is “to offset China’s dominance in Bitcoin mining and improve the country’s national security efforts for an asset class with the potential to be a reserve currency.”
As deep dived in a previous article on Crypto.IQ, the centralization of the Bitcoin (BTC) mining hash rate in China could be one of the biggest long term threats to the Bitcoin (BTC) network. As of December, 54% of the global mining hash rate was located in a single Chinese province, Sichuan, and most of that 54% is spread among only seven farms.
Further, another 11% of the global mining hash rate is located in China outside of Sichuan, giving China 65% of the global mining hash rate. It was speculated that the Chinese government could commandeer the farms in Sichuan to hard fork Bitcoin (BTC) if they ever perceived Bitcoin (BTC) as a threat to the Chinese Yuan (CNY).
At the end of that Crypto.IQ article, there was a plea for the crypto space to do something to negate this threat.
It appears Layer 1 Technologies is taking this threat head-on with the launch of its Bitcoin (BTC) mining megafarm, which was funded with $50 million of investment from Thiel, Shasta Ventures, and Digital Currency Group.
So far the farm has brought multiple 2.5-megawatt liquid-cooled mining containers online and plans on bringing 100 megawatts of mining containers online by the end of this year, which will be a modest 2% of the hashrate.
If the 30% of the global hash rate goal can be achieved by the end of 2021, then this farm will likely be bigger than any Bitcoin (BTC) mining pool and will go a long way towards making sure that China does not have more than 50% of the global hash rate.
Although there is no guarantee that Layer 1 Technologies will achieve this goal of 30% of the global mining hash rate, since in the meantime China could add much more hashing power to retain dominance, it appears Layer 1 Technologies does have some advantages.
Specifically, Layer 1 Technologies is producing its own mining chips and proprietary liquid cooling technology. In particular, the cooling technology allows Layer 1 Technologies to operate in the warm climate of Texas without cooling costs being too high, giving the firm access to cheap and sustainable energy in Texas.
Indeed, China has had the advantage so far since most major mining manufacturers are located in China, but it appears Layer 1 Technologies could change the balance of global mining power by mass-producing mining equipment in the United States.
Thus, it is a positive sign that a major mining firm has announced plans to build a farm in the United States that has 30% of the global hash rate, since if Layer 1 Technologies is successful then the decentralization of the Bitcoin (BTC) network will be guaranteed long term.