Binance launches $500M lending pool to support bitcoin miners during market downturn

Binance launches $500M lending pool to support bitcoin miners during market downturn

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Binance, the world’s largest cryptocurrency exchange by volume, today announced the launch of a $500 million lending pool for bitcoin miners to assist companies during an industry downturn led by rising energy costs and low bitcoin prices.

The lending project was launched by Binance Pool, the company’s dedicated service platform for miners as part of its ecosystem that provides technology, capital and industry resources to increase earnings from cryptocurrency mining.

Bitcoin mining is the process by which new bitcoins are introduced into the economy. It involves a computationally intense system known as “proof-of-work,” where multiple computers called “nodes” race to attempt to solve complex puzzles in order to add the next block of transactions to the bitcoin blockchain. The first computer to successfully solve the puzzle gets to add the next block and wins a bitcoin reward.

Bitcoin miners only need to offer collateral with physical or digital assets in order to secure a loan of 18 or 24 months with interest rates ranging from 5% to 10%.

Market conditions have been extremely rough for bitcoin miners with a massive downturn happening for bitcoin during 2022. The cryptocurrency’s value fell over 70% to below $20,000 from its all-time high of over $68,000 in November.

Rising energy prices have also led many cryptocurrency mining facilities to see a further reduction in profits. PoW mining itself is energy-intensive, meaning that as energy prices rise, so do the costs to mine bitcoin.

The stocks of publicly traded mining companies have also shown significant losses, such as mining company Riot Blockchain falling 70% year-to-date and Marathon Digital Holdings is down 65% over the same period.

In the past few months, a number of crypto miners have begun to scale back production or become insolvent. Mining hosting company Compute North filed for bankruptcy in September owing $500 million in assets to creditors, Compass Mining shut down its Georgia sites and the bitcoin mining pool Poolin froze withdrawals.

Other firms have also begun to offer miners loans amid the market downturn, including Maple Finance, a decentralized finance platform, which set up a lending pool with a 10% interest rate. Jihan Wu, the founder of the crypto mining company Bitmain, also launched a $250 million fund to buy assets at a discount from distressed mining companies.

Photo: Pixabay

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