How Does Bitcoin Mining Work?
Bitcoin mining works like this: Miners process transactions on the network—solving complex equations in a process that rewards them in newly created bitcoin. In the early days of crypto, most of the digital number crunching was done on home computers, before an industry formed of massive, energy-sucking data centers looking to process bitcoin transactions at scale.
When bitcoin prices jumped in 2021, the valuations of large miners surged into the billions of dollars. Given that these companies’ end product is bitcoin, their share prices tend to soar when prices rise and plummet when they fall. With bitcoin down over 70% from peak, shares of many publicly traded miners are down between 70% and 99% in the past year; the largest, Core Scientific Inc., filed for bankruptcy protection last month.
Adding to the challenges is that the price of electricity—a top expense for bitcoin miners—is up sharply.
Genesis Digital got its start in 2017 when a duo of German bitcoin miners joined forces with a trio of Kazakh entrepreneurs. Their plan was to set up bitcoin-mining data centers in Kazakhstan, taking advantage of its relatively cheap, coal-fueled electricity, company executives have said in video interviews posted online.